History
In the 70s an interest in the internal operations of a company was reborn, the availability of new information technologies made many executives focus on developing the quality of their performance and starting from the obtaining of raw materials to the end customer, this generated an approach that focused on quality and time-sensitive operations.
For the 80s, zero defects movements and TQM (Total Quality Management) were integrated, from this point on, the performance of operations in financial terms began to be measured and monitored, such as the reduction of working capital, use of assets, reduction of the cash cycle, among others.
In 1985 the Council of Logistics Management (CLM) defined logistics as: A part of the supply chain process that plans to implement and control the efficient and effective flow; and storage of goods, services and information related to the point of origin to the point of consumption in order to satisfy customer requirements.
For 1995, the definition is expanded because operations are designed based on an ever closer integration with select clients, called strategic clients, so that this collaboration leads to extending the effective control of the business line.
After the definitions were extended, the integration of the logistics concept continued to expand, since by 2003 the CLM corrects its definition of logistics as written below “A part of the supply chain process that plans, implements and controls the efficient and effective forward and reverse flow and storage of goods, services and related information from the point of origin to the point of consumption in order to satisfy customer requirements ”.
In this definition, an interest in return flows (inverse) is already clearly observed, since organizations began to pay special attention to being competitive in a way that allowed them to manage the effective delivery of their products and, if not, to integrate again the returns in its commercial channel; placing special emphasis on time and resources, this branch within the concept of logistics is known as reverse logistics. (Olivares, 2002).
Reverse logistics concept
It is known as Reverse Logistics “It is the discipline that consists of managing and optimizing the flows from the consumer to the manufacturer. (Florez, 2008)
"It is the process of planning, implementing and controlling the flow of products from the point of consumption to the point of origin in an efficient way, with the purpose of recovering their value or that of the return itself." (Boubeta, 2007)
Also from the CLM, “is a term that refers to the capacities and activities of the logistics management involved in the reduction, management, and elimination of hazardous materials or not, from packaging to final products. It includes the inverse distribution, as just defined, which causes the flow of products and information in the opposite direction to normal logistics activities. " (Kopicki, 1993)
"The processes of planning, implementation, and effective and efficient control of the flow of raw materials, intermediate products, final goods and related information from the point of consumption to the point of origin with the purpose of capturing value or reducing elimination." (Dale S. Rogers, Ronald S. Tibben-Lembke, 1999)
Reverse logistics manages the return of goods in the supply chain, in the most effective and profitable way possible; the recovery and recycling of containers, packaging and hazardous waste; as well as the mechanisms for returning excess seasonal inventories. On some occasions, it also deals with the product, in its phase of decline, and gives it an outlet in markets with higher turnover.
This activity has enormous growth potential, it is also conceived as a new space for reducing costs in companies, as well as representing a source of opportunities and alternatives. This requires that manufacturers and distributors participate and get involved in the process.
Reverse logistics is the process of moving goods from their typical final destination to another point, with the purpose of capturing value that would not otherwise be available, appropriately for the products.
From the perspective of business logistics
Reverse logistics is made up of management processes:
- Return of products: those that were rejected by agents in the marketing channel or by the end consumer, as well as surplus inventories (surplus) at the end of the life cycle. Return for the reuse of containers, packaging, packaging and handling units.Reuse of materials: there are certain materials that can be recovered for reuse. Reconditioning of rejected products. Management of waste and / or hazardous waste: these waste can be sent to recyclers or specific sites in order to process them to reduce their danger and carry out their final disposal Management of waste and / or waste to be recycled: such as waste and waste of materials from the manufacturing process, containers, packaging and packaging, which are sent to third parties to subject them to recycling processes.Management of waste and / or waste for destruction and final disposal. Management of substitute recycled materials that reduce the use of virgin materials: this implies innovations in product design, new search strategies for sources of supply (sourcing1) and development of suppliers, as well as a reengineering of supply logistics.
