Currently, business models at the international level are changing in such a way that there is repeated talk of a new economy, new industries, new quality approaches and novel theories in a highly competitive environment. It is difficult to approach the explanation of the changes from a single point of view, therefore, they must be explored from several approaches.
Globally, especially in industrialized countries, the development of the practice of Reverse Logistics is presented as a significant competitive advantage over other companies. It is possible to differentiate three factors that promote the development and implementation of this novel practice in organizations; legal factors (provisions that mark current legislation and regulations), social factors (social commitment to the region) and economic factors (increased demand, financial analysis).
Any company that has the concern of implementing Reverse Logistics within its medium and long-term development strategies must, in the first instance, clearly identify its scope, limitations and way of operating.
Reverse logistics should be understood as a process in which various functional areas of the company are involved to give appropriate treatment to the products that have returned to the company due to various situations, and by means of timely treatment to generate value for customers.
On the other hand, this process is divided into two approaches to establish the guidelines and differences between business logistics and ecological logistics; since both are important for the operation of the company.
Logistics Background
Since the beginning of civilization, man has had the need to move things from one place to another, man has seen the need to enhance these movements in the best possible way. (Olivares, 2011)
In those remote times, food and other products had to be consumed where they were or were produced, another option was to transport them to a certain area and store them for later consumption.
The man lacked a transport and storage system, therefore the movement of the products was restricted to the quantity of merchandise that the individual could carry and in turn the storage was possible for a short period, especially in the case of the products. perishable.
Years later, with the development of trade, the concept of logistics was established as a series of activities that form a link between production and markets.
Thus, during the 1950s, logistics focused its efforts to achieve cost reduction.
Then in 1955, thanks to marketing, a new point of view was integrated into the development of logistics, stipulating that the customer's perception of the product had an impact on sales. (Olivares, 2011)
In the 1970s, a perspective was generated that focused on the quality and internal operations of the company. The development of new information technologies encourages executives to move towards promoting the quality of their performance, from obtaining raw materials to the final customer. (Olivares, 2011)
Already in the 80's, the philosophy of zero defects and TQM (Total Quality Management) are included; therefore, measurements and reports on operating performance in financial terms began, such as reduction of working capital or use of assets.
The logistics concept is in continuous expansion, therefore in 2003 new elements are merged with the traditional concept, in addition to the planning, implementation and control of the forward supply chain of goods and services; The interest on the return flows (inverse) is considered, now the organizations have a special interest in being competitive managing the effective delivery of their products and if not, integrating the returns into their commercial channel again; with special emphasis on time and resources, that is, the branch known as reverse logistics is developed.
Basic concepts
Logistics
Defined by the Royal Spanish Academy as a set of means and / or methods used to carry out the organization of a company, or a service, mainly distribution. (Spanish, 2001)
For the research of some authors, logistics is also called direct logistics.
Then it can be specified that it is the art of directing the flow of materials and products from the source to the user. Integrating the total flow of materials, from the acquisition of raw materials to the supply of finished products to end users, in addition to the information flows that establish the control and registration of the movement of materials. Likewise, logistics is considered as a process that includes activities of planning, implementation and control over the flow and storage of raw materials, semi-finished or finished products: They also have the function of managing the corresponding information on the place of origin to the place consumer, in order to meet customer demands. (Lacoba, 2003)
Logistics is, therefore, an operational function that addresses all the activities and processes necessary for the efficient management of the flow and storage of raw materials and components, inventories in process and finished products; in such a way that they are in the right amount, in the right place and at the right time.
Therefore it can be said that the purpose of logistics is to solve or eliminate any problem that is caused by the time, place and way of supplying any product or service.
Reverse
As established by the Royal Spanish Academy, the word is said to be an adverb that means that something is found backwards or in an opposite way. (Spanish, 2001)
Supply chain
It is the coordination of all activities associated with the movement of goods, from raw materials to the end user, to create a competitive advantage over other companies. This includes systems management, information sources, production scheduling, order processing, inventory management, transportation, warehousing, and customer service. (Lacoba, 2003)
Definition of reverse logistics
The Reverse Logistics Executive Councilhas defined this concept as the process of planning, implementation and efficient control of the flow of costs and storage of raw materials, products in process and finished products or inventories, as well as the relevant information, from the point of consumption to the point of origin, in order to recover value or ensure its correct elimination. It can also be defined as a macro process in which the flow of products and materials from the place of consumption to the place of origin of the manufacturer or supplier is planned, administered and controlled in order to create economic, ecological, legal or image and generate customer satisfaction.
