Innovation with Reverse Logistics (Part 1 of 2)

Introduction

Both Challenging and Rewarding. When speaking to any experienced Supply Chain professional, it is these exact two terms that can almost be expected to be brought up somewhere within the conversation. A strong Supply Chain must contain elements such as Resilience, Agility, Responsiveness, Cooperation, Fluency and so forth. Managing to maintain all these elements can be highly challenging. However, if a business succeeds in doing so, the rewards are highly noticeable. Loyal customers, Fast delivery, Capability to adapt to the market, freedom in spending resources, time management, effective return management and so on.

SME’s (Small/Medium Enterprises) often struggle to effectively manage their Supply Chain due to limited capacity and resources. A popular solution to this can be given in the form of Outsourcing. Many SME’s take advantage of Outsourcing the core components of their Supply Chain to experienced professionals within the industry. This allows them to quickly scale their business and invest their time and resources into other parts of the business without sacrificing on the importance of the key driver behind their business, the Supply Chain. A large Supply Chain element that is often prioritized when Outsourcing is the process of ‘Reverse Logistics’. This is because the element is highly impacting the customer satisfaction ratio, and overall Supply Chain performance.

The definition of Reverse Logistics

Reverse Logistics is often referred to as Reverse Supply Chain, and part of Closed Loop Supply Chain. It has its first definition published only in the beginning of the nineties by the Council of Logistics Management (Bri-2004, S. 4) and thus still represents a young sector of Logistics.

The most acknowledged definition of Reverse Logistics is ‘’the process of planning, implementing and controlling flows of raw materials, in process inventory, and finished goods, from a manufacturing, distribution or use point, to a point of recovery or point of proper disposal’’ (Bri-2004, S. 5).

Figure 1(The Reverse Logistics Process) (Chi-2018)

The Figure above clearly illustrates the core elements of the Reverse logistics Process. Products are received from the end-customer and transported back to the warehouse in question. They are then carefully inspected for defects, depending on the reasoning behind the return. They are then adequately sorted and either resold/recycled or scrapped.

The introduction of Reverse Logistics within Supply Chain Management didn’t go as smooth as expected. Businesses often quickly experienced the challenges that come with Reverse Logistics such as capacity management, customer expectations, waste management etc. These challenges were often too grand to build a strong Reverse Logistics process. It is only as of recent that Reverse Logistics has become increasingly popular to manage effectively. There are a couple reasons for this. The uprising of eCommerce businesses is one explanation as many products flow quickly through an eCommerce business, increasing the importance of managing the returns process. Another reason for the increase in popularity of Reverse Logistics management has to do with the uprise of strong Technological Solutions/Innovations such as IOT (Internet of Things), AVG’s (Automated Guided Vehicles), etc. These solutions allow SMEs to overcome the challenges that come with effectively managing a reverse Logistics process.

Smart Reverse Supply Chain (SRSC)

The concept of merging the above-mentioned Technology/Tools, together with Reverse Logistics forms the concept that is called ‘Smart Reverse Supply Chain’. To overcome the challenges that come with managing your Reverse Logistics process, Businesses decide to make use of the uprising beneficial technologies mentioned above. They can choose to individually adopt these technologies, or collectively make them work together to strengthen the synergy within the Reverse Supply Chain.

SRCS can manage flow times and information exchanges more effectively between logistical partners. This minimizes the uncertainties and difficulties when returning products. (XU – 201-1b). According to Xu (Xu-2011b), each product can be equipped with a tag to be associated with a unique identity and to be able to communicate with other devices.

The two key elements that ought to be managed effectively to improve SRCS are (Xu-2011a):

  • Identification tools: In order to implement a well-organised Smart Reverse Logistics, it is necessary to establish appropriate identification methods such as RFID (ID Tags), 3-D and 4-D Barcodes to permit the recognition of incoming and handled object and the communication between them
  • Standardization: To allow every member of the Closed Loop Supply Chain to pro- cess and identify the products, it is necessary to establish a standardization of the used technologies. Although there is the EPC, which uniforms the identity of every item, also the reading technologies need to be standardized

These two elements are best managed through the innovative technologies such as Artificial Intelligence and Machine Learning, Blockchain and Internet of Things (IoT). Would you like to know more about these innovative technologies and how you are able to implement these within your Supply Chain? Stay tuned for our next Blog where we go more in depth or talk to a ModusLink Expert today clicking here!

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Bibliography:

D’Amico, E. D. (2021, October 10). ResearchGate. ResearchGate. Retrieved November 6, 2021, from https://www.researchgate.net/publication/354551628_Analysis_of_Challenges_and_Potentials_of_Reverse_Logistics

Jenkins, A. (2021, April 5). A Guide to Reverse Logistics: How It Works, Types and Strategies. Oracle NetSuite. https://www.netsuite.com/portal/resource/articles/inventory-management/reverse-logistics.shtml

Marchese, K. (2021, October 29). Supply Chain leadership. Deloitte United States. https://www2.deloitte.com/us/en/pages/operations/articles/supply-chain-leadership.html

Niroomand, I. (2021, August 31). The importance of reverse logistics in your supply chain network. Kinaxis. https://www.kinaxis.com/en/blog/importance-reverse-logistics-supply-chain-network

Reverse Logistics – Rhenus Netherlands. (n.d.). Rhenus. Retrieved November 6, 2021, from https://www.rhenus.com/en/nl/our-solutions/contract-logistics/logistics-solutions/reverse-logistics/