This article is based on the analysis of the so-called Reverse Logistics, investigating the main issues that an organization must take into account if it wants to implement this type of system.
All this unknown arises from the need that has taken place for some decades now to have a better balance between the environment and the management of companies' resources by having a less impact on it.
According to some forecasts, it was known that by the middle of this century we would reach a level of insufficiency of natural resources, so the organizations have had to respond since they are the ones who generate the greatest amount of pollutants, so they began to do responsible for the products and waste generated, but their responsibility no longer ends there but they must be responsible for those products that reach the consumer and that when they end their life cycle or simply do not meet their expectations and are rejected, the so-called Products Outside of Use.
The important thing about this topic is to know that these products were to generate certain value for companies and for the environment, through the development of this article we will be able to know how.
REVERSE LOGISTICS
Background
(Rubio Laboca, 2003) They ensure that the recovery of some used or discarded products is not a new issue, and that it is surely something as old as man himself since during the Stone Age they used the splinters that were obtained during the manufacture of the tools as tips for the arrows that they used to hunt.
Some of the oldest cultures such as the Inca, Aztec, Greek or even Roman already used recycling techniques in their daily tasks, among other examples it is known that when wars were fought, the party or civilization that won kept the weapons of the others, but what they did with them was to reuse them using them as agricultural instruments or they were melted down and other weapons were manufactured again.
You were simply trying to make money back on something that had already been used or discarded simply by common sense.
With the passage of the Industrial Revolution, a process of development and economic growth based mainly on technology began, and although great positive changes were implemented, the intense and irrational use of natural resources also came with it.
On the other hand, the primitive industry did not generate a great impact on the environment since its production processes had as a source the coal and the smoke that they gave off was not insignificant as well as the exploitation of the soil and subsoil, since its completely rudimentary processes allowed the renovation and conservation thereof.
But it was from the eighties when people began to realize an environmental awareness and then the terms that are so familiar to us today arose such as recycling, waste, greenhouse effect, environmental impact, etc.
At this time, the industrial world also began to consider these environmental aspects as important variables when formulating its business strategy.
Waste management is a very important part of this topic, and this article focuses its research on the opportunities that used products represent for companies and also those discarded by the consumer and, above all, that the producer has legal responsibility for this waste..
They are Guiltinan and Nwokoye in 1975 and Ginter and Starling in 1978 who take the first steps on this issue of the structure of distribution channels for recycling. And it is in these first steps that they determine some of the characteristics of reverse distribution networks such as:
- Existence of abundant origins (Consumers) and few destinations (recuperators) within the distribution network. A set of numerous intermediaries with certain functions. Importance of the classification of the recovered goods.
However, it was not until the nineties when the management of end-of-life waste began to be analyzed in greater depth, one of the first works related to this issue was carried out by Stock in 1992.
(Stock, 1992) In his work he analyzed the processes that can be related to the return of used or discarded products from the consumer to the producer, he also analyzed the most important issues of recycling, the possible reuse of materials and components, the elimination of waste as well as its possible restoration, repair and even re-manufacture and used the term reverse logistics for the first time.
Logistics
In order to delve further into the topic of reverse logistics, first we must define what logistics is, some meanings are mentioned below:
- “Process of projecting, implementing and controlling the flow of raw materials, inventory in process, finished products and related information from the point of origin to the point of consumption in an efficient and economical way possible with the sole purpose of complying with the end customer requirements ”. (UNAM) "Business logistics is all movement and storage that facilitates the flow of products from the point of purchase of materials to the point of consumption, as well as information flows that are launched, in order to give the consumer an adequate level of service at a reasonable cost ”. (Ballou, 2003) "Set of means and methods necessary to carry out the organization of a company or a service, especially distribution".(Royal Spanish Academy) "The process of managing the material and informative flows of raw materials, inventory in process, finished products, services and residuals from the supplier to the client, going through the stages of supply management, distribution, production and waste". (Castro Cespón, 2003) “Logistics is that part of the Supply Chain Management that plans, implements and controls the direct and reverse flow and the effective and efficient storage of goods and services, with all the information related from the point from a consumption perspective to meet customer requirements ”(Council of Supply Chain Management Professionals, 2014)going through the stages of supply, distribution, production and waste management ”. (Castro Cespón, 2003) “Logistics is that part of the Supply Chain Management that plans, implements and controls the direct and reverse flow and the effective and efficient storage of goods and services, with all the information related from the point from a consumption point of view to meet customer requirements ”(Council of Supply Chain Management Professionals, 2014)going through the stages of supply, distribution, production and waste management ”. (Castro Cespón, 2003) “Logistics is that part of the Supply Chain Management that plans, implements and controls the direct and reverse flow and the effective and efficient storage of goods and services, with all the information related from the point from a consumption perspective to meet customer requirements ”(Council of Supply Chain Management Professionals, 2014)with all the related information from the point of view of consumption to meet customer requirements ”(Council of Supply Chain Management Professionals, 2014)with all the related information from the point of view of consumption to meet customer requirements ”(Council of Supply Chain Management Professionals, 2014)
It is easier to understand the logistics term as it relates to the traditional logistics process, the flow can be set as shown below:
Illustration 1 Direct logistics flows (Oltra Badenes, 2012)
Reverse logistics
In modern industry, it is increasingly possible to recover products or materials from customers since what is desired is to recover the economic value or convert them into after-sales services, this process has been known for some time as reverse logistics. (Luttwak, 1971)
According to other authors, reverse logistics is a part of the trend known as the reverse supply chain where smart manufacturers are designing more efficient processes to reuse their products. (Guide, 2002)
Although this term is much newer than logistics, there are also multiple definitions of this concept.
