3/19/2011

SUBMITT ED BY: ANU ABRAHA M

IMPORTANCE OF REVERSE LOGISTICS IN SUPPLY CHAIN MANAGEMENT

GUIDED BY: | Dr. N.K.VARGHESE

CONTENTS

ABSTRACT INTRODUCTION SUPPLY CHAIN DECISIONS ROLE OF LOGISTICS IN SUPPLY CHAIN IMPORTANCE OF REVERSE LOGISTICS CASE STUDY CONCLUSION REFERENCES

3 4 6 8 11 16 25 26

ABSTRACT
Product flows in todays supply chains do not end once they have reached the customer. Many products lead to a second and even third or fourth life after having accomplished their original task at their first customer. Consequently, a product may generate revenues multiple times, rather than a single time. Capturing this value requires a broadening of the supply chain perspective to include new processes, known as reverse logistics, as well as multiple interrelated usage cycles, linked by specific market interfaces. Coordinating the successive product uses is the key to maximizing the value generated. Profit making is not only motivation for reverse logistics, legislation also imposing companies to be responsible for the contamination made by their products. Moreover these companies are learning to maintain green image, use information comes back with reverse flow for customer satisfaction.

1. INTRODUCTION
Reverse Logistics is the reverse method of doing logistics in supply chain. Today reverse logistics become very important issue for companies to capture the value of used products to manage returned products, to use return information came for customer satisfaction, to maintain green image and because it is imposed by legislation. The Indian logistics industry is expected to reach a market size of over US$ 125 billion by 2010.So it is significant value to keep attention towards RL. A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. Supply Chain Management (SCM) refers to the management of materials information distribution, to the final consumer. It also includes after-sales service and reverse flow as handling customer returns and recycling of packaging and discarded products. The supply chain management can be defined as: A set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time in order to minimize system wide costs while maintaining the desired service levels. Supply chain management is a cross-function approach including managing the movement of raw materials in to an organization, certain aspects of the internal processing of materials in to finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. SCM have five basic components:

1. Plan- This is the strategic portion of SCM. We need a strategy for managing all the resources that go towards meeting customer demand for our product or service. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, cost less and delivers high quality and value to customers. 2. Source Choosing the suppliers that will deliver the goods and services which we need to create our product. 3. Make This is the manufacturing step. Scheduling the activities necessary for production, testing, packaging, and preparation for delivery.
4. Deliver This is the part that many insiders refer to as logistics. Coordinating the receipt

of orders from customers, developing a network of warehouses, pick carriers products to customers and set up an invoicing system to receive payments.

to get

5. Return The problem part of supply chain generally referred as Reverse Logistics.

Creating a network for receiving defective and excess products back from customers and supporting customers have problems with delivered products. Figure 1 representing the return flow clearly. Order Fulfillment
Suppliers

Manufacture rs

Distributors

Retailers

Flow of Information (customer requirements orders) Recycle Reuse Remanufacture

Figure 1.1: A Schematic of a Supply Chain

Typical supply chain management have two types of flow of materials, one from supplier to customer (forward logistics) and another is from customer to manufacturer (reverse logistics). Material purchase, manufacturing, distribution to customers follows after market customer

services which includes customer services, depot repair, service logistics, replacement management, end-of-life manufacturing, recycling, refurbishment, etc.

2. SUPPLY CHAIN DECISIONS

We classify the decisions for supply chain management into two broad categories: strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these types of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas. 2.1 Location Decisions The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. Although location decisions are primarily strategic, they also have implications on an operational level. 2.2 Production Decisions The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before,

these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility. 2.3 Inventory Decisions These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw material, semi-finished or finished goods. They can also be inprocess between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels. 2.4 Transportation Decisions The mode choice aspect of these decisions is the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk

shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy.

3. ROLE OF LOGISTICS IN SUPPLY CHAIN

The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible. So logistics can be defined as Logistics is the art and science of managing and controlling the flow of goods, energy, information and other resources like products, services & people. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging. Forward logistics and Reverse logistics can be differentiated on the basis of direction of flow. Forward logistics can be defined as: Forward Logistics is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials , in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. Reverse logistics includes all of the activities that are mentioned in the definition above. The difference is that reverse logistics encompasses all of these activities as they operate in reverse. Therefore, reverse logistics as: Reverse Logistics is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. Every time it is not necessary material to come back at point of origin, in reverse logistics material tends to come at very different points such as point of recovery or point of disposal. So the European Working Group on Reverse Logistics, RevLog, puts forward the following definition:

The process of planning, implementing and controlling flows of raw materials, in process inventory, and finished goods, from a manufacturing, distribution or use point, to a point of recovery or point of proper disposal.