Reverse logistics drivers
In the Reverse Logistics literature, many authors maintain a point of view on drivers such as economics, environmental laws, and customers' environmental awareness. Generally we can say that companies are more inclined to the first channel because they are always in search of cost reduction; Although the second factor is relevant to continue because it depends on the stability and stay of the same company, and the second factor depends on the company and feeling socially motivated. According to the above, they are divided into 3 conductors. (Dekker, Fleischmann, Inderfurth, & Van Wassenhove, 2004)
- Economic Legal Requirements Social Responsibility
Economic
In the Reverse Logistics programs, they bring direct profits to the company due to the decrease in the use of virgin materials, coming from the addition of the collection value or the reduction of the cost disposal. As a financial opportunity in the expansion of raw material suppliers, that is, it contributes to obtaining other sources for materials and production supplements independently of normal suppliers. An example, are the scrap collectors that, through their collection of scrap metal, offer metal that can be re-worked and which can reduce costs by mixing scrap with virgin materials, thus reducing production costs in the manufacturing processes.
Asset protection
The design and manufacture of a product has a high cost for the company and, in many cases, that cost is avoided by companies that try to reuse products at the end of their life. (Ortega Mier, 2008)
Legal requirements
The legislation refers to the legal indications or the legal requirements that a city, state or country establish for companies regarding their product, production processes, packaging and containers, in order to regulate the environmental impacts that are general when producing, distribute, market and dispose of the product. The requirements of environmental legislation may refer to recycling fees, packaging regulations pertaining to components, and the responsibility of returning the product to manufacturing.
Social responsability
This concerns the section on generating value for the consumer, that is, it focuses on adapting the value of the product or the company itself, adapting to the requirements of the customer's environmental awareness. Companies seek social responsibility through the manipulation and control of the environmental impacts generated by the production of the product and its processes in its life cycle.
Marketing
Marketing partly influences its social responsibility because it seeks to improve the image of the company and with it its position in the market. For a lake, increasing competition may force companies to take over the used products of their customers, because it is an element for the creation of a "Green" image of the company itself. (Ortega Mier, 2008)
Reasons for using reverse logistics
As we know that reverse logistics is the opposite flow to logistics, then we generally speak of product returns or disposal because the product's functions have been disrupted, the product is out of date, or is no longer needed. Then we will observe the reasons that the product returns or is rejected in detail and we will classify the reasons in 3 large groups: (Dekker, Fleischmann, Inderfurth, & Van Wassenhove, 2004)
- Manufacturing return Distribution return Customer returns
Manufacturing returns
The return of manufacturing is defined as all cases where the components or products have been recovered in the production phase. This occurs for a variety of reasons. Materials or manufacturing can be rejected by quality control because it does not meet the pre-established quality requirements and has to be reworked; product leftovers; surplus 2 of virgin materials and the non-requirements of that product.
Distribution returns
It refers to all returns generated during the distribution phase. This included the following aspects:
- Product recall; Due to health or safety issues with the product Business benefits, all product returns from the retailer due to a commercial contract with higher benefits from the supplier to the retailer. May refer to Stock adjustments; in warehouses or stores, mainly due to the passage of seasonal products. Return of their function; products whose function remains in decline, where other products its function serves more categories than the product itself.