Figure 2. Logistics and Reverse Logistics Comparison
Differences between direct and reverse logistics
Figure 3. Differences between direct and inverse logistics
Reverse logistics prospects
When carrying out a documentary investigation that deals with the issue of reverse logistics, it is common to find information that corresponds to the recycling and environmental policies that many organizations have currently implemented as part of their social commitment and in compliance with legal regulations.
However, it is important to make a distinction between reverse logistics in your business approach and an environmental approach.
Business focus
It has its origin in the returns of the product to the supply chain made by the end user for some specific reason (obsolete products, malfunctions, products in defective condition, etc.). These returns represent a process that companies must consider when seeking to generate certainty in their customers and improve the image of the company.
Interest in reverse logistics has grown in recent years, due to the increase in returns that companies suffer in their inventories every year.
Therefore, new activities and processes have been developed, which were previously practically unknown by the company; in order to give timely treatment to this type of situation, trying to act in a timely manner, benefiting the client and without causing losses in the company.
Retailers are currently implementing solutions to reduce the volume of returns and improve return management; For their part, large companies are exploring the area of reverse logistics to reinsert the products generated from the returns into the market in an efficient way, offering them at appropriate costs to, if possible, recover part of the value.
For the above; establishing return policies can promote, become competitive with other organizations and gain customer loyalty. Which without a doubt, can generate different areas of development that lead to new strategies for the business.
Environmental focus
It is made up of activities that have exclusively ecological purposes, for example the recovery and recycling of products, avoiding the deterioration of the environment.
In this sense, reverse logistics is commonly considered as a synonym of recycling or reuse, this process offers three benefits to the company: economic, legal and social awareness.
Reverse logistics is responsible for managing the products that the user has discarded, in this glass not because they are defective products, but because after prolonged use they have reached the end of their useful life.
These products are known as "end of life products", which represent a business opportunity for many companies, which are responsible for the collection and sometimes the reuse of such products.
If these products are given adequate treatment, they can become a source of raw materials, since they have the possibility of incorporating themselves in some way into the company's production chain.
Both approaches coincide in the same sense and seek, each in its own style, the improvement of the organization's production processes and a greater supply of the markets.
Causes that generate the need for reverse logistics
- Customer Returns Environmental Legislation Customer Service and Warranties Economic Benefits Competitive Advantage Obsolete Products Excess Inventory Defective Merchandise Return of Excess Inventory Seasonal Inventories
Reverse logistics objectives
- Carry out adequate planning, execution and control of the company's product flows, information and costs. Improve the design of the processes for the products. Optimally coordinate the reverse logistics processes with the traditional one, so that they are used the advantages of both tools. Minimize the number of product returns.
Advantages of Reverse Logistics
- Reuse certain materials that make up the product Reduce costs Offer better customer service Cover other areas of the market Increase customer confidence when making the purchase decision Improve the image of the company to consumers Get of feedback information about the product.
Disadvantages of reverse logistics
- The inputs to a Reverse Logistics process are "unpredictable". The recognitions must be carried out on each product individually and thoroughly. The new (reverse) chain includes a number of non-existent processes in logistics. It is necessary to decide if the company should perform Different activities with their own resources or if they will require the services of an operator. Returns in small quantities tend to represent higher costs. Lack of interest of some organizations.
Using reverse logistics
An example is presented to illustrate the use of reverse logistics: The case of Acer América, a manufacturer of personal computers.
Acer experienced frequent changes with computers with low manufacturing cost, the depreciation of these equipment could be up to 13% if there was a return, since it took almost 15 days to be managed by the company, Acer did not have a In order to determine when a return shipment arrived, it did not know what type of content was in the returned package, so it was stored and not counted until the package was opened.
In this situation, the company contracted the service of the FedEx NetReturn company to account for these returns and control its resources efficiently. So when a client returned a computer, the client had to capture the information on the Internet, to generate a trace log, the system detected the nearest town and transferred the return order to an email, then a label with a code was printed of bars (to identify the authorization of the return order and its contents) and collected the package, in such a way that it was easier to forward it to the appropriate location.
Currently, Acer knows the amount of returns that are generated, which allows resources to be allocated more efficiently and avoids depreciation costs.
Figure 4. Example of reverse logistics
Reverse logistics is an area that is gaining strength in companies, however there is limited information regarding it, this process mainly involves two areas: final products and packaging.
The importance of returns according to industrial sectors is presented in the following table:
Figure 5. Sample return percentages
The source of the returns may be due to some issues represented in the following matrix:
Figure 6. Product return matrix
After identifying the sources of the returns, the question arises: Where do reverse flows in a supply chain come from?
These flows are not easily observable in all cases, however there are authors who have described the inverse flows in an empirical way, as the following figure shows.
Figure 7. Reverse Flows
Logistics for returns and Logistics for recovery.