3.1 Drivers of reverse logistics The driving forces behind reverse logistics can be categorized as economics, legislation and corporate citizenship.

Economics: A reverse

logistics program can bring direct gains to companies from

dwindling on the use of raw materials, from adding value with recovery, or from reducing disposal costs. Independents have also gone in to the area because of financial opportunities offered in the dispersed market if superfluous or discarded goods and materials. The indirect benefits include market protection, green image of company and improved customer/supplier relations.

Legislation: Legislation refers to any jurisdiction indicating that a company should

recover its products or accept them back. Eg. In European countries there has been an increase of environmentally related legislation, like on recycling quotas, packaging regulation and manufacturing take back responsibility.

Corporate citizenship: Corporate citizenship concerns a set of values or principles

that impel a company or an organization to become responsibly engaged with reverse logistics. 3.2 Type of returned products Generally, products are returned or discarded because either they do not function (anymore) properly or because either they or their function are no longer needed. We can list them according to the usual supply chain hierarchy: starting with manufacturing, going to distribution until the products reach the customer. Therefore, we differentiate between manufacturing returns, distribution returns and customer returns. Fig 2 shows types of returns and reasons for returns.

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Manufacturing returns: We define manufacturing

returns as all those cases where

components or products have to be recovered in the production phase. This occurs for a variety of reasons. Raw materials may be left over, intermediate or final products may fail quality checks and have to be reworked and products may be left over during production, or by products may result from production.

Distribution returns: Distribution returns refers to all those returns that are initiated

during the distribution phase. It refers to product recalls, B2B commercial returns, stock adjustments and for instance between warehouses or shops, e.g. in case of seasonal products . Functional returns concern all the products which inherent function makes them going back and forward in the chain. An obvious example is the one of distribution carriers as pallets: their function is to carry other products and they can serve this purpose several times. Other examples are crates, containers and packaging.

Customer Returns: The third group consists of customer returns, i.e. those returns

initiated once the product has at least reached the final customer.

MANUFACTURING

DISTRIBUTION DISTRIBUTION RETURNS Product recalls B2B commercial returns Stock adjustments

CUSTOMERS CUSTOMER RETURNS B2C commercial returns Warranty returns Service returns End-of-use returns

MANUFACTURING RETURNS Raw Material Surplus Quality Return Returns

Functional returns

Figure 3.1 : Type of returned products

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4. IMPORTANCE OF REVERSE LOGISTICS

Next step to returns collected, companies can re-use them, re-sell them, leave them to a third party or destroy them. Moreover to benefit by these returns, companies can take advantage of information that comes back with return merchandise. Reverse logistics is important for:

Assets utilization. Assets recovery: To capture the value, which otherwise will be lost. Profit maximization: Cost reduction through recycling and reusing.

To fulfill the Environmental obligations e.g.: Waste recycling, Hazardous waste management.

Customer Relations Management, e.g.: after sales service, buy back guarantee.

4.1 Application Areas The list of industries where reverse logistic play an important role:

Publication houses: To take back the unsold volume for reuse. Beverages industries: To collect & reuse the empty bottles .e.g. Coca-Cola & Pepsi

Heavy industries: To collect and reuse the waste. e.g. steel industries Consumer goods industries: To fulfill the commitments of after sale service and buy back guarantee.

Pharmaceutical industries: To collect the expired formulations and drugs for environment friendly disposal.

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Automobile industries: To fulfill the commitments of after sale service and buy back guarantee.

Computer industries: replacement warranty.

To fulfill the commitments of after sale service &

Chemical industries: To recycle & reuse chemicals and proper disposal of waste.

Table4.1: Return rates in different merchandise category

Business products Hard-goods gifts

Return Rates By Merchandise Category < 1% to 5% 5% to 9% 5% to 10% 5% to 20% 10% to 20% 10% to 30% 20% to 30% 25% to 40%

Home decoration Products High-tech products Casual apparel Shoes Fitted apparel High-fashion apparel

4.2 Activities Involved In Reverse Logistics Usually reverse logistics activities would be the processes a company uses to collect used, or damaged, stock balancing returns, or outdated products, as well as packaging and shipping

