5 Steps to Productive Use of Reverse Logistics Program

What is reverse logistics and how to use it properly? This article will explain related theories, best practices, and implementation issues.

1. Current Practices
Reverse logistics is often seen as a clerical function. According to the paper "An Overview of Some Reverse Logistics Practices in the United States" by Olorunniwo and Xiaoming in 2011,

- Return related cost is less than 5% of the total logistics cost. This is the reason why people call it "Necessary Evil", you don't need it but can't get rid of it.

- Major causes of product returns are wrong products delivered due to a poor process, customer changing minds, then make a refund and products returned to the vendor.

- Most companies see it as the way to satisfy the customer, but there is no specific performance measurement for it.

2. Related Publications
Let's take a look at the academic side of the story. The article by Rubio and Chamorro in 2008 explains about the current state research in their paper "Characteristics of the research on reverse logistics (1995–2005)" that major research stream is,

- Development of math algorithm in a production planning and design of optimal return network network
- Literature review and questionnaire-based survey about general issues

3. How to Streamline the Operations
The article by Brito and Dekker in 2003 indicates in the article "A Framework for Reverse Logistics" that it gains more interest due to lots of pressures from regulatory agencies, customers, and corporate social responsibility movement. Anyway, there is a big gap between supply chain theories and practices. As a result, the infographic is created to demonstrate 5 practical steps that you can improve the performance of reverse logistics every day.



4. Implementation Issues
The Reason code appears to be a very important factor to the success or failure of a program. Many surveys indicate that, even though a company has the reason codes within a manufacturing environment such as a type of work-in-process or defects, they don't keep track of the reasons for the returns properly. Establishing more comprehensive reason codes and using control charts to monitor the trend of each code will help a company to figure out the problems with normal supply chain operations such as sourcing, manufacturing, and delivery.

The return policy is also mentioned in many related articles that it's the important element. Anyway, paper related to the return policy can be found only in journals related to operations management and marketing. The recommendations provided in the infographic is then the results of the numerical examples and sensitivity analysis so you are encouraged to examine if it can be applied to your situation.

Another issue is how to forecast the demand for returns. Practitioners notice that the volume of returns is related to the volume of sales, but there are only 2 articles discussing the forecasting issue. The information provided in the infographic uses a multiple regression analysis to find the relationship between some variables that may influence the number of returns. Please feel free to explore other variables that apply to your business.

References
- Olorunniwo, F. O., & Li, X. (2011, January). An overview of some reverse logistics practices in the United States. In Supply Chain Forum: An International Journal (Vol. 12, No. 3, pp. 2-9). Taylor & Francis.

- Rubio, S., Chamorro, A., & Miranda, F. J. (2008). Characteristics of the research on reverse logistics (1995–2005). International journal of production research, 46(4), 1099-1120.

- De Brito, M. P., & Dekker, R. (2004). A framework for reverse logistics. In Reverse logistics (pp. 3-27). Springer, Berlin, Heidelberg.

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Last review and update: August 29, 2018

About the Editor

Ben Benjabutr is the editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in various functions in supply chain magement. In his free time, he enjoys reading business and management books. You can learn more about him here or connect with him via TwitterQuora and Google+ or drop him a line via e-mail.