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Ensure best value with integrated reverse logistics

Posted: 30 Dec 2014     Print Version  Bookmark and Share

Keywords:reverse logistics  OEM  supply chain 

Reverse logistics involves the movement of goods or products from the customer back to the manufacturer. This is being undertaken by a number of companies in order to reuse the products or salvage whatever value the products still possess. However, many electronics OEMs still don't have the proper system set in place to gain the most benefit from an effective reverse logistics process.

"Managing multiple vendors in an ad hoc fashion and running multiple RFQs per year to find reverse logistics vendors in an effort to get the best value simply adds to the daily challenge of the work," said Linda Li, executive director and corporate VP of the Li Tong Group. Many organisations believe that by getting the best deal in each moment, they can get the best deal overall. It's a misconception. "It's a big myth," she said. "In the long run, it's more costly. You have fluctuations in the market."

Further, in a traditional reverse logistics system, organisations face a variety of challenges. First, of course, is cost. Especially in organisations with a global reach, take back programs and the logistics involved with those efforts remain prohibitively expensive. In trying to act independently, organisations lose the potential economies of scale offered by a more collaborative approach such as working with a reverse logistics partner.

Product life cycle

For best results, organisations need to partner with a single reverse logistics provider rather than diluting the process across multiple vendors, where cost and security issues are hard to control. Source: Reverse Logistics Association.

Perhaps most importantly, organisations are concerned about security around IP, as well as with maintaining process integrity and environmental compliance. "If you push the envelope a little bit, and start to see things in a more holistic and integrated way, you will have high impact in terms of management cost reduction and maximum return on value," said Li.

For best results, organisations need to partner with a single reverse logistics provider rather than diluting the process across multiple vendors. "Typically, organisations start thinking about reverse logistics when obsolete product and scrap are occupying too much space, then they go to a local vendor who put in a bid and has minimum qualifications," said Li. "They take the products away and no one knows what happens after that."

The typical OEM has products coming back to them from a variety of sources. First, 3-5 per cent of manufactured products are scrapped before they even reach the customer. "It can be excess material from production, or product that doesn't pass quality control and can't be fixed," she explained. In addition, there is a volume of product created by post-consumer take back programs. The volume of this product is harder to manage and predict.

Li points to a variety of benefits associated with this more integrated way of managing reverse logistics. "You want to maximise the life cycle value of investment in the services and hardware throughout your supply chain," she explained. The potential gains include: the opportunity to reuse and reapply parts and components to new products, the ability to recover high-value engineering materials, the enhancement of asset management capabilities and the prospect of increasing the success of remarketing efforts.

An integrated reverse logistics program can translate into the vast majority of product being recovered and used in new ways. "We can enable reutilisation, remanufacturing, remarketing or repurposing of parts in a way that ensures that 90 per cent of the time we can find a second life for it," noted Li.

- Hailey Lynne McKeefry

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