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material from the end-user or the reseller. Once a product has been returned to a company, they have many options to choose. If the product can be returned to the supplier for a full refund, the firm may choose this option first. If the product has not been used, it may be resold to a different customer, or it may be sold through an outlet store. If the product cannot be sold as is, or if the firm can significantly increase the selling price by reconditioning, refurbishing or remanufacturing the product, the firm may perform these activities in-house, a third party firm (3PL) may be contracted, or product can be sold outright to a reconditioning / remanufacturing / refurbishing firm. After performing these activities, the product may be sold as a reconditioned or remanufactured product, but not as new. If the product cannot be reconditioned in any way, because of its poor condition, legal implications, or environmental restrictions, the firm will try to dispose of the product for the least cost. Any valuable materials that can be reclaimed will be reclaimed, and any other recyclable materials will be removed before the remainder is finally sent to a landfill. Generally, packaging materials returned to a firm will be reused. Clearly, reusable totes and pallets will be used many times before disposal. Often, damaged totes and pallets can be refurbished and returned to use. This work may be done in-house, or using companies whose sole mission is to fix broken pallets and refurbish packaging. Once repairs can no longer be made, the reusable transport packaging must be disposed of. However, before it is sent to a landfill, all salvageable materials will be reclaimed. 4.3 Four Main Reverse Logistics Activities

Collection: Bringing the products from the customer to a point recovery. Combined inspection / selection man / sorting: Sorting of collected products according to their quality state & recovery route.

Re-processing or Direct recovery: When products need additional processing, option of reprocessing is used. Repair, refurbishing, remanufacturing, recycling, Cannibalization & incineration are some of the reprocessing options used widely. In contrary, when condition of product is good direct recovery may be used. I include Re-use (valuable components) and Re-Sale (supply chain returns can be sold at a discount rate or at a secondary market).

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Redistribution: Bringing back the recovered products to new users or to the same customer. Forward logistics is used for this purpose as per possible.

Raw Materials

Manufacturing

Distribution

Consumer

Repair

Test

Disassembly

Service

Disassembly

Raw Materials

Manufacturing

Distribution

Consumer

Remanufacturing

Repair

Test

Recycling Disposal

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Disassembly

Service

Disassembly

Remanufacturing

Figure 4.1: Basic flow diagram of reverse logistics activities

4.4 Transportation and Facility Location Decisions Transportation decisions associated with the moving secondhand and recyclable materials can be difficult. The cost of transporting secondhand and recyclable materials can quickly exceed their value, eliminating any financial advantage the program might offer. If the total cost associated with recycling or reuse efforts exceeds the total cost of purchasing new materials, firms have no profit motive for implementing a reverse logistics system. Therefore, transportation decisions become crucial to recycling or reuse programs.

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Cost usually drives the transportation decision for RL. Little attention is paid to the service level provided by the transportation mode chosen or specific criteria; the secondary market seldom justifies expensive transportation. Extreme pressure to minimize costs affects to only transportation mode costs affects to only transportation mode choice but also facility location. Location analysis considers the potential impact transportation costs can have on the resale value of recycled products. Often, locations are chosen specifically to minimize future transportation outlays.

6. CASE STUDY
1. Introduction Reverse logistics aims to manage goods, returned goods and also waste materials from Customers to manufacturers. A reverse logistics can be used to enhance productions quality, minimize resource consumptions in operation process, supply new productions lots of materials, then to achieve sustainable development and environment benefits as well. The Shipbuilding industry is both a capital and labour intensive industry. But building cost can still be reduced by many methods such as advance in ship design, good processing of steel

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materials and also take the advantage of recycling steel wastes. When regarding to recycling steel wastes, a good constructed reverse logistics was considered more efficient in operating regeneration and reducing shipbuilding cost. The Chinese shipbuilding industry currently does not unduly worry about labour costs as a result of the plentiful supply of cheap labour, however this advantage will not last forever and new ways to keep prices cheap should be found. Thus the reverse logistics is one area which can help in this regard. This paper starts with explaining of what reverse logistics is and what the function it obtains, then to discuss how those functions can help solve the materials problems for shipbuilding industry. Moreover, with the investigation of presents the problems of their reverse logistics, and it proposed a reasonable reconstructed shipbuilding reverse logistics for Chinese shipyards, with the main objective of saving material costs. 2. Reverse logistics There are various definitions of reverse logistics. According to the Council of Supply Chain Management Professionals of America, reverse logistics was defined as playing the roll of managing return, repair, reproduction, waste disposal and hazardous materials, the main methods including source reduction, recycling, substitution, reuse, and disposal. Another definition is from Reverse Logistics Executive Council, who states that reverse logistics is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. Reverse logistics thus encompasses a number of streams of activity: Return of end of life products Return of defective, damaged and unwanted products Return of packaging and recovery of returnable equipment such as containers, pallets and barrel. 3. Shipbuilding material and material wastes Building ships involves massive resources including labour, capital and of course raw materials such as steel. According to data from the US Bureau of Labor Statistics, raw materials account for an average of 40 percent of total shipbuilding costs in worlds shipbuilding industries 3. Even if in countries like Korea who conduct more efficient shipbuilding and do very well in minimizing material payment, steel still occupies over 20percent of all materials for a ship . However, as steel materials occupied such large amount percentages of shipbuilding cost, also stated a potential problem that the rising steel material price definitely would bring extra costs for using it.