Until now, only the existence of a flow of materials and products from the producer to the consumer has been considered, in order to recover the products discarded by the consumer and reintroduce them into the supply chain or to proceed with their proper disposal. However, there is another situation in which there is also a return flow of products from the consumer to the manufacturer: returns.
Options for business management of End-of-Life Products.
The analysis of the administration options is carried out according to the variety of characteristics presented by the products returned by the client, either before use (returns) or after it (recoveries):
Management options for returns.
The percentage of a company's returns varies but approximately 6% of the total sales volume is assumed, although this figure can be modified. Of the total of these returns, half is made for defective products due to manufacturing failures or damage during the distribution process, purchase errors by the user, contractual reasons or inventory adjustments.
This variety of circumstances makes it difficult for the company to establish a single process to manage these returned products. In any case, we can mention the following:
- Reuse of products in other markets
It is the most widely used option and the one that generates the most advantages since it proposes the definitive sale of the product. Depending on whether or not the returned product has malfunctions, the feasibility of carrying out intermediate maintenance, repair and even re-manufacturing activities will be analyzed. (Olivares, 2011)
- Elimination
For many years it was the most used option and in some sectors such as food, it is still the main one.
It proposes to get rid, by own or other people's means, of the product returned through direct discharge or incineration. The possibilities to recover part of the economic value of the returned products, in addition to representing a business opportunity for companies, also generate environmental benefits for society due to the reduction of final discharges. (Olivares, 2011)
- Donation
Some organizations allocate part of the returns to certain charities, non-governmental organizations, foundations, etc.; with which social work is carried out while the company benefits from the tax deductions that, in some countries, exist for these operations. (Olivares, 2011)
Management options for recovered products.
The possibilities of economic recovery of products out of use have certain variants of one product to another, in some cases the best option to consider will be the proper disposal of it. Furthermore, not all products can be subjected to the same operations to recover their value. (Olivares, 2011)
A classification is established that contains five options that the company can use to maximize the economic value of end-of-life products:
- Repair
They are intended to put the used product in operating conditions. These procedures are usually carried out in the customer's home or in the technical repair services and, as usual, the quality of these restored products may be lower than in new products. Electrical and electronic devices are known examples of this recovery option. (Olivares, 2011)
- Restoration
Its purpose is to return to the used product specific levels of quality although, generally, they are usually lower than those of the original products but extend their useful life. These restoration operations are usually accompanied by others in which some of the components of the product are technologically improved. For example, the civil and military aviation industry. (Olivares, 2011)
- Remanufacturing:
It provides the used product with quality standards as rigorous as those of the original products, achieving manufacturing costs of between 30 and 50% lower than the original ones. Examples of this option are photocopiers, household appliances, or disposable cameras. (Olivares, 2011)
- Cannibalism
It is an end-of-life product recovery option in which only a small part of the reusable components that are destined for repair, restoration and re-manufacturing options are recovered. Electronic components, integrated circuits or precious metals are some examples of this option. (Olivares, 2011)
- Recycling
It tries to recover the material with which the out-of-use product is manufactured, to use it in the elaboration of new products. It is the best known option and for this reason it is of greater application in materials such as glass, paper, cardboard, cans, etc. (Olivares, 2011)
Figure 8. Logistics for recovery and returns
conclusion
Reverse logistics is a term that has been around for some time in the field of business management, but it is now, when companies gain importance and gradually grow to know the benefits of this type of tool.
For investors who are concerned with entering the world of quality and business competition, focusing their efforts on customer satisfaction, reverse logistics opens a path worth exploring. Since it represents in the first place, the possibility of modifying certain production processes for the reuse of raw materials, which in the long run represents considerable support for cost savings.
If analyzed from the point of view of customer service, the possibility of having a properly established system that handles returns or after-sales services, is a guarantee that the products offered to the market are of quality, therefore Both end users or customers feel a support in their purchase, which in the long term produces loyalty to the company.
In the environmental aspect, it is the opportunity to comply with the legal and environmental guidelines that the environmental authorities request from companies; in order to be in solidarity with the ecosystem and benefit society.
However, there is still a lack of information regarding the benefits logistics offers to organizations. In some cases it is the indifference of managers, company policies, the lack of infrastructure or systems, the lack of efficient coordination in human resources are some of the factors that slow this tool down.
Bibliography
- Española, RA (2001). Spanish dictionary. Madrid: ESPASA.Lacoba, SR (2003). Reverse logistics system in the company: analysis and applications. Extremadura: University of Extremadura, Olivares, AA (2011). Tactical-operational recommendations for. Madrid: eudme.net.
RLEC, for its acronym in English; It is the United States agency, charged with promoting and promoting fair practices within industries.
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