Customer Returns
It starts once it reaches the end of the flow, that is, the end customer; there are a variety of reasons for product return
- Business benefits: dissatisfaction with the promise of sale, then there is a refund for the product obtained, that is, the buyer returns products to the original seller in exchange for a refund of what it cost him. Guarantees: product defects or malfunction. It refers to products that have failed during use and also to products that have been damaged during shipment. This is due to customer service, it is a contractual agreement and the legislation of the place. For these cases, repair is generally the most widely used option, although spillage3 may be another solution, involving replacement with another new product or, in some cases, money back to the customer. Services: in repairs or spare parts. These services may also be involved in guarantees,Although there are companies that after the term covered by the warranty for the product, the repair or spare parts service is offered to customers, however the cost is borne by the customer. Term of use of the product; or obsolete products. Some businesses or shops use this type of returns, because there are many products that become obsolete due to sudden changes and evolutions in technology; or that they are seasonal and their life cycle is shorter, speaking of expiration. Term of useful life; recycling. Packaging constitutes and originates one of the existing flows in reverse logistics that generates higher volumes.Term of use of the product; or outdated products. Some businesses or shops use this type of returns, because there are many products that become obsolete due to sudden changes and evolutions in technology; or that they are seasonal and their life cycle is shorter, speaking of expiration. Term of useful life; recycling. Packaging constitutes and originates one of the existing flows in reverse logistics that generates higher volumes.Term of use of the product; or obsolete products. Some businesses or shops use this type of returns, because there are many products that become obsolete due to sudden changes and evolutions in technology; or that they are seasonal and their life cycle is shorter, speaking of expiration. Term of useful life; recycling. Packaging constitutes and originates one of the existing flows in reverse logistics that generates higher volumes.Packaging constitutes and originates one of the existing flows in reverse logistics that generates higher volumes.Packaging constitutes and originates one of the existing flows in reverse logistics that generates higher volumes.
Containers, returnable bottles, pallets, reusable boxes, are the best known examples. The recovery of these products is economically attractive since they are usually reused directly, simply by cleaning and without the need for re-processes.
When they are used only for transport, they are immediately available again for use (pallets, reusable boxes). Reusable packaging is sent to the seller (such as self-containers from supermarkets to suppliers), or if they cannot be taken to alternative companies. In many cases, reusable packaging is owned by a logistics service provider who handles the recovery and management of the packaging. Given the great contribution of packaging to the total volume of waste materials produced, its reduction, in use and in dumping, is becoming one of the objectives of environmental legislation.
Classification of reverse logistics flows
The classification depends a lot on the previously predetermined reasons for the use of Reverse Logistics, that is, once selected, the reason is inherently related to the options for recovering the value of the products in question. Then we can classify the flows depending on the final destination of the reverse flows. We start from the classification made by Thierry, which distinguishes different forms of recovery depending on the point of entry back to the value chain. (Thierry, Salomon, Van Nunen, & Van Wassenhove, 1995).
The products can be reused directly without any major transformation, except cleaning and some minor maintenance (automotive components, some containers or transport pallets). In restoration, the identity of the product is preserved and it is sought to return the product to its usefulness through the necessary revision, disassembly and renovation operations (computers, photocopier).
For its part, the objective of a repair is to make damaged products work again, although with a possibility of lowering the quality level (furniture). Apart from this, the products can also be cannibalized, that is, from several that cannot provide service by themselves, one can be put into operation with useful parts or modules of the other damaged products (fleets of vehicles, computers for those with no new components). As shown in the illustration.
Forms of recovery depending on the destination of the flows.
Illustration 1: Forms of recovery depending on the destination of the flows.
Structure of reverse logistics
The reasons for the use of reverse logistics lead to structuring a reverse logistics program, whose general structure, regardless of the reasons that lead to a return product, develops certain of the reverse flow or reverse logistics, we will compare the normal flow and the inverse and the general activities that are immersed to clarify the panorama as shown in Illustration 2. (Bonev, 2012), and its structure within the organization.
Supply Chain with Reverse Flow
Illustration 2 Supply Chain with Reverse Flow
The main idea of the image is to show the product when it enters the market through the traditional supply chain. Although it does not show specifically the activities and programs necessary for a reverse flow to take place, it does show the existence of the flow in general.
