Study of existing Reverse Logistics framework Retail industry

Study of brisk avoid Logistics frame run short Retail patience nobble b lap aside Logistics is a real labyrinthine and specialized bea of any render mountain range and it involves discussion individual in flood tide parcels, opening and inspecting produces, communicating with immanent departments, customers and vendors and hence directing products into liking channels which testament bear the highest assess. stinting Reverse Logistics system jackpot transform an increasingly dear(p) and complex fades counseling make for into a competitive service. Integration of gust logistics in specific sell sectors is vituperative for sustainability. The aim of this project nominate is to distinguish and examine the revoke logistics oversight in the sell application in allege to understand the existing finish of raise logistics and wherefore see relevant recommendations to advance qualification in coke logistics concern. later critical depth psychology of the existing volte-face logistics commission in the selected sell sectors, potential ways to improve the efficiency of wrench logistics activities would be recommended in the selected retail sectors.Chapter 1 IntroductionTwenty-years ago, allow for chains were busy fine-tuning the logistics of products from primitive tangible to the end customer. Products argon obviously still streaming in the direction of the end customer but an increasing prevail of products is coming back. This is happening for a whole range of industries, covering electronic goods, pharmaceuticals, beverages and so on. For instance distant sellers equivalent e-tailers train to handle high contain rates and many times at no embody for the customer. It is non surprising that the Reverse Logistics Executive Council has announced that US firms have been losing billions of dollars on account of world ill-prep atomic number 18d to deal with pileback flows (Rogers and Tibben-Lembke, 1999). firearm some(a) actors in the chain have been deplumed to take products back, others have pro-actively d matchless so, attracted by the value in used products. One way or the other, Reverse Logistics has go a keystone competence in modern sum up chains. Many companies that, previously, did not devote much time or heartiness to the management and understanding of inverse logistics have begun to pay attention.Definition of nobble logisticsIn 1998 Stock defined obliterate logistics as the role of logistics in product returns, source reduction, recycle, materials substitution, reuse of materials, intemperance disposal and refurbishing, repair, and remanu detailuring (1998, p. 20). In a 1998 paper in the Journal of Business Logistics Carter and Ellram adopted a connatural commentary, calling it the process whereby companies can pay off to a greater extent environmentally efficacious finished recycling, reusing, and reducing the amount of materials used (p. 85). If the counsellin g of logistics is the movement of material from the drumhead of origin toward the point of consumption (Council of Logistics Management 1999), then the focus of knock over logistics should be the movement of material from the point of consumption toward the point of origin. Rogers and Tibben-Lembke in their 1999 article emphasized a clear definition of override logistics drawn in essence from the Council of Logistics Managements definition given as follows, The process of planning, implementing, and controlling the efficient, apostrophize effectual flow of raw materials, in-process inventory, finished goods, and colligate cultivation from the point of consumption to the point of origin for the purpose of recapturing or creating value or proper disposal (Rogers and Tibben-Lembke 1999, p. 2)This discourse focuses on the mouse logistics activities in the retail industry with an analysis framework clienteleing the cost-benefit, visibility-information flow and efficiency. A p olicy change logistics flow is more reactive with much less visibility. The emblem 1 depicts a typical s raising logistics information flow for the retail channel. For instance, when a consumer returns an item to a retail store, the store collects he items to be sent to a centralized sorting facility. At the time, information some the item and its condition whitethorn be entered into retailers information system and shiped to the process centre.Figure Reverse logistics in Retail an epitome of information flowDe delineateation of rear logistics definitionSince Reverse Logistics is a relatively refreshed inquiry and empirical bea, there be other literature term, like run offd logistics, return logistics and retro logistics or annihilate distribution, sometimes referring roughly to the same. In fact, the diversity of definitions with respect to seey practices is a well-recognized source of misunderstandings some(prenominal) in enquiry as in practice (Melissen and De Ron , 1999)In this dissertation I would like to remark that Reverse Logistics is different from waste management as the latter principal(prenominal)ly refers to collecting and processing waste (products for which there is no unexampled use) expeditiously and tellingly. The crux in this matter is the definition of waste. This is a major issue, as the term has severe legal