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Research Paper: Reverse Supply Chain

In today’s highly competitive business environment, the success of any business depends to a large extent on the efficiency of the supply chain. Competition has moved beyond firm-to-firm rivalry to rivalry between supply chains. Managers in many industries now realize that actions taken by one member of the supply chain can influence the profitability of all others in the supply chain. Companies like Wal-Mart are trying to squeeze more costs out of their supply chain to offer everyday cheaper price to the customers. On the other hand, more and more companies are focusing on their core competencies while outsourcing the rest. But without efficient and effective supply chain, companies cannot benefit from outsourcing.

Supply chain is defined by The Council of Logistics Management 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 point of origin to the point of consumption for the purpose of conforming to customer requirements.” However, a company’s supply chain is not limited to delivering products to the end-consumers. What about the defective products that are returned by the consumers back to the company?

Necessity of Reverse Supply Chain

The foremost reason behind companies giving importance to reverse supply chain is that it reduces operating costs by reusing products or components. For example, previously, Estee Lauder Companies Inc., used to dump nearly $60 mn worth of its products into landfills every year. However, after setting up reverse supply chain it has been able to reduce the volume of destroyed products by half.

Companies have started realizing the importance of reusing products or components; as a result, reverse supply chains are becoming essential part of business. “Retailers are facing challenges as returns policies are becoming more lenient,” opines Mike Nardella, Senior VP, Logistics, Return buy. C Glenn Mauney supports his views, according to him, “the increased emphasis on new products and product “freshness” has caused a need to clear the distribution channel more often, requiring an efficient means to bring back obsolete, outdated or clearance items.” For example, Xerox replaces or upgrades hundreds of office printing machines every month.

In some cases companies are forced to set up reverse supply chains because of environmental regulations. C Glenn Mauney, opines, “many countries/states have instituted regulatory requirements regarding recycling and product disposition that requires increased record keeping and tracking. For example, from 2003, European Union is bringing a legislation that will require tire manufacturers operating in Europe to arrange for the recycling of one used tire for every new tire they sell. Some companies are using reverse supply chains as an integral part of new businesses.

Reverse supply chains differ from forward supply chains in information flow, physical distribution flow and cash flow. To manage reverse supply chain, companies need sophisticated information systems. Some of the technology involved in reverse supply chain is similar while in some areas the technology used differs from that of traditional supply chain. According to C Glenn Mauney, “depending on the volumes and complexity of the returned goods flow, there is some information capture specialization and processing efficiencies in returned goods processing that requires some unique systems.” Technology used in reverse supply chain such as real-time inventory tracking system (bar codes and sensors) are similar to that used in the forward supply chain. On the other hand, Devangshu Dutta said that activities such as warranty tracking or de-manufacturing of product is different. Agrees Karen Peterson. According to her, “repair optimization; slow moving inventory optimization; and reverse logistics,” are the areas where reverse supply chain differs from forward supply chain.

In designing a successful reverse supply chain, it is important to know what type of product will be returned at which point in time at which place and in which condition. Hence, importance of data is immense. C Glenn Mauney opines, “tightly integrated automatic data capture, system directed disposition support, unique receipt handling, credit processing, comprehensive and flexible reporting are some of the important functional capabilities in reverse supply chain.” However, the legacy systems or the standard enterprise resource planning systems used by companies are not effective to support these functional capabilities. What is required is a data warehouse with extranet and intranet technology.

The author is an expert in research paper writing service in the field of marketing and operations management. He has been with the company for some years as a senior writer.

About the Author

Thomas Hill is one of the senior editors at EssayAcademia. He has been in the research paper writing service for mroe than two decades. EssayAcademia provides you with free draft to check the quality before you buy research papers. You can oder a research paper after being satisifed with free draft

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