Reverse Logistics

REVERSE LOGISTICS SUPERVISED BY ASSOCIATE PROFESSOR M. RAKOVSKA PREPARED BY TATYANA BLAGOEVA FACULTY NUMBER 10114004 Contents A Supply set up Opport building blocky3 What is Reverse Logistics? 3 Case Examples4 Money is Hidden in Returns5 Reverse Logistics Completes the Supply Chain System6 Reverse Logistics and the Supply Chain maturity Model11 Concluding Case psychoanalyse Example13 The results were impressive14 A Supply Chain Opportunity Most practitioners have their own understanding of the fundamental transitiones gnarled in an ext decisioned release drawing string net treat.The novice will tell you it starts up flowing with suppliers add oning suppliers, moves through manufacturing and produceion and goes downstream through distributors or learn to the caper customers. An improvement effort starts within the four walls of a business by drawing a process map and working on product, training and financial flows to improve the key steps in the linkage that will save ti me, money and use of summations. The journeyman will go further and inform that a supply kitchen stove continues externally, until products and assistants have been delivered to the end consumer.System improvement involves order management, planning and distribution, inventory management and effective customer satisfaction. This counselor knows that supply chain is about bringing the key process steps to best practice and optimized conditions, while receiving high satisfaction ratings from the customers and consumers. The seasoned professional will jolt his or her head and calmly explain that the journey is not ended until the products and services elivered have been accepted. If in that location is dissatisfaction with the results of the supply chain and something is returned, the process continues. We stand with those who respect this extended enterprise view of supply chain, which results in the total satisfaction of the end consumer. There is a great opportunity in that sense, to focus on the generally forgotten or too often lower priority area of attention presumptuousness to finishing the job going the last fewer feet in the linkage.When it comes to completing the end-to-end processing, companies should do two things * Take the full view and understand the total cost of supply chain, which includes having and dealing with returns * Realize the opportunity that an analysis of the return part of the layment offers in terms of finding and solving businesss, better satisfying customers and consumers, and discovering a way to increase revenues What is Reverse Logistics?When considering whatsoever area of business as an opportunity for improvement, begin with having an understanding of just what you are trying to change. What is Reverse Logistics? The broader concept oflogisticsis described by The Council of Supply Chain Management Professionals (CSCMP) as The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the office of origin to the point of phthisis for the purpose of conforming to customer requirements.Wikipedia defines the narrower concept we are considering asReverse logistics is the logistics process of removing new or use products from their initial point in a supply chain, such(prenominal) as returns from consumers, over stocked inventory, or outdated merchandise and redistributing them using disposition management rules that will result in maximized think of at the end of the peaks useful life. For our purposes, reversal logistics includes all the activities that are mentioned in the definition above, with the difference that rick logistics encompasses all of these activities as they snuff it in reverse.Therefore, according to authorities Dr. Dale S. Rogers and Dr. Ronald S Tibben-Lembke, reverse logistics becomes The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. To settle on a specific definition, reverse logistics is the process of moving goods from their normal final destination for the purpose of capturing value, or achieving proper disposal to the satisfaction of the customer or consumer.Remanufacturing and refurbishment activities may be part of the procedure. Reverse logistics includes processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory. It also includes recycling programs, gaga material programs, obsolete equipment disposition, and asset recovery. For a practitioner, the disposition choice is determined by the most profitable alternative * Reconditioning when a product is cleaned and holdfasted to return it to a like new state Refurbishing similar to reconditioning, e xcept with perhaps more work tangled in repairing the product. * Remanufacturing similar to refurbishing, but requiring more extensive work often requires completely disassembling the product * Resell when a returned product may be sold a bump off as new * Recycle when a product is reduced to its basic elements, which are reused also referred to as asset recovery. Case Examples A business printer field service and reverse logistics model helps explain how an operating system works.The process for such a truehearted starts when a business customer with a problem calls an original equipment manufacturer (OEM) or third party customer digest contact, both of which are used in an try to diagnose the problem and provide problem resolution instructions if applicable. An OEM field technician or third party certified technician attempts to repair the equipment on- localize. If unable to make the repair, the unit is sent to the OEM or certified third party repair facility, where a region al-establish loaner or exchange program may be available. The unit is then repaired at the OEM or third party repair facility.The OEM then ships the returned unit or comparable unit back to the customer, or places the unit in used stock if an exchange is previously provided. A field technician is then scheduled to install the loaner unit, exchange units, or repair equipment at the customer site As an example, consider impregnables involved in the aftermarket sales and services business, and how reverse logistics plays a role. Products in this business can include accessories, replacement parts, and repair and service parts. The services could include product and technical support, training, product documentation, warranty and claims management, and field service repairs.As an adjunct to these products and services, reverse logistics fits the definition by providing for exchanges and in-warranty