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4. Reverse logistics of local shipyards 4.1 Current reverse logistics system According to the interviews, it was concluded that many local shipyards in China were still applying a very simple logistics system for recycling steel wastes. It was operated in the similar idea of reverse logistics, but missing the target of reducing material costs, and thus it could be rather called as a Material Returning System. There were four players in such a system, Shipyard, Small Wastes Workshops, Large Recycling Company and Local Resource Department (steel manufacturers). It was operated in FOUR SELL STEPS as STEP 1. Shipyards sell steel wastes to small wastes workshops; STEP 2. Small wastes workshops resell steel wastes to large recycling company; STEP 3. Large recycling companies resell steel wastes to steel manufactures; STEP 4. Resource department regenerated steel wastes and sell to the steel market.

Figure 1: The Current Reverse Logistics in Zhejiang

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STEP 1 Shipyards steel wastes were created by daily used steel plates: cutting, modifying and scrapping etc. These wastes were firstly sold to small wastes workshops by shipyards. Those workshops were not rich, they usually near shipyards and so their workers can make phone call or directly visit shipyards for buying those wastes. Then the material wastes were shipped back by manual pushcarts.
Figure 2: The Workshops Manual Pushcarts

STEP 2

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By collecting a certain amount of steel wastes, the workshops did simple classifications. They generally classified those wastes by large pieces of steel plates or small shape, and then sold them again to large recycling companies. They earned the little price differences and tried to save as much transport costs as they can. STEP 3 The large recycling companies transported the steel wastes from the small wastes workshops by their own trucks. They regrouped wastes again in more detail, as illustrated in Figures, with different steel types (component) and original usage (may different shape). Then, they assembled, resold and shipped to different resource departments for regeneration or disposal
Figure 3: Grouped Steel Wastes

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Figure 4: Grouped Wastes from Steel Plate

STEP 4 There are both local steel manufacturers in Ningbo and Wenzhou, where the large recycling companies forward their grouped steel wastes to for regeneration. The regenerated steel materials are assembled and sold to market to supply various other manufacturers. 4.2 Merits and problems of current system The advantage of the current system was the shipyards could release their burdens of handling wastes, and then they can focus much more on shipbuilding. Shipyards were thus likely to be quite willing to sell on, relatively cheaply, such unwanted materials. As the large recycling companies may not closely connect with shipyards for wastes, the small wastes workshops thus acted as the intermediary between the two, assembling the material waste to facilitate the operation of this reverse logistics. However, there were many potential problems. The small workshops only cared about win the price gap of resell rather than concerned with helping the shipbuilding save materials. They were considered as doing the unnecessary jobs. Meanwhile, the large recycling companies were less care about how to take the advantages of those material wastes, but did as merely for finishing governmental performance measure of handle wastes. Moreover, material wastes needed a long transfer time to go though the four steps in this reverse logistics system, and thus there were many mistakes in handling wastes.

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Even many works were wasteful duplication of effort, because lots of sectors in this system were less in communication. Such a simple reverse logistics was inefficient, which created less benefit to shipyards. Despite of those like Samsung Heavy Industry in Ningbo have applied a comparatively formal reverse logistics, i.e. directly forward the materials wastes to large recycling companies, they still bought new steel plate from steel manufacturers rather than purchasing back the regenerated materials, even if which were at a lower price or with acceptable qualities. 5. Shipbuilding reverse logistics 5.1 The proposed shipbuilding reverse logistics By researching the current reverse logistics in China, a new construction of shipbuilding reverse logistics was proposed as outlined in the figure. The Shipbuilding Reverse Logistics Center (SRLC) was introduced, which replaced all the middle sectors between shipyards and steel manufacturers. By allocating jobs among them, the operation thus was minimised into three steps: STEP 1: SRLC buy steel wastes from shipyards; STEP 2: SRLC resell steel wastes to steel manufactures; STEP 3: SRLC buy regenerated steel plates from steel manufactures.
Figure 5: Shipbuilding Reverse Logistics

