Reverse supply chain plays a very important role in Automobile industry because it is one of the largest industries and deals with very expensive consumer goods. In order to understand the significance of reverse supply chain in automobile sector, the most important thing is to look at the life cycle of the product and what is the end use. Even if the automobile becomes defunct, the raw material from which it is made is reusable provided it is sent back to the production line and remanufactured.
One of the significant aspects of automobile industry is the closed loop system maintained by Automakers. Example - When a vehicle needs a new transmission, they expect that the consumer will bring the car to a dealer and replace the old transmission with a remanufactured one. The dealer sends the old transmission (also called a transmission “core”) to the automaker for remanufacturing. In this way, the automaker ensures a stable supply of transmission cores.
The automobile market can be divided into two separate consumer bases: OEM (Original Equipment Manufacturers) and the aftermarket. The manufacturers and dealers that make up the OEM market focus mainly on vehicle assembly and marketing. On the contrary, the aftermarket gets its name from its primary focus on repair services provided after the primary sale of a vehicle. It includes the entire supply chain. It can include independents like gas station as well as manufacturers, remanufacturers, wholesalers and retailers.
The primary intent of the automobile aftermarket is to make repair parts readily available in a wide range of businesses and locations. Service is the primary competitive weapon.
With increasing commodity price, shorter consumer attention period and the need to introduce new variants of vehicles at shorter time intervals; reverse logistics is becoming a necessity for the industry. Reverse logistics is not only driven by cost cutting but also because of increasing awareness among consumers about environment impacts of improper disposal and benefits of recycling. Hence, in today’s scenario it becomes imperative for companies to be more sensitive towards their sustainable practices in order to winning trust of customers.
The areas where reverse supply chain plays significant role are -
• Salvage of parts and materials from end of life vehicles
• Remanufacturing of used parts
• Stock balancing returns of new parts from dealers
challenges in automobile sector
Implementing a reverse supply chain system in an automobile company is a challenging task because of following reasons – (Source: Automotive aftermarket reverse logistics opportunities by Inmar reverse logistics)
• Low importance given to returns management
• Warehouse space constraints
• Infrastructure bottlenecks
• Inefficient logistics service provider
• Retailer- manufacturer conflict
The volumes of returns of parts are also point of concern for automobile companies as it can be attributed to the following reasons:
1. Data entry errors
2. Absence of universal numbering schemes
3. Poor information flow
4. Over ordering
5. Errors in shipment
6. Warranty