The Importance of Reverse Logistics in Supply Chain Management

Introduction

Many people realize that the universe’s ability to support life is not infinite. The understanding causes significant pressure among global leaders and humans in general. Companies using natural resources to meet the ever-budding human demand acknowledge the rampant drop in natural deposits to levels that jeopardize sustainability. Thus, the situation pushes the global population to devise appropriate tactics to save the world before it is too late. Reverse Logistics (RL) is one of the methods applied by manufacturers to meet this goal. However, some groups view the idea as a negative facet of supply Chain Management. The matter arises from several reasons, among them a lack of comprehension due to the approach’s newness, cost implications, and the possibility of product damage through the reverse channels. Despite these complications, several organizations gradually appreciate the essence of RL and are adopting it to boost the supply chain system’s enduring competitiveness. As such, RLs are becoming more and more crucial in today’s market as they save costs for businesses, boost consumer loyalty, and benefit the environment, among other paybacks.

Definitions

Supply Chain Management

Supply chain management (SCM) is an administrative concept and organizational technique involving the integrated processes of planning and controlling the complete flow of products. The paradigm mainly takes care of the information regarding raw materials supply to the manufacturer, commodities distribution, and products and services supply to the end user through different channels (Sathish & Jayaprakash, 2017). SCM appreciates the changing nature of operations during an organization’s logistics and manufacturing processes. Accordingly, SCM’s primary goal is to streamline business operations while ensuring that products reach the end user in the right quality and quantity. Similarly, SCM allows multinationals to meet the varied needs of their customers in different parts of the world with efficiency.

Reverse Logistics

The lack of a clear understanding of the phrase ‘Reverse Logistics’ causes significant confusion in business and academic research. Accordingly, different sources define the aspect variedly, with the basic component being the return of used or end-of-life (EOL) products to the manufacturer for recycling or proper disposal. The REVLOG describes RL as ‘the course of planning, instigating, and monitoring regressive movements of commercially viable material from manufacturing, distribution or use point, to the point of recovery or proper disposal’ (Hult & Closs, 2014). Such resources include raw materials, packaging, finished products, and in-process inventory. According to this source, RL not only involves returning EoL items to the manufacturer but also already dispatched raw material and in-process commodities meant for a distant plant. Similarly, Kazemi and Govindan (2019) term RL as the administration of products’ recovery once they are not desired or can no longer be utilized to acquire a commercial value from the mended merchandise. Return, restorations, and the opposite delivery of the cast-off pieces back to the industry and then back to the consumer are standard practices in RL.

Cons of RL

RL exhibits considerable drawbacks like any other business practice. Examples of such cons are discussed below.

Cost Challenges

The standard supply chain management systems mainly involve processes to ensure the successful delivery of usable products to the end user. Under such a system, commercially viable items flow from primary producers to manufacturers to various distribution channels until they reach their point of use (Kazemi & Govindan, 2019). Many companies utilizing this scheme hardly care about what happens to the product after delivery or purchase by the end user. The few that care about these issues chiefly act through after-sales services, such as repairs or repossessions, in case of credit sales. The present situation where customers use products far away from their home nations makes connections between manufacturers and product users even worse. Following the single-way SCM system saves organizations substantial costs, making the practice common among many producers.

The high transportation cost involved in RL discourages many entities from adopting it despite the practice’s newness. Using the direct distribution SCM allows the seller or manufacturer to incur transportation costs only once when sending the product to the market. However, adopting RL means that the producer caters for a second transportation charge as the EoL or other returned material flow back to the firm. Such costs often involve millions of dollars, making the process costly and painful. Equally, most young corporations shun the new supply chain technique due to financial challenges related to the high transportation costs. Hult and Closs (2014) note that many organizations’ financial management systems demand strict budgeting due to financial constraints. Therefore, RL’s inclusion of higher transportation costs hinders the practice’s adoption, thus stopping the many benefits the world can reap from it.

Allies’ involvement in RL and the requirement for allowances contribute to RL’s cost issues. According to Kazemi and Govindan (2019), organizations using RL, such as Dell, work with multiple parties to make the procedure successful. Such associates include allies in charge of EoL items’ collection and their resending to the manufacturer. Multinationals and international distributors using RL require numerous allies for the operations to succeed. The producers pay the partners substantial money that can be utilized on other operations. The cash-out co-exists with other financial necessities, such as paying for transportation charges and inspections at different ports, increasing company expenses, and operation costs.

