Reverse Logistics And Its Role In Business Commerce Essay

Every twenty-four hours one is made cognizant of the current province of the economic system – with an of all time turning population and a big part of South Africa ‘s GDP being attributed to export market it is going progressively of import to conserve the resources and natural stuffs that South Africa has been so amply blessed with ( Vogt, Pienaar and de Wit, 2005 ) . This coupled with the fact that little and big concerns likewise are taking every possible step to do cuts and nest eggs on merchandises and services, to give themselves some kind of advantage in a extremely competitory environment is doing the usage of contrary logistics highly of import.

This study will try to explicate what change by reversal logistics is, and elaborate on different countries of contrary logistics.The importance that effectual direction in contrary logistics, more specifically the returns procedure plays in concern today will besides be discussed. Furthermore an effort will be made to place possible schemes to better to change by reversal logistics map of concerns.

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The attack of this study will be that of the usage of literary beginnings to assist understand certain constructs, and attacks so that a holistic position of contrary logistics function in a concern can be seen. Case surveies and interviews will besides be used to exemplify certain points.

What is rearward Logisticss?

Reverse logistics – merely set, incorporates all the activities of logistics in contrary.

Therefore harmonizing to Grant, Lambert, Stock and Ellram ( 2006 ) contrary logistics can be defined as:

“ the procedure of planning, implementing, and commanding the efficient, cost effectual flow of natural stuffs, in procedure stock list, finished goods and related information from the point of ingestion to the point of beginning for the intent of recapturing value or proper disposal. ”

If the activities found in the above definition are managed expeditiously, the long term profitableness of the concern should be affected positively. ( Grant, Lambert, Stock and Ellram, 2006 )

In the distribution procedure one will happen that there is the flow of merchandises, Information and money – this is the same for the rearward distribution procedure, merely the way that the above mentioned are fluxing in alterations. For the interest of this study the focal point will stay upon the motion of merchandises. ( Grant, Lambert, Stock and Ellram, 2006 )

Flow of Merchandises:

In a logistics system natural stuffs will flux from the point of beginning through the assorted channels in the supply concatenation until it reaches the terminal user as the terminal merchandise. At some point in this procedure it could go on that merchandises may hold to be return due defects in quality, wrong volumes, merchandise callbacks or disposing of waste stuffs that are a consequence of the fabrication procedure – this is what triggers the contrary flow of merchandises. These are in kernel non value adding activities and should be good managed to cut down any costs and in the long tally better profitableness. ( Vogt, Pienaar and de Wit, 2005 )

The reclaimable points that flow through the supply concatenation are value bearers and keep value of their ain. Glass coke or beer bottles, gas cylinders and the similar are illustrations of value bearers. The inefficient and uneffective direction of these points can take to either, a excess or deficit, either manner a negative impact will ensue. Massive cost nest eggs can be realized with efficient direction. ( Vogt, Pienaar and de Wit, 2005 )

The Importance of Managing Reverse logistics Efficaciously

Change by reversal logistics direction is going more and more of import within concerns particularly with the current economic clime. Businesss should be looking to cut cost while making a sustainable client base. This can be done by efficaciously pull offing contrary logistics.

First it is of import to delegate a contrary logistics director. Having a client service director, returns director, remarketing and all different sections, all working individually to put to death rearward logistics can merely do confusion and redundancy. Delegating a director who controls all activities that fall within the contrary logistics umbrella is the get downing point to simplifying the procedure of contrary logistics.

The following measure to expeditiously pull offing contrary logistics is to implement processs and constructions that are simple and effectual. It is of import non to divert from the processs that have been put in topographic point by the organisation.

Below ( fig 1.1 ) is an illustration of a returns procedure.

Simple Returns Process Model. Fig 1.1


Gate maintaining is one of the most of import activities in pull offing contrary logistics. It is the procedure of measuring whether the merchandise being returned should come in the contrary flow or be disposed of – this showing of merchandises can cut down unwanted costs significantly. It is of import to develop employees in gate-keeping, so that they are empowered to do good informed determinations. Good gate-keeping patterns will travel a long manner to pull offing change by reversal logistics more expeditiously ( hypertext transfer protocol: // 22 Sept 2010 )

Rearward logistics and client services:

Grant, Lambert, Stock and Ellram ( 2006 ) specify client service as:

“ aˆ¦ a procedure which takes topographic point between the purchaser, marketer and 3rd party. The procedure consequences in a value added to the merchandise or service exchanged. This value added in the exchange procedure might be short term as in a individual dealing or longer term as in a contractual relationship. The value added is besides shared, in that each of the parties to the dealing or contract are better off at the completion of the dealing than it was before the dealing took topographic point. Therefore, in a procedure position: Customer service is a procedure for supplying important value added benefits to the supply concatenation in a cost- effectual manner ”

Customer service can be broken down into three groups: Pre-transaction, dealing and post-transaction. The point where client service and contrary logistics begin to overlap is at the post-transaction group. The elements of this group are:

Installation, guarantee, fixs and parts

Merchandise tracking

Customer claims, and returns

Impermanent replacing of merchandises

( Grant, Lambert, Stock and Ellram, 2006 )

The Link between client service and logistics is an of import one and clear, changeless communications between selling and contrary logistics maps is imperative to pull offing the procedure expeditiously and efficaciously. Good client service can turn a disgruntled client into a satisfied 1. This can assist in making a sustainable client base.

