Product lifecycle management refers to the process of managing data and design processes that get involved in the life of a product from the conception phase through manufacturing to disposal (Caravan, 2012). Therefore, in reverse logistics, manufacturers plan, implement and control the efficiency and the cost of distributing inputs, in-process inventory, finished commodities, and relevant information from the consumers to manufacturers for improving value or proper disposal. The term reverse logistics emerged in the early 1990s after James Stock produced a white paper titled "Reverse Logistics" (Brito & Dekker, 2002).
This practice involves ten processes or techniques. Gatekeeping, as used in reverse logistics, refers to the screening of the unwarranted returns at the start of this process (Reddy, 2011). Compacting the disposition cycle time is also necessary to avoid customer dissatisfaction and the costs of extended cycle time (Reddy, 2011). More importantly, logistics managers should automate information systems to promote coordination. This automation can support reverse logistics by enabling both the retailer and the manufacturer to track the process. Additionally, corporations have to centralize return centers to ensure the effective sorting of returned goods and type of coordination that promotes customer confidence. Another technique used in reverse logistics is zero return policy in which a manufacturer accords retailers a certain return allowance and formulates rules for the acceptable disposition (Reddy, 2011). Other lifecycle management techniques used in reverse logistics include asset recovery, negotiation, and financial management (Reddy, 2011). However, managing these processes effectively exposes organizations to substantial expenses of coordination, collection, repair, remanufacturing, and refurbishing. This research paper intends to determine if reverse logistics leads to positive or negative returns in light of its associated expenses, complexities, and challenges.
- In what ways can effective LCM in reverse logistics benefit an organization?
- In what ways can reverse logistics result in increased operational costs?
- Does an organization realize positive returns after implementing reverse logistics?
A literature review and case study will be utilized for the gathering of information for answering the research questions. Literature review refers to the survey of scholarly knowledge that has been published by researchers about a particular topic. A case study is a research method that involves an in-depth investigation of an individual, group, or organization (Harrison et al., 2017).
Reddy (2011) categorized specific benefits that corporations seek to gain in reverse logistics into three categories, economics, legislation, and corporate citizenship. The author subdivided economic gains of implementing reverse logistics further into direct and indirect categories. Direct gains include the provision of raw materials for the manufacturing of new products, which reduces the cost of manufacturing compared to procuring these raw materials from suppliers (Reddy, 2011). Besides, reverse logistics enables an organization to realize value-added recovery by reducing waste, recovering revenue, and promoting green image (Reddy, 2011). Reverse logistics is also a practice through which organizations comply with business regulations. According to Reddy (2011), many countries have policies that entitle customers with the right to return products. Customers return products that do not meet their needs, have unclear procedures of usage, or are defective (Reddy, 2011). However, customers may, at times, return products as an abuse to the return policy. Retailers might return products if the packaging or the product is outdated, the inventory is too high or when these retailers cease to do business (Reddy, 2011). Therefore, most of the reasons for returning products are justifiable, implying that a firm that practices reverse logistics is likely to achieve some customer satisfaction. Vaz et al. (2013) echoed the sentiments of Reddy (2011) as they noted that effective management of reverse logistics leads to cost reduction, positive corporate image, and competitiveness.
Unlike Reddy (2011) and Vaz et al. (2013), Santos et al. (2014) provided useful insights about the financial gains that organizations can enjoy in reverse logistics. These scholars investigated reverse logistics activities in three supermarkets that allow product returns from suppliers and customers. After receiving these items, the supermarkets separate, compress, and store them in a designated area (Santos et al., 2014). They then sell the products to companies that prepare materials to be transformed into the packaging and later on sold to industries that supply to the supermarkets. The economic advantage for reverse logistics in the three supermarkets, as estimated by Santos et al. (2014), is about $109,370. Also, after investigating the adoption of reverse logistics in the pharmaceutical sector, Yu et al. (2018) found that this practice improves financial performance by 11.5%.
Still, Larsen (2017) investigated the practice of reverse logistics in original equipment manufacturers to detail several ways in which this practice augments firms' revenue. The scholar argued that original manufacturers could gain revenue through remanufacturing or refurbishing of returned products. Besides, Larsen (2017) concurred with Reddy (2011) and Vaz et al. (2013) that reverse logistics is necessary for attraction and retention of customers. There is no doubt that customers are the source of business profits through buying products. Indeed, some businesses consider customers to be the most important stakeholder group whose needs must be met consistently. With this realization, many corporations establish strategies for customer attraction and retention. Therefore, reverse logistics should result in some boost for firms' revenue since it increases the customer base (Larsen, 2017). Also, corporations that implement reverse logistics might gain revenue through the direct sale of these services to their clients. Another source of revenue in reverse logistics occurs if the firms manage to reuse returned items and thus avoid the costs of procuring new raw materials (Larsen, 2017).