Reverse logistics is also known as "reverse distribution", "retrologistics" or "recovery and recycling logistics" and its most important definitions include:
- "Reverse logistics involves integrating used and obsolete products back into the supply chain as valuable resources." (Dekker, Fleischmann, Inderfurth, & Wassenhove, 2004) “Reverse logistics consists of the process of planning, executing and controlling the efficiency and effectiveness of the flow of raw materials, inventory in process, finished product and related information from the point from view of consumption to that of origin, with the aim of recovering value or its correct elimination ”. (Rogers, Lambert, & Garcia-Dastugue, 2002)
The function of reverse logistics has allowed in recent years to obtain competitive advantages, this function is part of the set of activities that make up an organization's value chain.
Returns logistics and recovery logistics
Until now, only one type of reverse logistics system had been mentioned to be able to recover and reintroduce them into the supply chain or to be able to dispose of them properly.
However, there is another system in which there is also a flow of materials in return from the consumer to the manufacturer and is that of returns, generally caused because they do not satisfy the needs of customers.
In this way, we can speak of return logistics and recovery logistics as they are realities that are part of reverse logistics.
In the United States it is a very common practice where it is already a tradition to return a product that has not met your needs or fulfilled your expectations, these returns represent a loss of sale for what is classified as an unwanted practice.
Illustration 2 Logistics for recovery and logistics of returns (Rubio Laboca, 2003)
Either way, both returns logistics and recovery logistics involve the flow of materials and products that travel from the consumer to the manufacturer or reclaimer, so together they are part of reverse logistics.
(Rubio Laboca, 2003) Regarding returns, the company must manage the products that return, here are some ways in which organizations channel these products:
- Reuse of products in other markets: this option is the most used and generates the highest amount of sales since it implies the definitive sale of the product, if it presents some type of malfunction then it will first have to go through a process of maintenance, repair or even re-manufacture Elimination: this action was the most common until a few years ago and in certain sectors such as agri-food it is still the main one and involves disposing of the product through direct dumping or incineration.
Thanks to reverse logistics, these discharges have been reduced by half and an annual cost savings of more than two million dollars.
- Donation: which allows organizations to donate returns to charities, government organizations, a foundation, etc., in this way they also carry out social work and are benefited by some fiscal aspects that in certain countries exist thanks to these actions.
Some studies on reverse logistics carried out in the United States by Reverse Logistics Executive Control indicate that reuse processes are the ones that apply the most to returned products with a total of 70% and include its different modalities such as repair, remanufacturing or recycling; disposal through landfills represents 20 to 25% and donations between 5 and 10% of all operations.
Illustration 3 PFU management options 3 (Rubio Laboca, 2003)
Management options for recovered products
(Thierry, 1997) It establishes a classification in which they indicate five options that can be used to maximize the economic value of PFUs:
- Repair: action that allows the product to be returned to operating conditions Restoration: this involves returning the product to quality levels that are usually lower than the originals but that allow it to extend its useful life Re-manufacturing: it allows returning the used product quality standards as rigorous as the originals, although their manufacturing costs can be between 30 and 50% lower.Cannibalism: this name is given to those products in which only a small part of the components are recovered but are also used for other repairs, restorations or re-manufacturing of other products. Recycling: consists of recovering the material with which the PFU is manufactured to use them in the manufacture of other products.
3 PFU = End of Use Products
Reasons for PFU recovery
(Rubio Laboca, 2003) The reasons have two main reasons:
Legal grounds
They are basically due to pressures from social groups demanding greater respect for nature, all this has caused various administrations and governments to have demanded a set of good environmental practices.