consequences, for instance, it is lots forbidden to import waste. Reverse Logistics concentrates on those streams where there is some value to be find and the outcome enters a (new) tack chain. Reverse Logistics to a fault differs from honey oil logistics as that considers environmental aspects to all logistics activities and it has been focused specifically on out front logistic, i.e. from producer to customer (Rodrigue et al., 2001). The prominent environmental issues in logistics be consumption of non-renewable natural resources, air emissions, congestion and road usage, noise pollution, and two gaga and non-hazardous waste disposal (see Camm, 2001). Finally, retroversion logistics can be seen as part of sustainable development. The latter has been defined by Brundland (1998) in a report to the European Union as to meet the drives of the enclose without compromising the ability of future generations to meet their own needs. In fact one could regard reverse logistics as the implementation at the party level by making sure that society uses and re-uses both efficiently and effectively all the value which has been put into the products.The b nightclub amongst frontward logistics (from raw materials to end substance absubstance abuser) and reverse logistics (from end user to retrieval or to a new user) is not strictly defined as one can wonder rough what raw materials ar, or who the end user is, in modern supply chains. For instance, used/recovered glass is a substantial input for new production of glass. A holistic expectation on supply chains combining both forward and rever se logistics is embraced by the closed-loop supply chain concept (Guide and van Wassenhove, 2003). Recovery practices be framed within the supply chain, and the encircling aspect of the process as a whole is therefore stressed having either 1) a animal(prenominal) (closed-loop) to the original user (see Fleischmann et al., 1997) or 2) a functional (closed-loop) to the original functionality. view in term of closed-loop supply chains emphasizes the immenseness of coordinating the forward with the reverse streams. Actually, whenever both forward and reverse flows argon mired, co-ordination has to be given(p) (see Debo et al., 2003). This happens, either in closed- or open-loops (the latter refers to when neither the original user nor original functionality argon in the reverse logistics process).Aim and objectives of the projectReverse Logistics is a very complex and specialized area of any supply chain and it involves handling individual incoming parcels, opening and inspectin g products, communicating with internal departments, customers and vendors and then directing products into disposition channels which will provide the highest value. Efficient Reverse Logistics system can transform an increasingly costly and complex returns management process into a competitive advantage. Integration of reverse logistics in specific retail sectors is critical for sustainability.The aim of this project work is to identify and examine the reverse logistics management in the retail industry in order to understand the existing application of reverse logistics and then propose relevant recommendations to improve efficiency in reverse logistics management. In order to earn this objective the project work would involveIdentifying the key retail sectors in which reverse logistics has and will have potential immenseness visit the various reverse logistics activities in the selected retail sectorsAnalyze the effectiveness of reverse logistics management from the perspectiv e of efficiency, profitability and environmental aspectsPropose recommendations to improve the efficiency of reverse logistics managementReport presidencyThe dissertation consists of five main chapters which is organized as followsChapter 1 introduces the research topics as well as the main objective of this ruminate. Moreover, this chapter provides some of the background information some reverse logistics. It also provides a brief detail of the research methodology and the organization of the dissertation.Chapter 2 provides the basic knowl surround of reverse logistics process together with key success factors and barriers of effective reverse logistics management are introduced. The previous written document are discussed in the literature go off section.Chapter 3 discusses the information about research rule and data collection method. The section elucidates the research attempt and the relevant frameworks to be included in the research conduct. This section discusses about the methodology of how the reverse logistics management is analyzed to matchress the research questions.Chapter 4 discusses the analysis related to the reverse logistics trends and the effectiveness of reverse logistics management from the holistic perspective of cost, efficiency and environmental aspects. The key drivers and persistent barriers for reverse logistics management for the selected retail companies are discussed.Lastly, chapter 5 concludes the result of the finding and the analysis. The recommendation and the sermon about the future research are discussed.Chapter 2 Literature reviewBackgroundRetailers constantly focus on strategies to gain competitive advantage and to improve financial performance. In doing so, dialect is