Reverse Logistics

go up LOGISTICS SUPERVISED BY ASSOCIATE PROFESSOR M. RAKOVSKA PREPARED BY TATYANA BLAGOEVA qualification NUMBER 10114004 Contents A Supply stove Opportunity3 What is bowl over Logistics? 3 Case Examples4 M unriv each(prenominal)edy is Hidden in Returns5 Reverse Logistics Comp anyowes the Supply Chain trunk6 Reverse Logistics and the Supply Chain Maturity Model11 Concluding Case watch Example13 The results were impressive14 A Supply Chain Opportunity almost practitioners have their own reason of the fundamental branches involved in an wide cede cosmic string network.The novice testament tell you it starts upstream with suppliers pro quite a little suppliers, moves through manufacturing and harvest-homeion and goes downstream through distri besidesors or direct to the melodic phrase guests. An improvement effort starts within the four walls of a telephone circuit by drawing a routine map and working on harvest-home, information and financial flows to improve the k ey steps in the linkage that will save time, money and use of assets. The journeyman will go save and excuse that a supply chain continues externally, until intersections and work have been delivered to the dec simpleness con conglomerationer.System improvement involves order management, planning and distribution, inventory management and effective economic consumptioner blessedness. This counselor knows that supply chain is about bringing the key process steps to best make and optimized conditions, while receiving high gaiety ratings from the customers and consumers. The flavour professional will shake his or her head and calmly explain that the journey is non demolitioned until the products and dos elivered have been accepted. If at that place is dissatisfaction with the results of the supply chain and or sothing is decreaseed, the processing continues. We stand with those who favor this ext prohibited enterprise berth of supply chain, which results in the issue fo rth satisfaction of the force out consumer. There is a great hazard in that understanding, to focus on the mainly disregarded or too often lower priority area of watchfulness given to finishing the job going the last few feet in the linkage.When it comes to completing the set aside-to-end processing, companies should do two things * Take the full sop up and image the total cope with of supply chain, which includes having and dealing with publications * Realize the opportunity that an analysis of the return piece of music of the constitution offers in terms of finding and solving problems, better satisfying customers and consumers, and discovering a room to increase taxations What is Reverse Logistics?When recollecting both area of melody as an opportunity for improvement, begin with having an understanding of just what you are trying to change. What is Reverse Logistics? The broader image oflogisticsis described by The Council of Supply Chain Management Profes sionals (CSCMP) as The process of planning, implementing, and controlling the efficient, greet effective flow of raw materials, in-process inventory, finished goods and related information from the billet of origin to the forefront of consumption for the purpose of conforming to customer use upments.Wikipedia defines the narrower concept we are considering asReverse logistics is the logistics process of re mournful unsanded or apply products from their initial taper in a supply chain, such as returns from consumers, over stocked inventory, or outdated merchandise and redistributing them apply zest management rules that will result in maximized value at the end of the items useful life. For our purposes, puff logistics includes all the activities that are mentioned in the definition higher up, with the difference that bowl over logistics encompasses all of these activities as they operate in reverse.Therefore, according to authorities Dr. Dale S. Rogers and Dr. Ronald S T ibben-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 seemly government activity. To settle on a specific definition, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or achieving proper disposal to the satisfaction of the customer or consumer.Remanufacturing and refurbishment activities whitethorn be berth of the procedure. Reverse logistics includes processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory. It in like manner includes recycling programs, uncertain material programs, obsolescent equipment propensity, and asset reco very(prenominal). For a practitioner, the propensity choice is determined by the most profitable alternative * Reconditioning when a product is cleaned and fastenered to return it to a like naked as a jaybird state Refurbishing interchangeable to reconditioning, except with perhaps more than work involved in repairing the product. * Remanufacturing same to refurbishing, but requiring more extensive work often requires completely disassembling the product * Resell when a returned product whitethorn be sold over again as new * Recycle when a product is strangled to its introductory elements, which are reused also referred to as asset recovery. Case Examples A headache printer field dish up and reverse logistics model helps explain how an operate organization works.The process for such a tighten starts when a business customer with a problem calls an original equipment manufacturer (OEM) or tercet companionship customer support contact, both of which are used in an attempt to diagnose the problem and provide problem resolution instructions if applicable. An OEM field technician or tercet companionship certified technician attempts to repair the equipment on-site. If unavailing to make the repair, the unit is sent to the OEM or certified third ramifyy repair facility, where a regional-based loaner or commute 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 digest to the customer, or lieus 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 pattern, consider sloppeds involved in the aftermarket gross revenue and go business, and how reverse logistics plays a role. Products in this business washstand include accessories, surrogate parts, and repair and service parts. The function could include product and technical support, training, product documentation, guaranty and clai ms 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, and 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 general customer satisfaction and loyalty, and bon ton profits.In a specific case example of how complex the situation can become and how allowances are made to check proper services are provided, we can take a confront at what Microsoft did when it decided to introduce its XBOX. The details help make the point about the importance of paying attention to the full supply spectrum, including reverse logist ics. 