Economic reasons
The organization will seek in the execution of the activities that add value and a business opportunity, in this sense the reasons that drive the company to recover and take advantage of the PFU can be analyzed from two points of view:
- Demand: seeking to manufacture recyclable products from materials already recovered, achieving an image with environmental responsibility for the company, this is known as ecological marketing. Offer: it allows to recover materials and PFU by substituting raw materials and some components for the articles already recovered which can reduce the costs of manufacturing and selling the products.
In this way, not only would they be complying with the legal aspects, but the organizations would generate sustainable competitive advantages, achieving the business objectives.
Illustration 4 Reasons for the recovery of PFU (Rubio Laboca, 2003)
The economic recovery of PFU requires the development and control of a system that is capable of collecting it and taking it to the recuperator, which will apply the management option that is most optimal for its use.
Reverse Logistics System
This system flows in the opposite direction to the traditional ones, since it considers the flow of materials, products and by-products from the consumer to the recuperator or the manufacturer, which is known as the "Reverse Logistics System"
Common operations within SLIs They are:
- Collection of PFU Inspection and classification Process for the economic recovery of PFU Distribution Disposal
Illustration 5 Basic activities in an SLI (Rubio Laboca, 2003)
Each of those parts are detailed below:
Collection of PFUs
In this part, the greatest uncertainty is generated within the SLIs since it is not known how much product will be recovered (quantitative uncertainty) and when they will be recovered (temporary uncertainty).
Inspection and classification
Until a PFU reaches this stage, it is impossible to say if it has economic possibilities since it depends on the quality of the recovered components. (Qualitative uncertainty) if they have a possibility then the type of management that will be given must be determined. (Reuse, remanufacture or recycle).
PFU economic recovery process
In this case, it implies the use that will be given to the recovered product or some of its components within the production process.
Distribution
Once the PFU is fully recovered and is in a position to be distributed through the means that are considered appropriate, the means of transport (own or others), lot size, markets and routes will be evaluated.
Elimination
This affects the recovered products that do not have the quality levels that are required for their recovery or represent too high a cost, this activity will require evaluating the most convenient form of disposal: landfill or incineration, so that the impact on environment is minimal.
Design of the inverse logistic function
Illustration 6 Design components for logistics (Dowlatshahi, 1999)
Where:
- Logistics Engineering: process in which the requirements that the final product must meet are determined, such as size, weight, environmental impact, etc. Manufacturing logistics: design and analysis of the logistics system: production process, materials to be used, location and distribution of the production unit, etc. Packaging and packaging design: specifications in the product design process regarding packaging and packaging as they are considered to be an important marketing tool Design for transport: an efficient design will represent cost reductions of transport, which will have an impact on the final price of the goods Design of the inverse function of logistics: it refers to the recovery of PFU,where the objective will be to maximize the economic recovery of these so that they have a positive effect on the company.
Benefits and Disadvantages of Reverse Logistics
(Coringrato, 2013) Within reverse logistics we have several benefits but also disadvantages, some of them are mentioned below:
Advantage
- Reduces the surprise factor or the uncertainty created by the arrival of a PFU Allows to reuse the entire product or some components of it Engage other types of markets with the possibility of increasing sales Generates greater confidence in the customer when making their purchase.Improves the image of the company before consumers.
Disadvantages
- The inputs of products or goods to the reverse logistics process are usually unpredictable. Returns in smaller quantities represent a higher cost when they are integrated into the system. It must be decided if the same company will carry out the activities with its own resources or if it will require the services of another company. Inspections must be carried out in a meticulous and detailed manner on each product.
Companies that have implemented Reverse Logistics
Some of the companies that have implemented reverse logistics within their processes are:
- HP in Mexico: since it makes it easier for its customers to replace products and dispose of them to minimize the impact on the environment. Coca Cola: implemented a software called Numetrix / 3, this tool allowed it to match the demand peaks with the return of the bottles. (Recovery of containers) Grupo Bimbo: makes use of this type of logistics by recycling the bags of its products where once it collects them they go through a safety process to meet the requirements of the final product.Tetra Pak: This company has promoted the recycling of its packaging for many years, in 2014 approximately 651,000 tons of packaging were recycled.Linium: This company that sells products through the internet offers reconditioned items,which means that used products that have been restored to perfect conditions, some benefits of acquiring this type of products is that contamination is avoided by discarding them in addition to being offered at a very significant discount, they provide products from brands such as: Apple, Lenovo, Dell, HP, etc. Amazon: a company known worldwide for the sale of thousands of products, it also offers the option of acquiring reconditioned products and works with brands such as Samsung and Adidas. EBay: This store also offers the sale of reconditioned products online of various brands including Apple and Samsung.They offer products from brands such as: Apple, Lenovo, Dell, HP, etc. Amazon: a company known worldwide for the sale of thousands of products, it also offers the option of acquiring reconditioned products and works with brands such as Samsung and Adidas. eBay: This store also online offers the sale of reconditioned products of various brands, including Apple and Samsung.They offer products from brands such as: Apple, Lenovo, Dell, HP, etc. Amazon: a company known worldwide for the sale of thousands of products, it also offers the option of acquiring reconditioned products and works with brands such as Samsung and Adidas. eBay: This store also online offers the sale of reconditioned products of various brands, including Apple and Samsung.
conclusion
The new management of the PFUs has a great future ahead, not only benefiting significantly the environment but also the company through the readaptation of these products in its supply chain.