Quality Issues

Before reaching the producer, significant uncertainties surround the recovered products’ quality and value. The matter arises mainly because most returned items under the RL paradigm are already utilized beyond their valuable life. Rubio and Jiménez-Parra (2014) report that some of the recovered items under the new SCM model are damaged, leading to the recovery of materials with minimal quality and value. Breakages are common during the return voyages because allies packaging the ‘waste’ frequently do not apply due care as when packaging a new item for the customer. Rubio and his colleague describe automobiles, household items, electronics, and electrical devices as common items that undergo deformation and injuries during their return journey. The lack of qualified persons inspecting and packaging the recovered products implies increased chances of retrieving low-value items with poor quality. Spending money on such items leads to losses or increased expenditures that may force the manufacturer to pass the cost burden to the customer, affecting the prices and revenue flow.

Pros of RL

RL exhibit several benefits to the firms that utilize them. The first such cons concern revenue promotion through cost savings. Hammes (2020) describes how a Colombian business earned a 37% return on investment two months after adopting the RL system. RL saves organizations money in at least three ways. The first approach concerns the receipt of low-cost raw materials for consumer goods. A firm that handles its returned EoL products properly often has to refurbish the items and resell them to customers. The practice involves less cost than purchasing the independent parts and assembling them, making easier money (Han & Trimi, 2018). Moreover, companies such as Dell and other electronics manufacturers retrieve quality metals and plastics from returned items for making new products for sale. The recovered elements come at a significantly reduced cost, allowing the firm to save money on raw material acquisition. Similarly, companies with end-of-use strategies save a substantial amount, thus gaining profits, by utilizing RL due to the reduced disposal cost (Mthabini et al., 2020). Therefore, RL pays off substantially despite involving additional operations that cost money.

Implementing RL helps make the best use of resources and waste reduction. Many raw materials used in non-edible consumer products are reusable. Examples include the rare metals used in making computers and other electronic parts, such as motherboards. The material hardly degrades even after the gadgets’ end of life. Thus, RL helps organizations realize sustainability by reusing valuable components with a high initial cost. Dell is per excellent manufacturing firm that benefits from RL in this way. The company collects its end-of-life computers, especially in Europe, to reuse and recycle components (Kazemi & Govindan, 2019). The move gives the firm valuable plastics and cables for re-utilization, reducing the company’s raw materials costs significantly. Retrieving EoL products reduce waste by ensuring that customers do not litter useless items with dangerous metals into landfills where they cause damage to the environment. Equally, recycling used material via the RL approach helps conserve nature and keep the environment clean.

Embracing RL demonstrates an organization’s responsibility toward the environment and humans. Almost all the raw materials manufacturing businesses use come from the earth’s surface. Such include the rare metals in computers, wood, fossil fuels utilized for power generation, and numerous other essential components. A rise in demand for products using these elements means further exploitation of the earth and over-utilization of natural resource deposits. According to Mthabin et al. (2020), humans’ current demand for some items exceeds their natural supply. Such a fact necessitates the diversification of raw material sources for sustainability purposes. Thus, RL, which allows firms to retrieve end-of-use (EoU) products for material recovery, demonstrates businesses’ focus on saving the environment and lives.

RL promotes customer satisfaction by providing quality items at reduced prices. According to Zhu et al. (2020), companies utilize a specific formula for setting product prices. The approach mostly puts together production costs and a profit margin regarding a given product line. Erkan (2021) maintains that the rise in competition among global suppliers of consumer goods makes cost leadership a fundamental competitive strategy. Therefore, firms that realize cost reduction through RL frequently pass the same benefit to customers by charging reduced prices. The matter promotes customer satisfaction by making products affordable even to low-income groups. Moreover, RL establishes operational return policies for customers receiving incorrect items. The rise in online dealings allows clients to purchase products from companies located far away from their locations. The situation makes it impractical for patrons to return the shipped commodities if they differ from the ordered ones. Staying with or using the wrong items leads to immeasurable customer dissatisfaction that is solvable through RL. Buyers receiving faulty products easily return them to the sellers with RL systems for an exchange, thus promoting satisfaction.