- Collection. This phase is the center of all other activities. The collection can come from the consumer directly, from the distribution channel, from the leftovers of materials or the so-called srap, also although it is not shown in the image they can come from the collectors of recycled materials, also known as scrap dealers. The collection must include the location of the materials or products, procurement, transportation to the collection centers and their storage in the collection centers. Inspection / Separation (Inspection). After the products have been collected, each product must be examined in the inspection phase. It is one of the most difficult phases, since it depends on this phase so that the flows have greater productivity.It is determined if the product or parts of it can be reused, remanufactured, recycled or disposed of. Once this is determined, it is necessary to choose the most appropriate process for each one. This requires a physical inspection of the product and involves manual labor. Remanufacturing. It involves a series of activities, which are necessary to provide the product with a new condition, to develop a remanufacturing process according to it, the discarded product must first be completely disassembled; then the parts that can be used must be cleaned, restored and included in the inventory; although this must include large storage capacities. Remanufacturing consists of disassembling, cleaning, checking and replacing. Since new parts are added to the process,the remanufactured product may ultimately have better performance and proactivity in its expected timeline than the original product. Reuse. The process of reuse or re-use of the product takes its place in the products that were returned in better condition and that can be used again within the same channel and market or in an alternative market. One of the most typical examples is glass, bottles, containers, and rented equipment. In this phase, they are products that return and do not require a repair process. Recycling. During the recycling process, the product is disassembled and ground. Its materials are separated into homogeneous components. Afterwards, the materials are treated to obtain the necessary qualities for their future use. Disposal.Some return products must be eliminated if they do not fit the statutes mentioned above, although it is also due to technical situations or economic reasons. In the inspection phase, rejected and disposed of products, which involves transportation to specialized places to incinerate them. Redistribution. The distribution is directly related to the products that have been purchased in their used or remanufactured condition, although they can be placed in the original markets or in alternative markets. Design of reverse logistics systems based on diversity of flows requires designing and structuring new and different distribution channels with respect to conventional flow. Six stages are distinguished that verify a reverse distribution channel. (Giuntini & Andel, 1995).
First stage
Recognition of the need to collect a product at the end of the normal logistics chain. The information must be properly managed.
Also called the evaluation phase of the problem and its possible complications within the system. The evaluation can be economic or financial, for the first reference prices and tangible benefits are used. For the financial evaluation, the costs associated with logistics activities, their possible reduction, the savings generated, the better use of resources, and mainly as a measure of conviction and denial are used, by showing this type of measures they are useful to the society or organization. (Olivares, 2002).
ROA Analysis (Return Over Assets)
Profitability analysis is a means of evaluating logistics activities and proposed changes to a company's logistics systems. Profitability analysis goes beyond total cost analysis by incorporating the impact of income generated by logistics activities.
It provides a more due operational perspective that focuses on the use of operational resources to generate profits, becoming a direct tool for the analysis of logistics profitability. Describing the impacts as follows:
- Cost reduction through reductions in cost of goods sold and operating expenses Improved turnover of resources through good inventory management Improved short-term and long-term revenue through upsells and maintenance of the product at full price.
Second stage
The product must be transported to your experimentation center. The transport of materials must be suitable for the best development of the stage. The collection activity is included, that is, collecting used, waste or returned products, and their movement to facilities where they will later be treated. In general, collection includes purchasing, transportation and storage activities.
At this stage the phase of reduction of returns is important, due to the conditions of entry to the system of returns must be such that they are reduced to a minimum, so that in this way it is easier to handle them, to do this it is necessary map the process from beginning to end to detect possible improvements to the system, taking care of the following points:
- The selection of the appropriate channel strategy The appropriate authorization policies The appropriate policies for assigning discounts or credits (for crediting the value of returns to the customer's account) The appropriate level of after-sales service.
Third stage
Assess the product that is received to know what its final destination should be, that is, to be readmitted or not in the conventional logistics chain. It includes the Inspection / Separation phase, which encompasses all the operations that determine whether a product is reusable and in what way. In this way, inspection and separation divide the flow of used products according to their possibilities of use (reuse, restoration, disposal).
Fourth stage
Create the disposal activities for the products. Put options can be given to other companies or recycled. The phase of elimination is required by materials that cannot be reused for technical or economic reasons. Elimination includes transport and disposal or incineration, depending on the case.
Fifth stage
Development of product renewal activities. In this case, the product will be returned to the market, either directly or through a total or partial renewal process.
The reprocessing phase comprises the transformation of used products back into useful products or their component raw materials. This transformation, as already seen, can be done in different ways (re-use, repair, recycling).