more frequently creation placed on logistics, including tactical initiatives such as automatic renewal programs, real-time information sharing, and advanced demand management techniques designed to improve internal efficiencies (Li 2002 Daugherty, Myers, Autry 1998 Seideman 2002).However, retailers also compete on the basis of effectiveness, striving for change magnitude customer satisfaction. One competitive tactic used to enhance customer satisfaction includes the implementation of liberalized product returns policies. By taking a more consumer complaisant approach in their return policies, retailers communicate a high level of service to patrons, and thereby subjoin customer satisfaction with final goals of higher(prenominal) sales and profitability (Coopersmith 1990 Krapfel 1988).As a result of return policy liberalization, acceptance of product returns is now commonplace returns are describe to be as high as 10-15 percent of sales in some retail industries (Rogers Tibben-Lembke 1999), and are thought to be even higher in catalog and internet retailing, with typical return rates of up to 40 percent (Rogers, Lambert, Croxton, Garcia-Dastague 2002). However, the acceptance of returns places stress on the retailers l ogistics function. Whereas typical logistics activities are engineered to optimize flows from producer to consumer, reverse logistics activities move product, information, and currency in the reverse direction. While epochal efforts have been expended in streamlining and optimizing retail logistics activities, the accomplishments associated with these activities do not always directly apply to the reverse logistics process. The forward movement of goods by means of the supply chain generally results in large receipts of goods at clearly defined intervals (such as when inventory levels reach critical galosh levels, or at pre-specified and scheduled times), with the ultimate sale executed in smaller quantities to end-users. On the other hand, reversed supply chain flows are less predictable, pass byring at various times and for various reasons, and consequently, the be of returns handling can be high (Rogers et al. 2002 Stock 1998).One area of concern related to reverse logisti cs that has been largely ignored by academic research and practicing retailers is the financial implications of reverse logistics activities, especially as related to firm liquidity. When products reverse directions in a supply chain, it can happen quickly and without notice. While effective reverse logistics activities generally result in value electrical switch and increased cash inflows, there can be periods where significant unthought cash outflows occur. This is often due to the time lag between the import the firm recovers the value from the returned product and the assumption of cost incurred in the reverse logistics process. Therefore, financial management of the reverse logistics process becomes salient, and needs to be a retailer focus on an ongoing basis.Reverse logistics processA typical reverse chain process is shown in Figure 2. plainly a distinction should be made between different categories of returns moneymaking(prenominal) ReturnsReturns for which there is a n immediate demand at another market stance or segment. Possible causes customer dissatisfaction, catalogue sales, overstocks etc. Commercial returns occur in the sales phase or shortly by and by.Repairable ReturnsDefects and suspect components (modules/parts) from subject area (exchange) repair activities or products under warranty. Customer is empower to a replacement product.End-of-use ReturnsReturned products/components which are not of longer use to the original owner, but for which new customers can be found. Reasons end-of-season, end-of-lease, trade-in, product replacements etc.End-of- living ReturnsItems of no remaining use, which are processed due to contractual or legislative obligations. These returns are often collected and processed according to legislative obligations.RecallsProducts recalled by the manufacturer due to a condition or defect that could affect its safe operation. operate on a recall is completed at no cost to the product owner. Other types of retur ns, such as refillable units and reusable carriers, are not included in this study.Figure Reverse logistics processReturned goods often go finished the following activities depending on the return typeProduct encyclopaedismRetrieval of the product back from the market. The timing, quantity, quality and composition of returned product need to be managed in close cooperation with other supply chain parties. allurementLogistical activities (such as shipping, consolidation, transhipment and storage) to obtain the products back from the market and transport them to facilities involved in the other stages.Sorting, Testing DispositionThe classification (according to quality and composition) of returns and goal stage of the route the product will take in the reverse chain. Market and strategic conditions are taken into account in the disposition finis.RecoveryThe process of recovering value from the returned product by re-use, repair, refurbishment, recycling or other types of recovery .Redistribution SalesBasically, no value recovery has materialised until the recovered products, component or materials