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 wareho using, distribution, and end customer sales functions.Solectron was used for aftermarket warranty and customer repair services. Microsoft took the time to ensure the above capabilities were fully operational before the first base XBOX was sold to an end consumer and that any returns would be processed effectively by the designated party. In another example, a cell phone reverse logistics model proved very skilful for a firm 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. frontward logistics, including warehousing, carrier service programming and order fulfillment we re performed by CellStar. cellular carriers such as Verizon and Sprint provided the monthly service. Extended warranty and product protection insurance was provided by lock/line. The customer call internality service and reverse logistics was performed by CellStar. Money is Hidden in Returns average estimates made of the costs involved in the area we are considering evoke that reverse logistics as a part of supply chain could equal a half percent of the U.S. Gross 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 oppositeiate a business and throw satisfaction and revenues with customers is generally obscure in the dusk of this area. If we take a whole step under the covers of this often neglected part of supply chain, well see how a company can better understand the opportunities to eliminate many of the reasons for returns and tur n 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 common objective for reverse logistics initiatives. These include Improved customer satisfaction and loyalty decreased repair / replacement unit costs Reduced replacement turnaround times Feedback on hardware design and ease of use Feedback on OEM quality Feedback on end consumer education and first level customer support Improve understanding of real reasons for hardware returns Reduce overall level of returns Standardize returns processes across enterprise where thinkable/desired put on 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 L ogistics Completes the Supply Chain System Exhibit 1 Reverse Logistics Returns, Customer Service, Field Service, recourse andReplacementNow lets look at how you turn the objectives into benefits. A glance at Exhibit 1 shows reverse logistics can include a multiplicity of actions, from returning goods from a consumer to the retailer or provider, receiving customer service or having field service take place to repair or regulate 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 active 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 a rea of the supply chain and find ship canal 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 final dis incline of products that must(prenominal) be outback(a) 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 smart 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 handle 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 recognize manner, with the understanding that reverse logistics is far different than forward logistics. In the return situation, there must be a convenient point of disposition 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 maturement 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 homely problem. Much of the goods in the last category are re-conditioned or re- incase to go back into the system or to an alternate buyer.There are many examples of firms using this type of sys tem to turn what used to be an out-of-pocket discharge into a profit by re-selling the returned goods to a satisfied customer. Exhibit 2 Reverse Logistics Model Small Logistics Partner In the model picture above, the partner receives the returned goods 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 posterior used stock order fulfillment.In a broader situation, as shown in award 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 legitimate 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 being 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 Cost Savings for return Center Reverse Logistics and the Supply Chain Maturity Model upward(a) the reverse logistics process starts with making selections from the list of objectives a firm wants to put to death with its attention to this generally neglected area of supply chain.Our list includes the hobby 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 * make headway 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 reasons 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 contiguous 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/flag 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 prove methodology 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 adulthood 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 happy using this calibration matrix to help a firm position its reverse logistics activities against what can be achieved. Exhibit 6 Maturity gridiron 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 radio set communications industry, serving network operators, agents, resellers, deal ers, and retailers, located in North America, southwestern 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 logistics 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 labor 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 include some very typical steps in a reverse logistics situation. The firm assessed its existi ng 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 readiness and leverage existing IT infrastructure. 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 highlight 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 heighten 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 custome rs, 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