Efficaciously pull offing contrary logistics consequences in:

Decrease of costs

Decrease in otiose Time

Improved client satisfaction

In the undermentioned instance analyze the consequence of hapless direction and deficiency of procedures and processs. ( http: //, 2 Aug 2010 )

Instalek instance survey:

Instalek specializes in the sourcing, procurance and importation of machine spares for industry. One of the sub divisions of Instalek industries and sells industrial coding pressmans.

The followers is a short history of Instaleks traffics with one of its overseas based clients.

One of Instaleks clients returned a pressman late and were informed by the clients that the pressman caputs where non working decently. This is non an uncommon state of affairs so Instalek took out the pressman caputs and disposed of them. They so proceeded to fabricate and put in trade name new 1s. Once installed the pressman was tested to see if the new caputs were in working order, merely to happen that the job was n’t the caputs in the first topographic point. Alternatively the pressman had the incorrect ink installed.

Not merely did this waste clip for Instalek. It besides wasted 1000s of rands on fabricating new pressman caputs. Furthermore Instaleks clients faced downtime ensuing in important fiscal loss and terrible dissatisfaction.

This could hold all been avoided by merely proving the pressman foremost, and placing that the pressman had the wrong ink.

So it can be seen that holding hapless, or no contrary logistics direction and procedures in topographic point can be you clip, money and perchance hazard losing clients.

( C.Gouws, 2010, pers.comm.10 Aug )

Bettering the contrary logistics procedure:

When looking at bettering contrary logistics in a company it is critical that all relevant parties understand the importance of contrary logistics in the context of the concern. This acknowledgment entirely can convey about betterment in efficiency. It is of import to map out the current contrary logistics procedure so that a holistic position of the relationships and different constituents within the concern can be seen. ( http: // – 15 Sept 2010 ) Now that it can be seen what is taking topographic point in the contrary logistics procedure, objectives a company privation to carry through with respects to change by reversal logistics should be identified. ( http: // – 2 Aug 2010 )

Some common aims identified by Chuck Poirier are:

Improved client satisfaction and trueness.

Reduced fix, replacing or re-shipment costs.

Gain feedback from the procedure to extinguish root cause.

Improve apprehension of the grounds for returns.

Utilize common systems and automatize the returns procedure to the extent possible.

Distinguish the house ‘s services from those of the competition.

( hypertext transfer protocol: // – 2 Aug 2010 )

It is now of import to bridge the spread between what is presently being done to carry through these aims and what must be done to run into them. ( http: // – 2 Aug 2010 )

Centralized Returns Centers:

Centralized Returns Centers ( CRC ‘s ) are installations that are wholly devoted to managing the returns of goods. Stores will direct their returned merchandises to either an outsourced CRC or in some instances an organisation may hold internal CRCs.

Harmonizing to Rogers and Tibben-Lembke ( 1998 ) in a centralised system

“ aˆ¦All merchandises for the contrary logistics grapevine are brought to a cardinal installation, where they are sorted, processed, and so shipped to their following finishs. This system has the benefit of making the largest possible volumes for each of the contrary logistics flow clients. ” ( Rogers and Tibben-Lembke, 1998 )

Rearward Logisticss can be improved through CRC ‘s by:

Increasing Standardization and Information visibleness: By presenting CRCs standardisation of procedures will happen, therefore doing it significantly easier to place errors and mistakes and so take the necessary action in rectifying them. With the addition in standardisation comes simpleness, this brings approximately consistence in the contrary logistics procedure every bit good as improved visibleness.

Bettering infinite use: By directing Returned merchandises to CRCs alternatively of hive awaying them in the existent shop a more efficient use of infinite can happen. Particularly in retail shops where every square metre of infinite should be allocated to Merchandises that can be sold.

Cost nest eggs due to labor: Less labor is needed to finish undertakings by presenting CRC ‘s – therefore cutting costs.

Cost nest eggs due to transport: Conveyance Costss are by and large the largest cost constituent of Logistics. The same goes for contrary logistics. When CRC ‘s are involved, trucks can be running on a agenda, picking up all returned merchandises from shops. This will mostly cut down conveyance costs due to consolidation of cargo.

Enhanced client service: by holding an efficient returns system in topographic point client service is enhanced. For illustration devising usage of a CRC the clip a merchandise spends in the rearward grapevine is minimized – leting shops to return goods to the clients more rapidly or offering recognition to clients.

