Literature Review:
Reverse Logistics has been gaining importance of all sorts of businesses all across the globe. Tremendous research activities are coming up daily, suggesting new frameworks and models suitable for each business type and situation. Warehousing and Reverse Logistics are important to each other as they are in the direct relationship. The major issues in this regard are the lesser dedicated space for the returned items, too much paper work involved in getting the items back to the warehouse and from the warehouse to the production units, too much extensive process for tracking the reasons of return to the warehouse, difficulties in tracking the exact time the goods will be back at the warehouse, poor allocation of timing and shipping resources for sending items back to the production units or other destinations for review and further processing (Dowlatshahi, 2012).
The returns are very much significant for the various logistics and warehousing systems such as physical inventory, electronic inventory and accounting set-ups. All of the items need to be first acknowledged, secondly, allocated to specific customer accounts and most of the times, due to presence of various intermediate persons, this allocation is not possible or the reverse chain of actions breaks at points and starts at other abrupt points (Zhang & Ma, 2014). Last but not the least the credit payback suffers too much delays until the merchandise has reached its final destination. Automation of all of these warehousing processes is not possible and with the help of trial and error and empirical research, businesses have found ways of bringing reverse logistics and warehousing in good compatibility with each other (Inboundlogistics.com, 2014).
Most of the businesses have separated the physical processing and accounting processing and intentionally allow time for the processes to go in synchronization with each other. Similarly separating physical inventory responsibilities and customer’s credit responsibility have also helped in managing reverse logistics processes. Moreover, removing the confusion between the customer return reasons and physical state of the merchandize also saves time and cost of reverse logistics (Zaarour, Melachrinoudis, Solomon & Min, 2014). Making a separate putaway zone for saleable products in the warehouse and controlling the process of returns authorizations also helps in removing hurdles from smooth back flow of goods. Finally, labeling the unsalable merchandize for altogether different processing can help in improving the role of warehousing in the reverse logistics processes (Salema, Póvoa & Novais, 2006).
Min in 1989, studied direct and consolidated shipping options for returned and recalled products and developed a model for this purpose. However, the major issue was that he did not include the inventory handling cost and the model failed in practical arena. Earlier, Geoffrin and co-worker had come up with a model bases on Bender’s decomposition and had successfully practiced it at a food store. However, Melachrinoudis and co workers used the multiple planning processes and successfully solved reverse logistics problems for the sanitary landfills (KANNAN & SASIKUMAR, 2009). In 2003, Jayaraman and co-researchers moved a step ahead and introduced MIP for reverser logistics management of hazardous products (Jayaraman, Ross & Agarwal, 2008). They were also the first to introduce the idea of dealing with heuristic problems at their separate centers and refurbishment issue at refurbishment centers. Schultman and coworkers, in the same year, combined the simulation with the previous model and suggest two tier handling of returned steel products. All of these researches addressed these problems in practical terms but, failed to control the cost of reverse logistics in the form of freight tradeoffs and inventory management cost (Tsao, 2014).
Reverse logistics has a vital importance in supply chain management. It is usually defined as the transportation of goods from their consumption point to their original point via members of supply chain, for revaluation or for proper disposition. It involves minimizing returns, reducing inventory in the forward system and to make sure that all the materials are either used or disposed of properly. These returns or back flows affect all the stakeholders of the supply chain including consumers, retailers, distributors and finally manufacturers. There are many reasons behind this back flow of materials depending on the initiator of returns and the nature of products involved in the activity. Reverse logistics is beyond the conventional concepts of supply chain; it comes into discussion when consumer has fully used the product and does not need it any more. In the future, manufacturers will have to consider the potential value associated to the recovery of obsolete products, their material and the components.
It will enable the companies to build logistics infrastructures and manage supply chain interfaces to let the products to be re-used in related markets instead of being discarded or disposed of. There four critical reasons for companies to perform the RL may include; a) legal issues associated with wastage disposal; b) Sustainability issues involved; c) strategic issues related to company’s quality, and flexibility image; d) to minimize costs by recycling materials (De Brito & Dekker, 2004). RL is more than management of returns; it is a set of activities linked to avoidance of returns, gatekeeping, and all other after-market issues of supply chain. Management of returns has been recognized as a factor affecting the competitive positioning which provides an important link between marketing and logistics.
Reverse Logistics (RL) is one of the less appreciated part of supply chain. It has many reasons like lack of interest by top management, inadequate time allocation, varying priorities in the firms and value chains, short-comings in the integration of supply chain to handle back flows and lack of understanding about the value associated to integration of operations (PricewaterhouseCoopers’ report, 2008; Gunasekaran and Ngai, 2012). Frota Neto et al., (2008) emphasized that proper handling of reverse logistics results in increased sales revenue and decreased operational costs. It has many benefits like efficient utilization of resources and protecting the environment (Gunasekaran and Spalanzani, 2011). Most of the research studies on reverse logistics is based on the characteristics associated with the value chains in the developed countries, except a few studies done in developing countries like China & India (Miao et al., 2011). RL studies done in China investigated four electronic manufacturing companies (Lau and Wang, 2009). Jindal & Sangwan (2011) conducted a study on RL barriers in India by exploring generalized factors related to organizations, market situations and government policies associated. Research establishes the fact that RL is a crucial part of value chain in developed countries but needs a lot of attention in the context of developing countries (Zhang et al., 2011). RL is a complex process that needs comprehensive planning related to continuous audit of returns, determining an economically feasible process for disposing off products, managing warehouses and transportation, and other issues involved.
