Essay Example on Reverse Logistics: A Benchmark For Food & Beverage Firms.

Reverse logistics is defined as the flow of products or materials in the opposite direction of the supply chain or the purpose of creating value. A consumer return the products due to several reasons, such as the end of life, expired product damage, poor quality, product recall, and non-halal products (Ngadiman et al., 2016). The positive implementation of reverse logistics firms can be used as a benchmark for other food and beverage firms. Two decades ago, supply chains were busy revamping the logistics of products from raw material to the end consumers (Ngadiman et al., 2016). Products are still heading in the direction of the end consumer, however, an increasing flow of commodities is being returned to the food and beverage industries. Reverse logistics has become an important competence in contemporary supply chains (Ngadiman et al., 2016). The paper will examine the reverse logistics in the food and beverage firms in Malaysia and other parts of the world.

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The food and beverage industries experience a cohort of difficulties and challenges concerning the supply chain. This is mainly because of the existing fact that the industry deals with perishable products that might go bad without the notice of the hotel managers (Ngadiman et al., 2016). The retailers in this industry, and across the world endure several challenges in waste management, and the projection of available stock, quality management, and consistency in the supply of food. It simply implies that there is not just the need for the quick and effective flow of food and beverage products in the supply chain, but also the necessity for forwarding supply chain management, to a further establishment of a backward flow management scheme for the products (Ngadiman et al., 2016).

Reverse logistics procedures begin with the end-user, when the consumer feels the product that they purchased, particularly for food products that are quickly damaged. The rejected items are returned to the suppliers, resold as it is redirected to discount store or donated for charity. Reverse logistics should be effectively managed. For example, Estee Lauder has after a very fruitful reverse logistics, established a USD 250 million product base from its return goods flow (Ngadiman et al., 2016). Reverse logistics has become essential since food and beverage organizations are under growing pressure from several stakeholder groups, including stakeholders, clients, workers, vendors, government agencies, non-profit organizations, and meeting customer expectations (Ngadiman et al., 2016). The main drivers of reverse logistics include; economics, legislation, and corporate citizenship. These three features all directly impact on the organization's decision to implement reverse logistics activities as part of their supply chain management algorithm (Ngadiman et al., 2016). The following paragraph will discuss in detail about these three driving forces and how they would directly affect a food and beverage organization's decision to execute reverse logistics processes as part of their supply chain activities (Ngadiman et al., 2016).

Economics

This element refers to processing used goods to provide substantial gains to the firms. In some instances, Food and beverage companies are encouraged to reuse products since it can act as a cheap raw material source, and sometimes when the production of new products is deemed to be more costly (Ngadiman et al., 2016). These organizations are also encouraged to implement reverse logistics processes as part of their supply chain as it will bring implicit direct economic benefits, like the reduction of raw material usage, creating value through recovery and reselling valuable product returns. Some of the indirect monetary benefits from utilizing reverse logistics include; enhancing consumer relationships, and market protection (Ngadiman et al., 2016).

Legislation

The legislation factor refers to any law that affects how a company recovers its product, or how consumers return different commodities and materials due to instances of damage or rotten in case of perishable goods. For example, legislation in the UK allows consumers to return the ordered products within 90 days, and the environmental laws, such as recovery quotas, and take back responsibility (Ngadiman et al., 2016).

Corporate Citizenship

Corporate citizenship drive refers to the set of values or principles that a firm embraces to be responsible for reverse logistics processes. The Impetus behind the application of reverse logistics activities lies in both being legally obliged and attempting to create an image the consumers will desire as an ecologically responsible hotel (Ngadiman et al., 2016). Improved consumer service like augmenting the level of consumer awareness for returning and refunding alternatives (Ngadiman et al., 2016). By further guaranteeing improved services would positively impact an organization's image and provide them underlying benefits in terms of revenue growth, and realization of their sales objective.

Intricacies of the Implementation of Reverse Logistics

Irrespective of the benefits and prospects, reverse logistics application is marred with hurdles. The uncertainty in return forecasting, complete value gain from returned products, and difficulty in the management of returns network are some of the major challenges food and beverage companies have identified in regards to logistics adoption (Ngadiman et al., 2016). Food and beverage firms in Malaysia are currently feeling the pressure to implement reverse logistics into their supply chain system. One of the difficulties faced by these companies that desire to go international is the need to comply with the laws introduced by foreign nations that can guarantee effective disposal of manufactured goods and waste. For example in Europe, there is a law that was implemented to reduce the amount of waste dumped in landfills, such as solid food waste (Ngadiman et al., 2016). Due to this, their capacity to manage the reverse logistics process effectively will ultimately become a significant factor, particularly for stakeholders in the hospitality industry (De Brito & Dekker, 2004).

