WEBVTT Kind: captions Language: en 00:00:08.940 --> 00:00:14.879 To understand reverse logistics, let’s start with how it relates to forward logistics, 00:00:14.879 --> 00:00:16.779 as is shown here. 00:00:16.779 --> 00:00:20.740 We simply reverse the flows of cash… 00:00:20.740 --> 00:00:22.730 and materials,… 00:00:22.730 --> 00:00:26.680 which could include returns of products from the end user… 00:00:26.680 --> 00:00:29.540 from the retailer… 00:00:29.540 --> 00:00:32.680 from the wholesaler or distributor… 00:00:32.680 --> 00:00:38.110 or from the manufacturer to an upstream location. 00:00:38.110 --> 00:00:40.660 Why invest in reverse logistics? 00:00:40.660 --> 00:00:45.539 It is often thought of as a required cost of doing business. 00:00:45.539 --> 00:00:50.550 Let’s assume that in one organization’s gross sales,… 00:00:50.550 --> 00:00:59.319 a significant percentage of product is returned, sent for repair, traded in for remanufacture, 00:00:59.319 --> 00:01:01.340 or recycled. 00:01:01.340 --> 00:01:06.670 These reverse logistics activities directly reduce gross sales. 00:01:06.670 --> 00:01:14.250 The remaining net sales must cover all product and administrative expenses. 00:01:14.250 --> 00:01:19.320 Organizations can limit the cost of reverse logistics by limiting returns. 00:01:19.320 --> 00:01:25.860 They can establish return criteria and enforce the rules with a return material authorization 00:01:25.860 --> 00:01:26.940 form. 00:01:26.940 --> 00:01:33.800 The organization could charge fees for restocking, service programs, or extended warranties. 00:01:33.800 --> 00:01:39.080 A drastic policy would be to accept no returns at all. 00:01:39.080 --> 00:01:46.610 In today’s “customer is always right” world, however, going too far in return policies, 00:01:46.610 --> 00:01:53.730 charging too much for services, or limiting repair options can backfire. 00:01:53.730 --> 00:01:59.200 While the number of returns would be much less, market share would be lost to competitors 00:01:59.200 --> 00:02:01.640 with better guarantees. 00:02:01.640 --> 00:02:07.810 Because it is important to develop well-balanced returns policies that enhance customer loyalty, 00:02:07.810 --> 00:02:14.060 it is vital to find other ways to reduce reverse logistics costs. 00:02:14.060 --> 00:02:21.200 The next main cost lever is to make reverse logistics more efficient. 00:02:21.200 --> 00:02:28.310 This could be to hand off all reverse logistics to a 3PL or 4PL who has reverse logistics 00:02:28.310 --> 00:02:29.950 as a core competency. 00:02:29.950 --> 00:02:39.320 For example, GENCO ATC is a reverse logistics 3PL that has clients like Walmart and Target. 00:02:39.320 --> 00:02:47.160 Regardless of who manages logistics, manufacturers can reduce waste and scrap so that less material 00:02:47.160 --> 00:02:49.720 is entering the system. 00:02:49.720 --> 00:02:54.800 Other organizations develop their own reverse logistics infrastructure. 00:02:54.800 --> 00:03:01.990 A key example is a dedicated reverse logistics warehouse or entire supply chain. 00:03:01.990 --> 00:03:08.070 Creating a central warehouse just for reverse logistics can prevent this stream of varied 00:03:08.070 --> 00:03:15.560 returns from clogging up whole storage bays at an outgoing logistics warehouse. 00:03:15.560 --> 00:03:21.420 Reverse logistics can also be made more effective by redesigning products and services for reverse 00:03:21.420 --> 00:03:22.450 logistics. 00:03:22.450 --> 00:03:27.760 In many cases this can also benefit sustainability. 00:03:27.760 --> 00:03:35.959 The waste hierarchy shown here prioritizes reduction of waste over reuse, and so on. 00:03:35.959 --> 00:03:40.380 Each area can apply to reverse logistics. 00:03:40.380 --> 00:03:46.760 For example, for reduce, organizations can redesign a product to have fewer replacement 00:03:46.760 --> 00:03:48.569 parts. 00:03:48.569 --> 00:03:53.840 For reuse, they could design packaging and products so that more returns will be fit 00:03:53.840 --> 00:03:55.960 to be resold. 00:03:55.960 --> 00:04:01.020 Cores or cartridges can be returned for remanufacture. 00:04:01.020 --> 00:04:06.490 Manufacturers can make more effective use of materials by reusing components instead 00:04:06.490 --> 00:04:08.220 of scrapping them. 00:04:08.220 --> 00:04:14.500 They can ensure more of their product is recyclable or free from hazardous materials. 00:04:14.500 --> 00:04:21.590 They can recover recyclable or hazardous materials and reuse them in production. 00:04:21.590 --> 00:04:29.570 Finally, they can reduce landfill use such as by making longer-lasting or re-manufacturable 00:04:29.570 --> 00:04:30.710 products. 00:04:30.710 --> 00:04:37.970 The analysis then sums the costs and benefits of reverse logistics. 00:04:37.970 --> 00:04:45.720 Note the revenue generators, such as revenue from liquidating products or selling recyclables. 00:04:45.720 --> 00:04:53.330 Also note the costs, such as material costs for unsellable items or transportation costs. 00:04:53.330 --> 00:05:00.910 A flowchart can be used to help determine how to dispose returned products. 00:05:00.910 --> 00:05:04.800 Note how the process starts with a control point. 00:05:04.800 --> 00:05:11.100 A return material authorization is required before material can be returned. 00:05:11.100 --> 00:05:16.000 Next, returns are consolidated at a returns facility, 00:05:16.000 --> 00:05:23.090 where each item is sorted into recall, defective, or acceptable categories. 00:05:23.090 --> 00:05:29.169 Some recalls will not meet recall criteria and may end up being returned or processed 00:05:29.169 --> 00:05:31.370 as defective. 00:05:31.370 --> 00:05:38.280 For defective items, they may be subjected to repair or their parts may be reused. 00:05:38.280 --> 00:05:46.560 Finally, the returns are sorted into restock items, returns upstream, liquation at a discount, 00:05:46.560 --> 00:05:54.840 donation for a tax deduction, recycling of materials, or disposal in a landfill. 00:05:54.840 --> 00:05:57.800 Transportation is then the last step. 00:05:57.800 --> 00:06:01.860 We hope that you enjoyed this overview of reverse logistics.