are brought back into a forward supply chain.Review of Past research worksFinancial aspects of RLRaimer (1997) indicated that returns are, and always have been, a fundamental part of retailing. His estimate was that reverse logistics account for between 5 and 6% of total logistics costs in the retail and manufacturing sectors. Daugherty et al. (2001), in a survey of US catalogue companies, reported reverse logistics costs on average to be 9.49% of total logistics costs. Rogers and Tibben-Lembke (1998) set returns for different industries, with figures being recorded of 50% (magazine publishing), 20-30% (book publishers), 18-35% (catalogue retailers) and 10-12% (electronic distributors). Returns of merchandise bought over the Internet are expect to escalate as online sales grow. Consequently, companies in many sectors are lining a change of customer interface pos sibilities and subsequent supply chain dynamics (Rowley 2000). Returns are high because customers purchase online items on trial until they can handle them physically. Moreover, in mail order, especially ladies fashion, return rates of 60% are common (Wheatley 2002).Given this level of returns, it is eventful to recognise that reverse logistics can have a significant bottom line tint on a company, and the ability to address opportunities may depend at long last on management perceptions of reverse logistics (Stock 1998, Mason 2002). Autry (2005) argued that managers need to realise that effective handling of reverse logistics transactions can result in stinting and strategic benefits. In practice, some companies seem to ignore the significance of reverse logistics to their supply chain, some companies have gradually recognized its importance, whilst others review reverse logistics as a strategic variable. It has been suggested that innovator firms that develop an expertise in rev erse logistics activities and recognize them as a set of business processes that add value can potentially generate revenue, improve customer satisfaction, achieve significant cost savings and deliver a competitive edge in their various markets (Stock 1998, Carter and Ellram 1998). Given such potential benefits from evolution reverse logistics processes, it is important to recognize the existence of barriers that may hinder the implementation of reverse logistics processes. Ravi and Shankar (2005), in a study of the automobile industry, identified 11 barriers to the application of reverse logistics. These include resistance to change, wish of appropriate performance measures, lack of training related to reverse logistics, lack of commitment by top management and lack of strategic planning.Dowlatshahi, S. (2008) in his cost-benefit analysis for reverse logistics management considered and analysed the relevant literature in RL and identified the present state of possibility in RL re garding cost-benefit. The research methodology used is exploratory fictitious character study approach. The cost-benefit is analysed and evaluated in terms of specific sub-factors associated with it by use of two in-depth case studies. Two companies from different industries engaged in RL operations are considered. The analysis of these case studies resulted in propositions and insights regarding RL operations. Based on these insights, the cost-benefit sub-factors, propositions, and a framework for effective design and implementation of RL operations are provided. This framework determines the appropriate sub-factors and how the return process of products/parts with respect to cost-benefit works. In conclusion, the managerial implications and future research directions were provided.There are several parties involved in the management of the reverse logistics process and the way in which such interfaces are managed is crucial in both environmental and economic terms. As returns man agement becomes increasingly treasure as an area of supply chain importance, retailers are either create in-house capabilities or outsourcing the operation to third-party logistics (3PL) providers (Krumwiede and Sheu 2002, Meade and Sarkis 2002, Hughes 2003). These supply chain interfaces occur in a number of different ways. For example, interfaces occur between retailers and manufacturers, between retailers and 3PLs and between end customers and retailers. There are many tensions occurring between these different players in the process. Currently, some companies prefer to build a separate infrastructure in order to hurry the operation of the reverse logistics process. Other companies want to optimize the avail of their physical network by combining the reverse operation with the forward operation. In addition, centralized returns are a related possibility when companies are considering the construction of their physical network. environsal aspects of RLEnvironmentally friendly practices and the need to conserve sustainable development are important aspects in the debate meet reverse logistics. By not embracing sustainability, organizations face consequences in terms of increased economic and social liability (Savits 2002). Sustainable development embraces the tierce bottom line philosophy of not compromising the future needs of society, the economy and the environment. In many reports on corporate social responsibility, sustainable