Companies with operational RL structures save buyers the pain of dealing with EoU stuff. Many long-term products purchased by customers have a life span beyond which their functionality reduces or becomes unreliable. Equally, product breakdowns cause significant customer pain, especially when local repairs are impossible. This issue particularly affects smart devices like smartphones, television, and PCs. According to Shittu et al. (2021), customers globally have several broken pieces of electronics in their houses, wasting valuable space. The point that getting a new product when one misbehaves is easier than repairing some items with rare spare parts supply leads customers to pile large stocks of EoU devices in their households. The aspect exposes humans to stress as some components are marked dangerous to the environment and humans. Accordingly, manufacturers or sellers with RL paradigms promote customer satisfaction by retrieving the stuff and taking away the disposal cost burden or the pain of hiring additional space to store out-of-use pieces.

RL leads to improved customer relations that promote product preference and sales. Generally, buyers looking for long-term items value convenience, cost, reliability, and quality, among other aspects. Numerous manufacturers and suppliers manage the quality issue but fail significantly in the other facets. For example, product makers without RL lack a system of protecting customers from ‘items return’ headaches resulting from the supply of broken or wrong products, mostly for long-distance purchases (Garzón-Agudelo et al., 2021). However, such issues do not exist in firms that have a system of sending products to customers and receiving others from the same patrons. The aspect boosts clients’ loyalty and trust, with many buyers favoring a seller who cares about their after-sale concerns (Kazemi & Govindan, 2019). Therefore, introducing the RL platform in an organization’s logistics plan can boost the connection between companies and their customers, giving them a competitive edge.

Implementing RL enables companies to comply with government policies on waste management. Hult and Closs (2014) provide four basic forces controlling international markets and supply chain management. Such include markets, governments or laws, cost, and competition. The former, markets, connotes consumer behavior and the availability of channels for sending and receiving products to and from the public. On the other hand, costs refer to the monetary aspect necessary for a product to successfully move from the manufacturer to customers, while competition touches on the activities of competitors in the market. But for the government facet, all the other elements are non-obligatory, meaning that businesses are free to adopt varied tactics to meet them. However, compliance with the law demands that organizations devise a specific operation method that fits the set regulations. RL is one of the ways for manufacturers to incorporate governments’ demands on waste control without experiencing momentous constraints. Dell already beats the EU’s e-waste management directive through RL strategies (Kazemi & Govindan, 2019). The company operates a cyclic SCM that allows it to deliver new computers to customers while picking the out-of-use ones for material recovery purposes.

RL is a source of industrial employment and contributes to regional sustainable development. As noted earlier, a successful LR strategy requires allies’ involvement and cooperation. The associates are often parties dealing with EoU collection processes, including the retrieval of such items from customers or collection from landfills. Other RL systems even have grass root partners that dissemble the collected objects, recover the valuable items for exportation to the manufacturer, then dispose of the remaining bits through an appropriate method. Rubio and Jiménez-Parra (2014) describe the furniture sector in San José de Cúcuta, Colombia, as a successful venture that depends on RL. According to scholars, the nation’s rapidly growing real estate industry’s high demand for new furniture leads to excessive waste. The matter affects forest size in the nation and requires alternative intervention, leading to the survival of a new segment that collects raw materials through RL for use in making new furniture. The point that the republic’s real estate market releases waste almost throughout makes the emergent recycled wood, plastic, metal, and glass furniture sustainable.

Lastly, RL contributes to greener operations that earn organizations competitive benefits. Globalization and other technological innovations make competition among businesses almost cutthroat. Due to this aspect, even local manufacturers no longer feel assured that their products will sell to the domestic market. Therefore, firms look for the slightest way to stand out for competitive benefits. Only organizations that make their brands and products dear to customers manage the thing. Being conscious of the environment and people’s needs are examples of things that make entities favorable to customers. RL combines the two aspects by allowing manufacturers to take care of purchasers’ unique needs and ensuring that harmful business practices do not threaten human survival. Thus, adopting RL moderately converts a business’s products into a cause, making it easy for patrons to relate with easily.

Conclusion

In conclusion, RL is the way for business establishments seeking sustainability. The model exhibits demerits and benefits like any other aspect of life. Cost and quality issues are the two primary concerns regarding RL, while the merits are countless. Examples of such advantages include revenue promotion through cost saving, facilitation of the best use of resources and waste reduction, and depiction of organizations’ responsibility towards the environment and humans. Additional rewards include converting SCM systems into greener endeavors, compliance with waste management laws, and realizing competitive advantage.

References

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