Reverse Logistics
Reverse logistics is the logistics process of removing new or used products from their initial point in a supply chain, such as returns from consumers, over stocked inventory, or outdated merchandise and redistributing them using disposition management rules that will result in maximized value at the end of the items' original useful life. A reverse logistics operation is considerably different from forward logistics. It must establish convenient collection points to receive the used goods from the final customer or remove assets from the supply chain so that more efficient use of inventory and/or material overall can be achieved. It requires packaging and storage systems that will ensure that most of the value still remaining in the used good is not lost due to careless handling. It often requires the development of a transportation mode that is compatible with existing forward logistic system. Disposition can include returning assets into inventory pools or warehouses for storage, returning goods to the original manufacturer for reimbursement, selling goods on a secondary market, recycling assets, or a combination that will yield maximum value for the assets in question.
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The management of operations related to the reuse of products and materials can be referred to as Product Recovery Management (PRM). PRM is concerned with the care for products and materials after they have been used. Some of these activities are, to some extent, similar to those occurring in case of internal returns of defective items due to unreliable production processes. Reverse logistics though refers to all logistic activities to collect, disassemble and process used products, product parts, and/or materials in order to ensure a sustainable recovery.
Reverse logistics deals with five basic questions:
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Why Reverse Logistics?
Traditionally, manufacturers did not feel responsible for their products after consumer use. The bulk of used products were dumped or incinerated with considerable damage to the environment. Today, consumers and authorities expect manufacturers to reduce the waste generated by their products. Therefore waste management has received increasing attention. Lately, due to new waste management legislation (especially in Germany), the emphasis has been shifting towards recovery, due to the high costs and environmental burdens of disposal. Firms become more and more responsible for collecting, dismantling and upgrading of used products and packaging materials. The main reasons to become active in reverse logistics are:
- environmental laws that force firms to take back their products and take care of further treatment,
- economic benefits of using returned products in the production process instead of paying high disposal costs, and
- the growing environmental consciousness of consumers.
A graphic from the Reverse Logistics Assocation shows how to position reverse logistics versus forward logistics.