transport is a significant feature with attempts to cut harmful emissions whilst maintaining economic operations. A driving force behind the search for improvements in sustainable distribution was the document published by the Department of Transport (1998) entitled A new deal for transport better for everyone. Efficient desegregation of forward and reverse logistics has a significant part to play in this process. In this drive for sustainable distribution, it is important to recognize that accounting has a role to play. Me ntion has already been made of Corporate Social responsibility Reports. There is a danger that traditional models of accounting and finance are actively fouling and encouraging unsustainable organizations and institutions (Gray 2002). Accountants need to be engaged in debates about environmental strategy, the institutional framework (government incentives) needs to support environmentally sound behaviour, and the change agents (such as environmental accounting) need to be imbed within the organization (Larrinaga-Gonzalez and Bebbington 2001).Reverse logistics managementMany tools exist to support the management of the reverse logistics process. The literature identifies mathematical models to support supply and transportation decisions (Du and Hall 1997). Also, the management of inventory can be supported through a range of mathematical models and enterprise resource planning (ERP) information systems (Boykin 2001, Teunter 2002). Hu et al. (2002) put forward a cost-minimisation m odel for minimising the total operating costs of a multi-time-step, multi-type hazardous waste reverse logistics system. Keeping with the theme of super acid supply chain management, Sheu et al. (2005) presented an integrated logistics operational model to co-ordinate the cross-functional product logistic flows and used-product reverse logistics flows in a green supply chain. tuition communication technology (ICT) plays a significantly growing role in supporting reverse logistics operations and Daugherty et al. (2005) called for resources to be focused on developing information technology. In recent years there have been a number of developments and improvements in dedicated reverse logistics software (De Brito et al. 2002). Developments in artificial satellite tracking systems have also enabled vehicles to navigate better their way through congestion and to monitor and improve fuel consumption. The continuing development of ICT offers opportunities for significant economic and e nvironmental benefits in the reverse logistics process.Drivers of reverse logisticsThere are a number of drivers of reverse logistics and many of these actually occur as a result of product and service decisions taken at the design and planning stage of product and service provision. Interestingly, Sciarrotta (2003) illustrates how Philips Consumer Electronics place great emphasis on trying to prevent returns rather than dealing with them later. In the retail sector, however, strategic decisions concerning on-shelf availability together with a liberal returns policy amongst retailers are significant factors in the level of returns. Legislative factors (e.g. WEEE Directive to be enforced June 2006) are also becoming increasingly important, with new legislation pore on the need to dispose of and recycle products in an environmentally friendly manner.In summary, the literature review has provided an overview of the issues that need to be considered when reflecting upon the management of reverse logistics processes. The significance of reverse logistics processes, in terms of both bottom line performance and environmental impact, has been highlighted in the literature. Also, the need to recognise the drivers of reverse logistics is highlighted together with the requirement to manage the interfaces between different members of the supply chain. Finally, the literature has identified numerous tools that can be used to support the reverse logistics process, and unresolved up the possibilities for using accounting information in this setting to facilitate improved economic performance, supply chain efficiency and sustainability.Determinants of reverse logistics (Ravi et.al, 2005) scotch factors both directly and validatoryly (de Brito Dekker, 2003), legislation (de Brito Dekker, 2003), corporate citizenship (de Brito Dekker, 2003 Rogers Tibben-Lembke, 1998) and environmental and green issues (Rogers Tibben-Lembke, 1998) are the four determinants of reverse l ogistics taken into account in this research. These are briefly described below.Economic factorsEconomics is seen as the driving force to reverse logistics relating to all the recovery options, where the company receives both direct as well as indirect economic benefits. It is seen that companies continually strive for achieving cost savings in their production processes. If a firm does reverse logistics well, it will make money (Stock, 1998). The recovery of the products for remanufacturing, repair, reconfiguration, and recycling can lead to paid business opportunities (Andel, 1997). Reverse logistics is now perceived by the organizations as an enthronisation recovery as opposed to simply minimizing the cost of waste management (Saccomano, 1997). A reverse logistics program can bring cost benefits to the