Usually, business focuses only on improving their forward supply chain network. But with increasing competition it has become more important for them to focus on their backward loop as well. Reverse supply chain refers to the movement of goods from customer to vendor/distributor/manufacturer. Manufacturers are facing challenges because returns policies are becoming more lenient, which has created a need to clear the distribution channel more often. This requires efficient means to get back/replace obsolete or outdates items.
Drivers for reverse Logistics
Reverse logistics can be driven by several reasons which include cost reduction, regulatory motivations, customer satisfaction, value reclamation, and corporate citizenship. Establishing and maintaining a good working relationship with customers facilitates the reverse logistics process. Therefore, a relationship-orientation or relationship marketing approach – aimed at attracting, developing, and retaining customer relationships provides a good platform for developing successful reverse logistics programs.
There are two important aspects in relationship-orientation– trust and commitment. Trust and commitment have been shown to lead to cooperative behaviors which allow marketing program efficiency, productivity, and effectiveness. Relationships that include trust and commitment can facilitate the management of reverse logistics.
Whether a company implements reverse supply chain by choice or by compulsion it has to face many challenges like educating customers, establishing new points of contact, take decision on which activities to outsource etc. It differs from forward supply chain in physical distribution flow, information flow and cash flow. To overcome the challenges companies can implement the following strategy which can be divided in five phases: Product acquisition, Reverse Logistics, Inspection & Disposition, Remanufacturing or refurbishing & Marketing. Apart from cost reduction, reverse supply chain helps in understanding why products are returned, cause of return etc. companies are now looking at reverse supply chain as a strategic weapon to gain competitive advantage. The importance of reverse supply chain is increasing because of following reasons -
1. Tangible Benefits rom returns
2. Increased regulatory requirements
3. Product lifecycle compression & need to clear distribution channel frequently
4. Competitive pressure to provide effective efficient goods return process
Jinesh Vora,
NMIMS, Mumbai
Aniket Pallav,
NMIMS, Mumbai
Reverse supply chains