Expediting the contrary logistics procedure: without the usage of CRC ‘s, retail merchants store all returned merchandises, frequently go forthing them for a big sum of clip before directing unorganised, big batches of returns to the industry. This resulted in returned merchandises fring value. With CRC ‘s the temperament clip can be reduced greatly. This can be seen for illustration by holding regular “ pick-ups ” of returned merchandises from retail shops as opposed to directing merchandises back all at one time in big batches

( Rogers and Tibben-Lembke, 1998 )

The danger of holding CRC ‘s is that Employees go self-satisfied with respects to Gate-keeping and merely get down to disregard it wholly, leting any merchandises into the contrary logistics procedure. It is of import to observe that the demand for decently trained employees who are empowered to do determinations sing the Gate-keeping is highly of import and can non be over looked. If all returned goods from a shop were sent to CRCs without being inspected foremost, it could go on that many merchandises may necessitate to be thrown off. This evidently is non efficient, for illustration unneeded conveyance costs have been incurred by first transporting the merchandise to a CRC, Merely to be thrown off. ( Rogers and Tibben-Lembke, 1998 )

Rogers and Tibben-Lembke ( 1998 ) have identified some Benefits of holding CRCs:

Simplified shop processs

Improved supplier relationships

Better returns stock list control

Improved stock list bends

Reduced administrative costs

Reduced shop degree costs

Reduced shrinking

Refocus on retail merchant nucleus competences

Reduce landfill

Improved direction information

( Rogers and Tibben-Lembke, 1998 )

From the above information it can be seen how the usage of Centralized returns centres can assist change by reversal logistics run more expeditiously.

Wood bender instance survey:

Wood bender – a company that manufactures chairs is based in Somerset West was founded in 1988 and is owned and managed by Charles Mast. Wood bender find their niche in their ability to flex wood. There is no other company in South Africa and really few in the universe who have these capablenesss. Any rival that requires Bent wood for their furniture must look to outsources internationally. This allows Woodbender to fabricate merchandises at a much lower cost, increasing net income borders significantly.

This concern is built upon “ Making certain the client gets what they want ” and if there is a job with any of the merchandises they can be returned no inquiries asked. Mr. Mast stated that about 70 % of Woodbenders returns come from their clients who are most profitable to the concern. It is by this logic that Woodbender places extreme importance on finishing the returns procedure in a timely mode – whether it ‘s for merchandises to be refurbished, repaired or replaced.

Charles Remarks on the importance of fulfilling clients.

“ One of the fringe benefits of flexing our wood internally is that when we get returns we can fabricate a new portion instantly, salvaging clip and finally doing the client happy. In this manner we have created a competitory advantage that has led to a sustainable client base ”

Upon sing Woodbenders mills it was discovered that one out of the five installations is dedicated to returns – all returned merchandises come ining into the contrary logistics procedure get sent to this Centralized returns centre ( CRC ) , where they are so dealt with consequently. The manner that Woodbenders run their returns procedure has a focal point on simpleness.

Wooderbenders returns procedure:

Client contacts Woodbenders with respects to faulty merchandise, and depending on the location of the client,

The merchandises get shipped to Woodbenders CRC where they are so inspected.

Or a representative from Woodbender will be sent out to inspect the merchandise at the clients site – if the merchandises in inquiry are so deemed tantrum to come in the contrary flow, they are either shipped to the CRC or the company that Woodbenders outsource their upholstery from.

Once the job has been identified the following class of action is rectify the mistake. A new portion is manufactured, and the merchandise is reassembled.

The finished merchandise is so returned to the client from the CRC or the outsourced upholstery company

It is through simplifying the returns procedure by utilizing a CRC and a “ client satisfaction ” based returned policy that Woodbender is able to make client trueness.

At the decision of an interview with Mr. Mast, he remarks on what rules Woodbender usage in running an efficient returns system:

“ The job with most concerns today is that Reverse Logistics is n’t paid adequate attending to. We make certain of two things, one that our returns are handled every bit rapidly as possible, and two, that we minimize the costs of returns every bit far as possible ”

The two rules applied by Woodbender should be a focal point of any organisation.

( C.Mast, 2010, pers.comm, 20 Sept )


A study done inquiring the concerns involved to rate the importance of contrary logistics shows that 60 per centum of all concern surveyed position reverses logistics as unimportant and hence give small clip and few resources to this map of logistics. This is a position that must be corrected and until concerns view Reverse logistics as of import, clip, money and valuable resources will be lost, moreover without paying proper attending to the nexus between client service and contrary logistics it will be hard to construct a sustainable client base.

Having the contrary logistics function good managed is of extreme importance. Employees managing returns should be good trained in policies and process pertaining to change by reversal logistics and empowered to do determinations by direction. Some chief benefits of efficaciously pull offing contrary logistics are cut downing costs, salvaging clip and bettering client satisfaction.

It is of import to take a holistic position of the supply concatenation and see what countries are doing hurting with respects to change by reversal logistics. Once this has been done it is of import to seek ways to better on these countries. Making usage of CRCs goes a long manner in bettering the contrary logistics procedure by increasing standardisation, salvaging costs from labor and conveyance, heightening client service and rushing up the returns procedure.


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