companies by emphasizing on resource reduction, adding value from the recovery of products or from reducing the disposal costs. Guide and Wassenhove (2003) give an example of the US firm named ReCellular, which by refurbishing the cell phones, had gained economic advantage. Thus, the economic drivers of reverse logistics lead to direct gains in input materials, cost reduction, value added recovery and also in indirect gains by impeding legislation, market protection by companies, green shape for companies and for improvement in customer/supplier relations.LegislationAnother important driver for the reverse logistics is legislation. Legislation refers to any jurisdiction that makes it mandatory for the companies to recover its products or accept these back after the end of life of the product. These may include collection and reuse of products at the end of the product life cycle, shift waste management costs to producers, reduce volume of waste generated, and the use of increased recycled materials. For example, the Waste Electrical Electronics Equipment directive encourages a set of criteria for collection, treatment and recovery of waste electrical and electronic equipment and makes producers responsible for pay these activities (WEEE, 2003). There has also been a restriction on the use of hazardous substances in the production processes, which facilitates the dismantling, and recycling of waste electronics. A reverse logistics decision for the EOL computers should ensure that the end-of-life products are retired in a way that is compliant with existing legislation.Corporate citizenshipAnother driver for the reverse logistics is the corporate citizenship that concerns a set of values or principles that impels a company or an organization to become responsibly engaged with reverse logistics activities. Reverse logistics activities can lead to increase of corporate image (Carter Ellram, 1998). A good example in this context would be of Paul Farrow, the founder of Walden Paddlers, Inc., whose concern of the velocity at which consumer products locomote through the market to the landfill, pushed him to an innovative project of a 100 -percent-recyclable kayak (Farrow, Johnson, Larson, 2000). In 1996, Hanna Andersson, a million direct retailer of infants and toddlers clothes developed a program called Hannadowns in which they distributed the childrens gently worn returned clothes to schools, homeless shelters, and other charities (Spence, 1998). Nike, the shoe manufacturer encourages consumers to bring their used shoes to the store where they had purchased them after their usage. They ship these back to Nike plant where these are shredded and made into basketball courts and running tracks. Nike also donates the material to the basketball courts and donates fund for building and maintaining these courts, thus enhancing the value of brand (Rogers Tibben-Lembke, 1998). It is seen from the last two examples that few firms are playacting as good corporate citizens by contributing to the good of the union and assisting the people who are probably less fortunate than their typical customers.Environment and green is suesConcern for the environment and green issues is also one of the drivers of reverse logistics. The reverse logistics lead to benefits of environment (Byrne Deeb, 1993 Carter Ellram, 1998 Wu Dunn, 1995). Hart (1997) proposes that the principle of the ecological tone indicates the relevance of greening initiatives for countries. Reverse logistics has led to competitive advantage to companies which proactively structured environmental goals into their business practices and strategic plans (Newman Hanna, 1996). Managers are giving increasing importance to the environmental issues (McIntyre, Smith, Henham, Pretlove, 1998). The environmental management has gained increasing interest in the theater of supply chain management. Handfield and Nichols (1999) mention greening as a critical future avenue in this area. Murphy, Poist, and Braunschweig (1995) have found that 60% in a group of 133 managers surveyed considered the issue of the environment to be a very important factor and 82% of them expected that the importance would increase in the years to come. A green image of producing environmentally friendly products has become an important marketing element, which has stimulated a number of companies to explore options for take-back and recovery of their products (Thierry, 1997). A reverse logistics operations for EOL computers should ensure that the environmental and green issues are taken into account.Summary of literature reviewThis brief overview of the literature provides a framework for addressing the research questions identified in the study. The literature covers the definition of reverse logistics, the scale of the problem, the bottom line impact and potential barriers, the drivers of reverse logistics, supply chain interfaces, methods suggested in improving the reverse logistics process management and importance of sustainability issues.Chapter 3 MethodologyResearch objectiveThe aim of this project work is to identify and examine the reverse logi stics management in the retail industry in order to understand the existing application of reverse logistics and then propose relevant recommendations to improve efficiency