It is worth mentioning that a reverse logistics system is not carried out by itself, since it requires the support of all the people involved in the system, participating in making important decisions such as the type of management that the PFU will receive.
Reverse logistics activities do not necessarily have to represent costs as long as they are carried out efficiently.
If companies decide to ignore the importance of reverse logistics in their processes, it can have serious consequences for them since people every day seek to have a relationship with those who care about the environment, even if it sometimes means leaving aside certain preferences.
On the other hand, if organizations implement a reverse logistics system, they should know that they will generate a competitive advantage that, although it requires a planning, development and control process, will be a great strategy for the development of the organization.
Thesis topic proposal
The reverse logistics system in organizations: analysis and applications.
Overall objective
Analyze and apply the reverse logistics system to generate a competitive advantage in the organizations of the Orizaba region.
Thanks
To the National Technological Institute of Mexico for being my alma mater and to Dr. Fernando Aguirre y Hernández for their support and motivation to carry out these articles on the subject of Fundamentals of Administrative Engineering.
References
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Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfNew York: Harper & Row.Oltra Badenes, RF (2012). Reverse logistics. (UP Valencia, Ed.) Royal Spanish Academy. (sf). Retrieved March 2016, from: http://dle.rae.es/srv/fetch?id=NZJWMiVRogers, D., Lambert, DC, & Garcia-Dastugue, S. (2002). The Returns Management Process. Rubio Laboca, S. (May 5, 2003). Doctoral thesis The reverse logistics system in the company: analysis and applications. Bajadoz, Spain: University of Extremadura Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfNew York: Harper & Row.Oltra Badenes, RF (2012). Reverse logistics. (UP Valencia, Ed.) Royal Spanish Academy. (sf). Retrieved March 2016, from: http://dle.rae.es/srv/fetch?id=NZJWMiVRogers, D., Lambert, DC, & Garcia-Dastugue, S. (2002). The Returns Management Process. Rubio Laboca, S. (May 5, 2003). Doctoral thesis The reverse logistics system in the company: analysis and applications. Bajadoz, Spain: University of Extremadura Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfReverse logistics. (UP Valencia, Ed.) Royal Spanish Academy. (sf). Retrieved March 2016, from: http://dle.rae.es/srv/fetch?id=NZJWMiVRogers, D., Lambert, DC, & Garcia-Dastugue, S. (2002). The Returns Management Process. Rubio Laboca, S. (May 5, 2003). Doctoral thesis The reverse logistics system in the company: analysis and applications. Bajadoz, Spain: University of Extremadura Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfReverse logistics. (UP Valencia, Ed.) Royal Spanish Academy. (sf). Retrieved March 2016, from: http://dle.rae.es/srv/fetch?id=NZJWMiVRogers, D., Lambert, DC, & Garcia-Dastugue, S. (2002). The Returns Management Process. Rubio Laboca, S. (May 5, 2003). Doctoral thesis The reverse logistics system in the company: analysis and applications. Bajadoz, Spain: University of Extremadura Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfes / srv / fetch? id = NZJWMiVRogers, D., Lambert, DC, & Garcia-Dastugue, S. (2002). The Returns Management Process. Rubio Laboca, S. (May 5, 2003). Doctoral thesis The reverse logistics system in the company: analysis and applications. Bajadoz, Spain: University of Extremadura Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfes / srv / fetch? id = NZJWMiVRogers, D., Lambert, DC, & Garcia-Dastugue, S. (2002). The Returns Management Process. Rubio Laboca, S. (May 5, 2003). Doctoral thesis The reverse logistics system in the company: analysis and applications. Bajadoz, Spain: University of Extremadura Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfSpain: University of Extremadura. Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdfSpain: University of Extremadura. Stock, J. (1992). Reverse logistics. Council of Logistics Management. Illinois Thierry, MC (1997). An analysis of the impact of product recovery management on manufacturing companies. The Netherlands.UNAM. (sf). Logistics. Obtained from http://www.ingenieria.unam.mx/industriales/descargas/documentos/catedra/loginver. pdf
Splinters: Small portion or splinter detached from a fractured bone
Direct discharge: discharge of pollutants into groundwater without going through the ground or subsoil.
SLI: Reverse Logistics Systems
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