In retrospect, there is a group of studies that allude that reverse logistics may result in increased operational costs. Kaynak et al. (2014) argued that corporations must integrate information technology systems and relevant training programs to promote the effectiveness of reverse logistics. These systems might, however, necessitate substantial costs that squeeze profit margins. Furthermore, Larsen and Jacobsen (2014) found that the implementation of reverse logistics compels corporations to incur different types of costs. Precisely, firms that implement these processes must incur investment expenses. For instance, implementing a recycling chain requires companies to install specialized recycling equipment, which should involve substantial costs (Larsen & Jacobsen, 2014). Besides the investment cost, reverse logistics also has costs related to collection, inspection, recovery, and disposal. Still, companies must incur expenses in the remarketing of returned, remanufactured, or refurbished goods. Zhou et al. (2018) concurred with the sentiments of other scholars reviewed in this essay that reverse logistics can be costly due to the many categories of expenses that it involves. According to this study, corporations that pursue reverse logistics incur costs related to remanufacturing, waste disposal, transportation, and environmental damage that might be caused by waste (Zhou et al., 2018). Besides, these firms must incur some fixed costs, just like is the case in any other business activity. Fixed costs in reverse logistics may involve rent, salaries, property taxes, and utilities. Overall, this set of scholarly work seems to propose that reverse logistics has specific expenses that, if not well managed, might limit the expected financial benefits of its processes.
The researcher investigated the possible impact of reverse logistics in Apple Inc and Hennes & Mauritz (H&M). Apple is an American multinational technology firm that has headquarters in Cupertino, California (Academia, 2020). This company manufactures consumer electronics and computer software. Apple's reverse logistics began with the creation of a genius bar, which is a group of highly trained employees, who provide technical support and information to customers (Academia, 2020). The existence of this group has ensured that Apple customers can return products as conveniently as possible. This group also reduces response time, and thus it mitigates the possible consequences of reverse logistics like customer dissatisfaction and reduced reselling time. Thus, reverse logistics has played a critical role in Apple's consistent customer attraction and retention. As a result, the practice can be viewed as a fundamental revenue generation strategy in Apple. In essence, customer retention not only increase sales, but also mitigates costs. Indeed, an increase in customer retention of 2% results in a 10% cost reduction (Academia, 2020).
However, Apple's logistic managers understand that reverse logistics might have exorbitant expenses. With that realization, Apple's genius bar implements quality controls, customer education to mitigate unnecessary expenses and reduce unjustifiable returns (Academia, 2020). In addition to these techniques, Apple's logistics group ensures efficiency in the gatekeeping process and formulates return policies that result in higher benefits of reverse logistics than costs. On this point, Apple charges customers 10% fees for restocking and unboxing (Academia, 2020). Also, the company has a policy that requires customers to only return products within 14 days from the date of purchase (Academia, 2020). These strategies deter customers from returning products for trivial issues and also promote earnings. Apple also implements third-party outsourcing, packing labels, correct management, and other tracking methods to facilitate effective coordination (Academia, 2020). The logistics group at Apple acknowledges that reverse logistics overburden the company with costs of human resources, assessment, repair, packaging, reselling, and refunding. However, they find that the profits that Apple gains from maintaining high customer satisfaction levels outweigh the costs of reverse logistics by far.
H&M is a Swedish multinational clothing company that produces fast-fashion clothes for all age groups and gender (Yang et al., 2017). H&M is a unique case study since, unlike Apple, it operates in the clothing industry. All the same, the company is one of the companies that implement reverse logistics successfully. Here, H&M has recycling centers that allow customers to return clothes even if they did not purchase from its stores. This way, the firm adopts reverse logistics as a form of marketing. Through liberal return policies, H&M attracts customers through positive comments on social media or mass media. Besides, the focus on recycling in reverse logistics makes customers perceive the company as a good corporate citizen that also attracts and retains customers (Yang et al., 2017).
The research questions intended to determine if reverse logistics result in any benefits. The second question aimed at determining if reverse logisti...
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