repair, out-of-warranty repair, maintenance, upgrades and retrofits, remanufacturing, a nd end-of-life asset recovery and hazardous material disposal. In the aftermarket business, field services and reverse logistics are generally considered one of the harder areas to manage, coordinate and operate efficiently. The area is often forgotten or given little consideration regarding launch of new products, importance to overall customer satisfaction and loyalty, and company profits.In a specific case example of how complex the operation can become and how allowances are made to assure proper services are provided, we can take a mind at what Microsoft did when it decided to come in its XBOX. The details help make the point about the importance of paying attention to the full supply spectrum, including reverse logistics. Microsoft decided to have the main product manufactured by Flextronics. Accessories would be produced by a variety of manufacturers. Distributors and electronics retailers were to perform the warehousing, distribution, and end customer sales functions.Sol ectron was used for aftermarket warranty and customer repair services. Microsoft took the time to ensure the above capabilities were fully operational before the first XBOX was sold to an end consumer and that any returns would be processed effectively by the designated party. In another(prenominal) example, a cell phone reverse logistics model proved very beneficial for a impregnable selling such products under their brand name. This firm had the cell phones manufactured by LG Industries, Samsung, Motorola and others. Accessories were again manufactured by a variety of firms.Order taking and initial end consumer billing was performed by Amazon. Forward logistics, including warehousing, bearer service programming and order fulfillment were performed by CellStar. Cellular carriers such as Verizon and Sprint provided the monthly service. Extended warranty and product protection restitution was provided by lock/line. The customer call center service and reverse logistics was perform ed by CellStar. Money is Hidden in Returns Reasonable estimates made of the costs involved in the area we are considering indicate that reverse logistics as a part of supply chain could equal a half percent of the U.S. revenue Domestic Product, an enormous sum that often simply detracts from financial performance. Saving some of that money is one avenue for finding benefits. Understanding how to use reverse logistics to differentiate a business and build satisfaction and revenues with customers is generally hidden in the twilight of this area. If we take a look under the covers of this often neglected part of supply chain, well understand how a company can better understand the opportunities to eliminate many of the reasons for returns and turn dissatisfaction into satisfaction.The idea is to take a look and consider where you might do a better job with a nuisance part of your business. Lets start by considering some harsh objective for reverse logistics initiatives. These inclu de Improved customer satisfaction and loyalty Reduced repair / replacement unit costs Reduced replacement reverse gear times Feedback on hardware design and ease of use Feedback on OEM quality Feedback on end consumer education and first take aim customer support Improve understanding of real reasons for hardware returns Reduce overall level of returns Standardize returns processes crosswise enterprise where possible/desired Utilize common systems across enterprise and automate the returns process to the extent possible/desired Handle increased volumes of returns due to new products, programs, business partners Enable demand driven supply chain concepts for returned products Differentiate company services from the competition Reverse Logistics Completes the Supply Chain System Exhibit 1 Reverse Logistics Returns, Customer Service, Field Service, compensate andReplacementNow lets look at how you turn the objectives into benefits. A glance at Exhibit 1 shows reverse lo gistics can include a numerosity of actions, from returning goods from a consumer to the retailer or supplier, receiving customer service or having field service take place to repair or fix the item in question, or having the product sent to a third party for repair or replacement. The fact is that reverse logistics includes virtually all of these services, and we counsel a broad perspective should be taken to not let this area be a burden to the business.Most companies tend to place the involved operations in the hands of a subsidiary part of an lasting logistics function and pay little attention to the effect it can have on the companys brand, financial performance or supply chain efficiency. A better view is to take a harder look at this area of the supply chain and find ways to turn what is typically a nuisance into something of value to the business. To make sense out of what were considering, lets remember that reverse logistics includes all of the activity related to the fi nal disposition of products that moldiness be removed from the supply chain system.Such activity involves the processes related to removing products from a supply chain that do not have value for the customer or end consumer. These products may be the result of poor workmanship, over-stocked inventory, outdated or obsolete design, damages, or general dissatisfaction with product performance. For whatever reason, someone at the end of the downstream side of the supply chain says I dont want it and the pine supplier will make it easy to return the goods.The goal is to make certain the least damage is done to the firms brand and reputation, and to give care the process so it results in a positive rather than a negative impression. A system of disposition management is required to handle such situations in an effective and rewarding manner, with the understanding that reverse logistics is far different than forward logistics. In the return situation, there must be a well-off point of collection for receiving the goods or to remove these goods from the supply chain.This process step can require inspection, re-packaging, storage, and salvage of any residual value that might exist and the development of a transportation mode that is compatible with the existing forward system of supply. The range includes credits for unwanted goods that are returned to inventory, payment for damage that may or may not be a fault