The distribution phase, which refers to the management and transport of reusable products to potential markets and future users. It encompasses activities such as sale, transport and storage.
Sixth stage
Re-engineering call in the process of evaluating change attitudes so that the logistics system functions in the best possible way.
The materials reduction phase is the replacement of certain materials to work with or the redesign of the product for a later reuse of its components. Regarding the part of re-use of packaging materials, general guidelines can be given on how to use them, in fact the most difficult part of this re-use of packaging materials is how to calculate the utilization rate. real and how to control the management of the return, for this it is necessary to collect certain information from the re-use packaging, which must obey the following:
- The packaging must be specifically designed for re-use i.e. be robust and capable of making numerous trips / deliveries etc. The packaging must make a minimum of two return trips. It does not matter if this occurs between two parties or within a system, you must make an agreement between the parties involved (stakeholders 4: retailers, distributors, manufacturers, etc.) to declare that they are involved in the reuse of materials. This should be documented for audit purposes. It should be noted that:
The wholesaler will only remove a small amount of the tertiary packaging (packaging for transportation and shipment consolidation).
The retailer will remove everything else (secondary packaging, multi-unit packaging made by the manufacturer) except what is associated with the primary product.
The end user will remove all other packaging.
The reduction of materials in the design or, where appropriate, their replacement by other less polluting or more “friendly” to the reuse or recycling processes, this is done in two categories: the reuse or modification of packaging materials, packaging and container; the replacement of certain materials to lower costs, as long as they are environmentally friendly or, in that case, redesigning the product for a subsequent reuse of its components. (Olivares, 2002).
Basic objectives of reverse logistics
These are the objectives that must be taken into account when designing a reverse flow in Reverse Logistics, that organizations seek to cover these points in order to obtain the best benefit from using Reverse Logistics.
- Purchase management.Removal of merchandiseClassification of productsRecyclingReturnsReuse or destructionProduct engineeringSubstitution of materialsWaste management
Factors for the success of an LI system
Administration and control
The reverse logistics processes must be mapped in the cross-functional structure to be understood throughout the entire supply chain and be positioned in the relational context of correct management.
An environmentally sensitive style and driving system must be implemented. Simultaneously within the organization and throughout the supply chain with the suppliers of materials and services. It is convenient to identify the scale aspects that will allow obtaining an adequate economic threshold for the operation of third party reverse logistics processes to be profitable.
Indicators of performance. Establish an evaluation of how costly it is based on the activities, so that the performance of each one is measured within reverse logistics. Every program, as well as every one of its actions must be measured. The recycling and re-use of containers, packaging, packaging and handling units are hardly accepted by companies if their benefit is not measured. It is also necessary to transmit to customers and the end consumer, the commitment that the company has adopted with the environment.
Financial aspects. Implementing reverse logistics implies the need to allocate sufficient financial resources to:
- Audit "environmentally the logistics processes throughout the supply chain. Carry out studies of industrial design compatible with the environment of containers, packaging, packaging and handling units. Finance specific equipment to recover and recycle materials. Establish strategic alliances and even risk shared to outsource operations. (Florez, 2008)
conclusion
The reasons that lead companies to adopt reverse logistics can be so varied and in combination of some; but the important thing is the adoption and adaptation in the original structure of the company to be able to maintain a new product recovery system.
The benefits can be varied, of which organizations should be aware that it is a system that is not so easy to implement or carry out, since its implications may lie in the very structure of the organization and the facilities and mainly the costs of the same. The benefits can be obtained in a longer term than expected but that does not imply that it is no longer efficient.
The main impulse of reverse logistics is the maintenance of innovation, due to the fact that a more direct contact is maintained with our final consumer and the response that our product originates; reengineering plays an important role for those organizations that seek to maintain their forefront in the market and that gives the opportunity to enter or create new markets.
Bibliography
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Thesis topic: "Use of quantitative and qualitative methods for the analysis of implementing reverse logistics in Kimberly Clark".
Objective: Analyze if the organization has the capacity to adopt a reverse logistics system in order to obtain raw materials through recycling.