In a different argument, even though reverse logistics deal with product returns or recalls, it presents the greatest operational challenges for companies in the food and beverage industry, and also manufacturing firms (Ngadiman et al., 2016). Some of the identified challenges include the problems of collecting returns, sorting the recalled goods, other potential customers have lost confidence in the returned products, credit approval, and repair processes. Further, a prolonged processing cycle times of returns and issues connecting to ecological sustainability (Ngadiman et al., 2016). Therefore, it is important to perform reverse logistics efficiently and effectively to gain maximum benefits of its opportunities.

The salient impetus for reverse logistics is enhanced by the underlying patterns of consumer behavior that can give rise to reduced product life cycles and volatile food markets. Further from returns of directive goods, honest return procedures evidenced in online retail markets is a clear sign of growing demand for reverse logistics (De Brito & Dekker, 2004). The significance of reverse logistics in the food industry is ostensible since companies are required to provide quality and safe food products to consumers, devoid of inflicting any danger on human health welfare and the environment in which the business operates. Moreover, the food and beverage are not close to providing 100 percent of safe food and drinks to their client (Vlachos, 2014). For instance, statistics show that there are an estimated global food loss and waste that transcends 1 billion dollars every year due to foods going bad and lack of enforcing safety standards while serving meals to clients.

Reverse Logistics in the Food Industry

The greatest challenge for reverse logistics in the food sector depends on the perishable nature of the food and agricultural products which have reduced shelf life, and need fast and effective logistics operations (Vlachos, 2014). In this circumstance, the smallest error in an organoleptic physiognomics may create a food safety incident, and then pose a conceivable threat to consumer's health. The recent horsemeat scandal, even though there was no implicit threat to the consumer's health, is a clear sign that nonconformities from the promised quality of food may dent the public confidence, and elicit distrust even among loyal consumers (Vlachos, 2014). Poor reverse logistics mechanisms can have adverse legal and economic ramifications (Vlachos, 2014).

Drawing references to the horsemeat scandal, the Food Safety Authority of Ireland (FSAI) stated that horse meat was discovered in frozen beef burgers at numerous several Irish and British supermarkets, including Tesco, Dunnes Stores, and Asda. After the consumers got aware of this scandal, Tesco dropped 360miillion EUR in market value (Vlachos, 2014). Even though there was no problem with food safety, Tesco immediately suspended the sale of their burgers, both fresh and frozen from its shelves regardless of whether they had traces of horse DNA (Vlachos, 2014). The performance of reverse logistics is impacted by several factors namely, cost, competitive advantage, regulation, and information management (Vlachos, 2014). These elements will be discussed in the subsequent paragraphs.

Food and beverage companies must assess the physical features of food products, such as sensitive sensory and physic-chemical elements before concluding on how to execute the reverse logistics. The identified food features that may affect logistics performance include; shelf lifetime, production throughput period, production seasonality, transportation, and temperature control. For example, companies like Nestle have managed to avoid the return of commodities by reducing waste to 3.0 percent and by augmenting reuse or recovery to 4.2 (Vlachos, 2014).

Cost

As emphasized in the preceding paragraphs, the economic performance of reverse logistics depends on re-capturing value from raw materials, and it results in lowering consumer prices due to recycling and plummeted waste expenses (Vlachos, 2014). Re-processed food products will cost 40-60 percent less than new products, and save 80 percent of the energy required to begin from scratch since re-processing food and beverage products is the only way to expand to the life-cycle of these commodities (Vlachos, 2014). Proper utilization of resources is also a way that augments supply chain efficacy and decreases logistics costs.

Competitive Advantage

The product recall policies and procedures fluctuate among supply chain partners. For instance, retailers aim to avoid the risk of unsold goods, yet other hotel managers may follow liberal return policies, resulting in high product returns (Vlachos, 2014). Lower product returns contribute implicitly to a competitive advantage since they incur lower reverse logistics expenses (Vlachos, 2014). Further, supply chain collaboration contributes to the entire supply chain performance, and reverse logistics should not be an exception (Vlachos, 2014). For instance, H-E-B Grocery Company reported a 50 percent drop in the unsold commodities by executing joint policies like "Storage Damage Allowance", and "Unsaleables Recovery Program." Therefore, Supply chain collaboration is one of the effective ways in decreasing logistics costs by making supply chain partners create forces in seeking and removing waste across the entire supply chain process (Vlachos, 2014). Retailers who are working in tandem with food manufacturers can eliminate the damaged s...