Reverse supply chain in automobile sector
Overcoming challenges related to dealer returns:
Problem: Hyundai had 640 dealers in US. The returns received from dealers were mostly unseen and office used to credit the dealers without knowing what was the right amount to be credited. this resulted in heavy losses for the company.
Strategy employed:
• Transmission core removed from vehicle at dealer store
• Roadway picks up the defective unit
• Roadway inspects it at its facility, issues credit to the dealer for sending the core backk
• Roadway batches cores on pallets, ships via rail to san diego, then to mexico where it is remanufactured
• Roadway transports the remanufactured transmission core to Hyundai factory.
• Hyundai sends the transmission core back to dealers.
This strategy helped Hyundai to cut freight costs on returns by $250,000 a year. Partnering with a reverse logistics provider has helped Hyundai in many ways.
• As transportation costs amount to 60 – 75 % of total returns costs, partnering with a reverse logistics provider helps save on transportation.
• Hyundai doesn’t need to stock all returns in warehouse and unnecessarily involve unproductive work.
• With a vast transportation network it is easier for roadway to collect return products from various dealers across the country.
ADvantages
A survey by Automotive Aftermarket Industry Association (AAIA) has found out that successful implementation of Reverse logistics in automobile sector has following advantages
• Cost Containment
• Environmental regulatory compliance
• Improved customer relations
• Improved labour productivity
• Improved profitability
• Recovery of Assets
• Reduced Inventory investment
Recent developents
Formation of Vehicle recycling development center (VRCD) by the big three automakers in US in order to increase the recyclability of cars is an important step in this aspect. At VRCD, emphasis is given on building vehicles that can be disassembled more easily. The center is also focusing on one of the newest trends in engineering - Design for disassembly (DFD). DFD makes product disassembly easier by reducing the number of parts required, rationalizing the materials and snap fitting components instead of using screws.
According to Auto parts remanufacturing association (APRA), the estimated market for remanufactured auto parts is $34 billion. APRA also estimates that there are more than 12000 remanufacturing firms involved in remanufacturing automobile parts like alternators, starters, water pumps etc every year.