In the recent years, companies have realized the importance of economic benefits and environmental legislations attached to the RL, indicated by several industrial case studies and academic research studies (Guide and Li 2010; Stindt and Sahamie, 2012). An in-depth analysis of product recovery identifies a large number of planning issues that differ from those occurring from forward integrated supply chains, and ‘reverse distribution is not parallel to forward distribution’ (Fleischmann et al. 1997, p. 6). Traditional supply chains have no room for planning of tasks like forecasting back-flows, choosing satisfactory recovery alternatives and issues related to remarketing.
Challenges may also arise from factors that are related to multi-faceted unseen circumstances and allied information that has to be considered in reverse supply chain settings (Guide et al. 2000). The major factor behind the success of product recovery value chain is planning of tasks and inter-linked factors (Guide and van Wassenhove 2002). The key elements associated with reverse logistics include: gate keeping, integrated information system, central warehousing, asset recovery management, remanufacturing facility, negotiation with suppliers, outsourcing facilities and lastly financial management tools. We have discussed the corporate perceptions associated with managing RL, but product attributes are also play a role in reverse logistics. The most important feature is the quality of the product being reversed. Items of good quality are worth saving than those that are cheaper in quality. The second attribute is product size that determines how a returned product is handled. It is insensible to pay a high-cost transportation to return a damaged item that is cumbersome to handle.
The third attribute is the product lifecycle that drives strategy and tactics for returns management. The fourth attribute is price point. If the product returned is of low cost, then a lengthy decision process to dispose it is unnecessary. Fifth driver is the company’s strategy of “going-to-market”. It relates to the channels company uses to connect with customers. Lastly, there are the financial drivers involved like inventory turns. Companies make a considerable investment in inventory and once the product is sold, it converts into CGS, moving it back to inventory makes things difficult.
“They propose a mixed integer linear programming model to determine the number of containers required to run a five echelon system under consideration with an appropriate service, distribution and collection fee per shipment for empty containers and location of depots for empty containers. Piplani and Saraswat [49] propose amixed-integer linear programming for optimizing the reverse logistics network to minimise the total cost. Mishra et al.., [50] propose a multi-agent architecture to handle recycling and reverse logistics and to facilitate the efficient logistics of materials between different units(Guide and van Wassenhove 2002).”
RL is usually divided into three sub-categories of inventory control, manufacturing, recovery and planning of distribution. Companies have started accepting the concept of RL due to its positive effects on customers and the profits associated but still managing them is a big issue. Lenient return policies result in frauds and breakages that cost a lot for small firms. Frauds occur when customer buys the products but has no intent of keeping it, it’s just like renting out (National Retail Federation, 2012). Efficient flow of information is very crucial to managing reverse flow of products. Performance of RL supply chain is directly influenced by company’s information systems in terms of associated costs, operating efficiencies and processing of RLs (Sharif, et al., 2012). They also discovered that resource commitment and information system are crucial factors in the development of an efficient and effective RL supply chain. It was also proved that information system can also play a crucial role in management of RL by creating links with business partners so that information of returns becomes quickly available to change business decisions involving production schedules (Sharif, et al., 2012).
In typical organizations, warehousing and backflows are managed separately which bring additional costs for the company. Bringing them under one roof may reduce the processing speed, associated costs, and quick integration of logistics to meet customer demands and unusual orders. Customer returns usually arrive without prior notification. It may cause a severe issue in handling warehouse capacity causing delays in in-bound delivery system. RLs have to be properly entered back into the system, finding the proper entry is a big issue and causes system delays. So it is recommended that bar-coding should be available in warehousing facilities to save time. The researcher says:
“Multi-objective optimization models have been developed for the design of reverse logistics network [51, 52]. Some researchers have modelled the reverse logistics network design problems under uncertainty. Lieckens and Vandaele[53] propose a planning model with integrated quality routing that explicitly takes into account stochastic delays(Sharif, et al., 2012).”
The warehousing facilities differ with the size of the company and nature of products offered. Companies producing in small bundles or bulks like lumber, iron, crude oil etc, can easily mange backflows without mentioning RL. But it’s a heavy business for large manufacturers to handle reverse logistics and to get the product back in the market (Dowlatshahi, 2012).
So, warehousing and Reverse Logistics are very closely related to each other and can be customized for compatibility and business type for getting optimum benefits of Reverse Logistics to the organization. Warehouses need to change their traditional approach towards merchandize handling when dealing with Reverse Logistics. Moreover separating various processes which are performed collaboratively in Forward Logistics can save time and improve efficiency of Reverse Logistics operations. This paper will find out that relationship between separation of processes, places and merchandize handling tactics, integration of technology, credit issues, different inventory management in place and price perspective and re-shipping. Reverse Logistics.
The theoretical framework for research relies upon two main pillars; warehousing and reverse logistics. The sub-factors both of these together are mentioned above. The researcher will formulate a hypothesis and check it for research paper.
References:
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Guide, V.D.R. and Li, J. (2010). The potential for cannibalization of new products sales by remanufactured products. Decision Sciences, 41, pp. 547–572.
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