The term reverse logistics refers to the exercise of receiving returned products or components from customers for the purpose of obtaining value from those products and components (Ailawadi, & Rakesh, 2012). It also refers to the process of planning, executing and managing the backward flow of raw materials (Dekker et al., 2010). The returned products and components in this case might come from customers who might be dissatisfied with them. They might as well come from the supply chain. In either case, the company might lose money and it might be interested in recovering a portion of that money through recycling. The company may as well be interested in repairing the products for the aim of reselling them. An enterprise that manufactures hazardous products such as leaded toys might incur huge losses because those products cannot be recycled. Rather, they can only be destroyed to get rid of the harmful lead paint. On the contrary, a company that manufactures products that can be repaired or recycled might not be affected significantly even if it would incur the cost of repairing or recycling the faulty products (Gupta, 2016).
Generally, reverse logistic is the opposite of logistics because whatever is done in logistics is done in reverse logistics, but in reverse direction (Ailawadi, & Rakesh, 2012). This means that under normal circumstance, we may regard reverse logistic as anything that takes place after products have been sold to customers. For example, consider defective products that have been shipped to a customer and on arrival to the customer, the customer returns them. The products might be damaged in the process of shipping or in the process of manufacturing them. Whichever the case, the company would have to organize for shipping of those products, test and repair those products. The company may also choose to recycle or dispose the products. After the company repairs the products, it would have to ship them back to the customer. This means that the logistics process would take place in reverse direction.
In as much as reverse logistics might appear disadvantageous to companies that practice it, it is also advantageous to them too in the sense that they are able to retain their customers. Additionally, those companies are able to improve their images to the members of public thereby remaining competitive in their fields of operation. More importantly, they gain value from products that would otherwise be destroyed. At the same, there is positive environmental impact when companies dispose their products in the right way (Ailawadi, & Rakesh, 2012).
A scenario in an automotive company
In automotive industry, consider company A that produces trucks. In the process of its daily practices, it produces trucks with defective steering wheels. The company does not recognize this mistake immediately. As a result, the production of such trucks continues for a period of six months before the national regulatory committee identifies the mistake and orders for the recall of the trucks that have been produced within the six months in question. In such a case, the company will have to recall all the trucks that have been produced in the last six months. Moreover, the firm will have to recall all the steering wheels distributed within the same period. Given that the company might want to protect its future businesses, then it should not hesitate from recalling its products.
The company’s purpose
The purpose of company A in such a case would be to recall its trucks and repair the faulty steering wheels so that it can resell those products or give them back to their owners. The company should do this to protect its future businesses as well as maintain its customers. At the same time, it should do that to abide by the law and regulations that govern manufacturing industries.
Steps to follow
In order for the company to execute the reverse logistic effectively, it should follow the following steps. Initially, the company would need to plan the recall process. Planning in this case would involve establishing what should be done at every stage of the recall process. It would also involve making the necessary arrangements so that the recall process can run smoothly. Assume that the company operates throughout the globe and that the trucks have been distributed to almost every part of the globe. In such a case, the company would have to decide whether the customers should return their trucks and steering wheels to one particular location or different locations for repair. Once the company has decided what should be done, it should then decide the manner in which the process should be conducted (Gupta, 2016). This means that the company should define the process that would be utilized to bring the trucks into designated locations. If the company decides that customers should take their trucks to regional branches, it should specify the process that should be utilized. In such a case, it should determine whether it would publish the issue on newspapers or advertise it on televisions to reach the customers.
After the process of recalling the trucks and steering wheels has been determined, the next step would be to gather the trucks and steering wheels from every part of the globe and repair them. This would be the challenging step because the company would have to determine certain issues before receiving trucks and steering wheels from affected customers (Dekker et al., 2010). For example, the company would have to develop a process of separating the faulty steering wheels from the perfect ones. If the steering wheels would be specific, the process would be less complicated. Nevertheless, if the steering wheels would not be specific, the procedure would a complicated one. Assuming that the affected steering wheels would be the latest in the company, then the company would not have problems identifying the affected customers because the steering wheels would be specific.
The last step would be to repair the affected trucks and steering wheels and return them to customers. Assuming that the customers would not have problems with the trucks once repaired then the process would be simple. However, if the customers would not be comfortable with the repair exercise, then the process would be a complicated one. In the first instance, the company would repair the trucks and steering wheels and return them to the customers. In such a case, it would only incur the cost of repair, advertising cost and probably re-distribution cost. On the other hand, if the customers would return the trucks for good, the company might be forced to re-sell the trucks and refund the customers their money as it would be agreed (Fleischmann, 2001).
Broadly speaking, the two main steps that would be involved in the company’s reverse logistic include planning and implementation of the recall exercise. Planning, on one hand, involves establishing what should be done at every stage of the recall process whereas implementation, on the other hand, involves executing the plan developed in the planning process.
Ailawadi, S., & Rakesh, P. (2012). Logistics management. New Delhi: PHI learning private limited.
Dekker, R. et al. (2010). Reverse logistics: Quantitative models for closed-loop supply chains: with 76 figures and 34 tables. Berlin: Springer.
Fleischmann, M. (2001). Quantitative Models for Reverse Logistics. Berlin, Heidelberg: Springer Berlin Heidelberg.
Gupta, S. (2016). Reverse supply chains: issues and analysis. Boca Raton: CRC press.