of the supplier, replacement of obsolete product, and simply accepting the return of goods that have no apparent problem. a good deal of the goods in the last category are re-conditioned or re-packaged to go back into the system or to an alternate buyer.There are many examples of firms using this type of system to turn what used to be an out-of-pocket loss into a profit by re-selling the returned goods to a satisfied customer. Exhibit 2 Reverse Logistics Model down(p) Logistics Partner In the model depicted above, the partner receives the returned good s and makes a test to determine if the need is for disposal, there is a major defect and the unit must be repaired, or there is a cosmetic defect and the unit can be refurbished. In either of the latter cases, the unit is repaired and placed in stock for subsequent used stock order fulfillment.In a broader situation, as shown in exhibit 3, the process becomes more involved. Now we see the unit is returned based on the return from location and goes to a designated center. The same type of processing takes place, but may also include factory direct repair if veritable by the OEM. This model is more appropriate where large volumes of product are to be processed. Exhibit 3 Reverse Logistics Model Large Repair Partners A model used by a satellite TV service provider is described in exhibit 4, where we see different business partners creation used for returns processing and minor defect removal versus major product defect repair.Exhibit 4 Model for Satellite TV Service Provider Where there is sufficient volume, cost savings for using a regional test and refurbishment center can be significant. As shown in exhibit 5, we see the results of an actual example. In this case, the total annual savings of $3. 5 million was based on 1. 4 million returns. Exhibit 5 Projected follow Savings for Refurbishment Center Reverse Logistics and the Supply Chain Maturity Model Improving the reverse logistics process starts with making selections from the list of objectives a firm wants to accomplish with its attention to this generally neglected area of supply chain.Our list includes the following common intentions * Improved customer satisfaction and loyalty dont lose customers because of a bad experience * Reduced repair, replacement or re-shipment costs handle the process in an effective manner * Gain feedback from the process to eliminate root causes demonstrate to the customer that the firm studies its problems and makes them go away * Improve understanding of the reason s for returns get to the bottom of why the system did not function in a fail-safe manner * Utilize common systems and automate the returns process to the extent possible Find the way to turn a problem into an opportunity for better customer satisfaction and a source of revenue * Differentiate the firms services from those of the competition Use the experience to gain customer confidence and build new sales With such a list in hand, the next step is to determine what is currently taking place to meet the objectives versus what must be done to assure they are fully met. The procedure must follow some basic principles, including * Move credit/ reel product receipt point for returned product as close to the customer as possible * Minimize shipping costs * Minimize refurbishment/repair costs * Minimize hand-offs between organizations, facilities, systems, etc. in order to reduce costs and overall cycle time CSC has developed a proven methodological analysis for helping take this step. In Exhibit 6, we see the characteristics and capabilities a firm demonstrates, as it moves up the familiar supply chain maturity model.Beneath each level of the model, we see industry examples showing what a company can achieve as it makes its progress to higher levels of achievement. CSC has been very successful using this calibration ground substance to help a firm position its reverse logistics activities against what can be achieved. Exhibit 6 Maturity Grid Reverse Logistics Concluding Case Study Example A concluding case study will help demonstrate the kind of hidden values weve been considering. The firm is a major provider of logistics services to the wireless communications industry, serving network operators, agents, resellers, dealers, and retailers, located in North America, South America and Asia. Sales are in excess of $2 billion. The business problem was typical of the industry.Strong competition and low margins were prevalent factors on traditional forward logisti cs services. The firm needed to improve its business customer and end customer service levels. There were increasing business customer demands for more timely and useful data. Existing processes were fragmented, inconsistent and error prone. It was a very ram and paper intensive situation. The company did have a vision Focus on diversification into higher margin product and service lines. Position the firm to provide more value added customer services with higher profit margins especially around reverse logistics including end customer support, advanced exchange programs, asset recovery, warranty and repair services.The solution that emerged included some very typical steps in a reverse logistics situation. The firm assessed its existing application architecture and technical infrastructure along with the high level business requirements needed to achieve its vision. A packaged application was recommended to address gaps in reverse logistics force and leverage existing IT infras tructure. The firm reviewed its existing operations and business processes and introduced industry best practice concepts for reverse logistics. Business process improvement workshops were conducted, which were used to sidle up opportunities for standardization and guide new application software configuration, enhancement and implementation.Finally, the firm performed custom enhancements as needed and implemented new software to enable enhance reverse logistics capability. The results were impressive * Re-designed business processes, new reverse logistics application capability and outsourcing of non-core functions allowed them to expand and improve level of service to customers, increase sales revenue stream by adding new customers, and increase overall profit margins * The new reverse logistics solution enabled the following typical improvements for their business customers (before versus after) Reconcile warranty credit from 30+ days to