Reverse Logistics
Group 4:
Nripesh Sen
Pratik Poddar
Pratyusha Dash
Preetish Swain
Priyaranjan Mohanty
Rahul Jain
2
“
Reverse Logistics is the process of moving
products from their typical final
destination to another point, for the
purpose of capturing value otherwise
unavailable, or for the proper disposal of
the products.
IMPACT OF REVERSE LOGISTICS
» Forecasting
» Carrying costs
» Processing costs
» Warehousing
» Distribution
» Transportation
» Personnel
» Marketing
Comparison between forward and Reverse logistics 4
Workflow 5
Typical Reverse Logistics Activities 6
» Processing returned merchandise - damaged, seasonal, restock,
salvage, recall, or excess inventory
» Recycling packaging materials/containers
» Reconditioning, refurbishing, remanufacturing
» Disposition of obsolete stuff
» Hazmat recovery
Impact of Reverse Logistics on Brand 7
Impact of a negative Impact of a positive returns
1%
returns experience. experience.
120%
1% 100%
85% of 95% of
1% 80%
customers WILL customers WILL
1% NOT shop again 60% shop again if the
if the return return process is
0% 40%
process is not convenient
convenient
0% 20%
0% 0%
Business Drivers of RL
External
Legislation Business Strategy
• WEEE directive • Customer Retention/Loyalty
• Potential EU legislation on re-use • Corporate citizenship
of packaging material • Market/customer behavior analysis
• RoHS directive • Reduce risk for forward channel
• Sarbanes-Oxley • Drive sales
• Feedback to new product development/IT
Customer Service Initiatives Economic Benefits
• Return of defective products
• Recover assets
• Product disposal after end-of-life
• Recapture value
• Product upgrades
• Control gray market
• Product recall
• Global Labor Cost
• Warranty returns
• Product defect analysis
Internal
Operational Strategic
Source: Infosys & Cisco Systems
Key Parameters for RL supply chain 9
»Rate of returns?
»Cost to process a return?
»Time to get the item back on the shelf if resaleable?
Costs above the cost of item 10
»Merchandise credits to the customers.
»The transportation costs of moving the items from the retail
stores to the central returns distribution center.
»The repackaging of the serviceable items for resale.
»The cost of warehousing the items awaiting disposition.
»The cost of disposing of items that are unserviceable,
damaged, or obsolete.
Costs in RL Supply Chain 11
»Process inbound shipment at a major distribution center = 1.1
days
»Process inbound return shipment = 8.5 days
»Cost of lost sales
»Wal-Mart: Christmas 2003 - returns = 4 Days of Supply for all of
Wal-Mart = 2000 Containers
»PalmOne - 25% return rate on PDAs
»Wal-Mart: $6 Billion in annual returns = 17,000 truck loads
(>46 trucks a day)
»Electronics: $10 Billion annually in returns
»PCs: $1.5 Billion annually = approx $95 per PC sold
RL Adds to Bottom Line
12
»Your Company Manufactures 1 Million Units Per Year
»Revenue per Unit is $1 or $1,000,000
»Profit per unit is 5% After Tax or $50,000
»Return Rate Average is 10% or 100,000 units
»Returns Represents $100,000 of Sales or $50,000 negative
to bottom line
»Reverse Logistics Recovers 80% of the Returns or $80,000
to company bottom line
»Company’s After Tax Profit is $30,000
What Value Can Reverse Logistics Deliver? 13
Function Key Objective How Reverse Logistics Can Help
Maximize • Control costs with efficient operations
Finance
profitability • Recover value from returns
• Make returns process painless, to increase customer
satisfaction
Sales Grow the business
• Support growth by making product available to
surgically resell
Marketing Build the brand • Control the gray market
Improve customer • Feed returns data back upstream to drive process and
Quality
experience product design improvements
All of the above, • Ensure environmental protection
CEO + Corporate Social • Leverage returns to accelerate giving back to the
Responsibility community
Returns: An Operations Perspective 14
»Emerging industry in infancy stage »How do we know WHAT we should be
»Many skill sets involved, deep doing?
knowledge of some skills »How do we know HOW WELL we are
»Person on Warehouse floor –needs doing?
tools »Where are the opportunities to
»No Schooling for Reverse Logistics improve PROFITS?
»No rules or standards
»No methods
»Few Best Practices
»Few comparisons
Some Key Challenges Operations people face: 15
So many people, from so many departments, at so many locations, from different
companies, needed to process one return.
For the group managers, returns is a small, annoying part of their group – Most of a
Return is someone else’s problem /fault.
Turn Around Time is often very slow and difficulties often arise that add days to the
processing of a Return.
Stressful work environment due to frequent issues that need to be resolved ASAP
Some Key Challenges Operations people face: 16
Difficulties arise with process Hand-offs between groups, Outsourced providers and
multiple data systems
Collect little data about a Returned unit; it often has errors, so it may get handled
incorrectly or we have to believe what the customer tells us
Often time consuming or difficult to track down the status of a unit
Senior staff spend considerable time solving processing problems or escalated issues
Best Practices 17
»All Returns under control of ONE GROUP.
»Very Defined Business Processes
»Process Mapping – companies that develop process maps saved up to 40%
»Map all processes and add timelines
»Automate processes where possible
Flipkart Reverse Logistics 18
• eKart's reach - 150 Cities,
the largest such network set
up by an online retailer in
India
• eKart currently offers
services such as delivery
logistics, reverse logistics
and pay on delivery
How does Flipkart handle its returns? 19
Product is
Defective/Damaged/Quality Wrong Product
Issues
When?
Exchange of Product (Ex:
Customer is not willing to
Old phone exchange with
buy anymore
new phone)
The Return Process 20
Return Request by customers
Validation of request and Return Initiated
Agent assigned to return location
Agent Verifies the product to be returned
Shipping back to the vendor
Thank you.
Any questions?
