I have been analyzing the processes that are in place in companies in the Central American region and I have seen a practice that is applied mostly in the European Union since 2001; this is due to the implementation of the “Sixth European Community Action Programme on the Environment”(1), which focuses, unlike the Central American region, on the fact that once the customs process is completed, the waste or samples or packaging remains as part of the completion of the same, but for the European Union it creates a relationship towards the “reverse logistics”, where it involves both the recipient and the buyer to create a purchasing relationship, including in its customs process the “reverse logistics”. But what is it and what does it consist of? We will explain it in more depth in this article.
Reverse logistics is the strategy in the world of logistics that consists of the waste recovery originating from a productive or consumption activity. It is important to understand what this means, as it starts at the end consumer, moving backwards through the supply chain to the distributor or from the distributor to the manufacturer.
Reverse logistics can also include processes where the end consumer is responsible for the disposal of the product, including recycling, refurbishing or reselling.
International trade players use reverse logistics when goods move from their destination through the supply chain to the seller and potentially back to suppliers. The goal is to either recover the value of the product or dispose of it. By anchoring it, a symbiosis of reverse logistics objectives is achieved, which, by recovering value, ensure repeat purchases. Increasingly, companies are using reverse logistics to build customer relationships, repeat purchases and minimize losses related to returns.
History of Reverse Logistics with its theoretical framework
In the 70s the terms of “Reverse Flow” and "“Reverse Channels” by Guiltinan and Nwokoye, 1974 (2) and Ginter and Starling, 1978 (3) focused mostly on recycling, but it was not until the 90s when the debate through the Logistics Management Council He developed the first formal definition of reverse logistics, defined as “the logistics of recycling, waste disposal and hazardous materials management.”
Until then, the term was closely linked to recycling, landfilling and the management of hazardous materials, but from then on it included everything related to the logistical activities of source reduction, recycling, replacement, reuse and disposal.
In this period of the 90s, several terminologies were introduced regarding an environmental awareness of the handling of goods that could be applicable to the management of return costs and active reuse of goods, but the main definition of Reverse Logistics was Rogers and Tibben-Lembke (4) de 1998: "the movement of products or materials in the opposite direction, in order to create or recover value, or for proper disposal". In this way he entered the European Reverse Logistics Group (5) Taking into account the study by Rogers and Tibben-Lembke, in the same year it produces its own approach, creating the most specific of possible treatments, which does not focus only on the origin of the supplier, but is a broader definition that involves the entire logistics process: “Reverse logistics is understood as the process of managing the flow of raw materials, inventory in process and finished products, from a point of manufacture, distribution or use to a point of recovery or appropriate disposal.”
By combining these various points of view in your analysis, we can verify what advantages and disadvantages can accompany the application of reverse logistics in your supply chain:
Advantages
- Minimize environmental impact: Reusing materials in manufacturing processes helps to avoid the misuse of unprocessed raw materials and requires less energy. This practice will directly benefit society as a whole.
- Improve corporate image and customer satisfaction: There are significant competitive advantages for companies that use reverse logistics. More and more customers are interested in doing business with companies that are committed to the environment.
- Discovering new ways to rework materials: Recovering the monetary value of rejected items can open up new business opportunities. Outlet stores are a good example, specialising in selling last season's products or those with minor defects at lower than usual prices.
- Stock control: Reverse logistics involves better organization of stock, which prevents the storage of obsolete products and minimizes possible errors.
All these advantages also have a positive impact on cost reduction and increased revenue.
Disadvantages
- Increased work: Reverse logistics processes are not easy. You have to know how to manage the supply chain and make appropriate programming for it to work well. In order to implement these functions, more staff or overtime is necessary.
- All company departments must participate: Through this process, a large part of the company must be involved; if not, it may be negative for the day-to-day work of some sections or departments of the company.
- Control of returned products: Here it is necessary to have personnel to inspect the materials, and the review must be done one by one, which is something expensive.
- Return of material: Sometimes the cost of reverse logistics cannot be amortized. If the customer returns small quantities, recycling or reuse may not be worth the effort.
All these disadvantages have negative repercussions if they are not implemented with a clear plan in a sequential manner.
Types of Reverse Logistics
- Returns management: This process focuses on customer product returns or avoiding returns in the first place. These activities must be fast, controllable, visible and direct. Customers judge a company by its returns flow and return policies.
- Re-manufacturing or reconditioning: Another type of reverse logistics management includes remanufacturing, refurbishing and reconditioning. These activities repair, rebuild and reprocess products.
- Packaging management: This type of reverse logistics focuses on reusing packaging materials to reduce waste and disposal.
- Unsold products: Reverse logistics for unsold goods handles returns from retailers to manufacturers or distributors. These types of returns may be due to poor sales, too much stock, or refused delivery.
- End of life (EOL): When a product is at EOL, it is no longer useful or functional. The customer may want to replace it with a newer, better version. Manufacturers often recycle or dispose of products that are at the end of their useful life. These goods can create environmental challenges for manufacturers.
- Product not delivered: Drivers return the goods to sorting centers. From there, the sorting centers return the goods to their point of origin.
Both the supply chain and its customs and customs clearance process make up a complex process, the basic thing that the external user sees is carrying a product "X" from a point "TO" to a point "B", But those of us who work in the field know that multiple situations can occur between the two points in question and their customs clearance. Reverse logistics invites you to think in reverse from the point "B" point "TO", to deconstruct the logistics process and be able to create a symbiosis of processes and link them in a single sequence where, by understanding the reverse process, it will be possible to maintain a constant flow of the supply chain. I wonder if in the not too distant future, the master's degrees taught at universities will be about the deconstruction of the process with the exploration of reverse logistics, and just as there are International Logistics Operations Managers, positions will be created for Reverse Logistics Managers and their reverse work teams, thinking about the return of the same and the care of the environment with their own policies and processes. But we will leave the rest for a next episode of the multiverse of logistics.
(1). “Sixth European Community Action Programme on the Environment” (2001)
(2). Guiltinan and Nwokoye. (1975). Distribution channel and system development in the emerging recycling industries. International Journal of Physical Distribution and Logistics Management.
(3). Ginter and Starling. (1978). Reverse distribution channels for recycling. Review of California management.
(4). Rogers and Tibben-Lembke (1998). Going Backward: Reverse Logistics Trends and Practices.
(5). European Reverse Logistics Working Group (1998). Study of the European Working Group on Reverse Logistics.
Graduate in Customs Economics from the Universidad Nueva San Salvador. Specialist in Continuous Improvement and Customs Processes, General Directorate of Customs of the Republic of El Salvador.