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STEP 1 Shipyards managed the material wastes before selling, i.e. classified them by usage such as steel for hull construction and deck buildings, and also made a record of quantitative and qualitative information. Such collected material wastes were then shipped to SRLC, and all the created information would be passed as well. STEP 2 SRLC assembled a large amount of material wastes from various shipyards. It then checked, classified and resembled material wastes again, by different standards such as usages, ship types, qualities and materials component. The previous information of material wastes was upgraded, and new database were created for recycling. When the marginal benefits outweigh the marginal disassembly costs (Johnson and Wang, 1995), those grouped material wastes were sold and transported to the steel manufacturers. STEP 3 SRLC buys the regenerated materials back from steel manufacturers, and used them for Supplying shipyards again. According to the database of wastes materials that previously created, the regenerated materials thus could be reclassified by their original usages. SRLC was acting as the supervisor for maintaining the technical standards of regeneration, and also a promoter of shipbuilding reverse logistics. 5.2 Improvements This proposed shipbuilding reverse logistics system was more efficient than the previous one. First of all, the operation time (transfer time) could be minimized. The previous reverse logistics obtained two middle transfers: the small wastes workshops and the large recycling companies, and so the material wastes had to go though two departments. Many of their works were unnecessary. But in the proposed shipbuilding reverse logistics system, the SRLC took over these two departments, which, directly connected shipyards with steel manufacturers to reduce the transfer times. The created internal information system indeed ensured a more efficient operation. It also helped reduced the environment pollution which created by unprofessionally operating those material wastes. On the other hand, the proposed shipbuilding reverse logistics reduced operation costs. In the previous system, the small wastes workshops and the large recycling companies would add their earnings into resell price, which were all transferred into the later regenerating price. Indeed, as the standards of managing material wastes were various among all the different

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sectors, extra management costs thus were more likely to be happened. Such a price addition could be saved in the shipbuilding reverse logistics system, as because SRLC would focus much more on scaled economics rather than the unreasonable addition of price. Moreover, the SRLC acted as the supervisor of shipbuilding reverse logistics, it promoted the sustainable development in shipbuilding industry and material industry. The regenerated building materials were positively supplied shipyards by the SRLC, which would be ensured the most acceptable qualities. The demand for new produced building materials could be control, and thus it helped to relieve the stress of resource (especially iron ore) supply. 5.3 The basic preparations for the establishment Firstly, establishing a professional Shipbuilding Reverse Logistics Centre. SRLC worked as a third party logistics between shipyards and steel manufacturers, which received classified and transported waste materials for both two sides. The functions were quite similar to the agency section in container reverse logistics, for example, who operate or own the containers and responsible for the return of the containers after they have been emptied by the recipients . Secondly, the recycling work should be reasonably allocated among the shipyards, SRLC and steel manufacturers. Material wastes should firstly be assembled and classed in by shipyards, and a full information database must be created before transporting to the SRLC. The SRLC handled the assembled material wastes, upgrading the database and passed all of them to steel manufactures. It was also responsible for promoting the adoption of regenerated materials from steel manufacturers, with the full materials information to provide efficiency and protect against pollution. Last but not least, the proposed shipbuilding reverse logistics necessitated the communication system, which ensured efficient and clear information flows. A systemic communication system promoted accurate works in grouping material wastes, and could also stimulate more efficient recycling process. The information of material wastes could be shared in the database by computer networks among the departments, which would also be used to indicate what the new materials were regenerated. Indeed, shipyards could follow there cycling process to tell their expectation of how those material wastes were managed for any possible future usages. 6. Conclusion The Shipbuilding industry still consumes large amounts of materials, which created potential problems in material supplies, shipbuilding costs and even environment pollutions. According to the interviews with Chinese local shipyards, a very simple logistics was applied

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for handling material wastes but was inefficient and less cost effective, and it did nothing for providing shipyards the sustainable development. An efficient shipbuilding reverse logistics system was considered could help solve those problems. The proposed shipbuilding reverse logistics system in current research was Simplified in three players: Shipyards, Shipbuilding Reverse Logistics Centre (SRLC) and Steel Manufacturer. The SRLC as the core operator connected with the shipyard and the steel manufacturer to ensure the efficiency of whole revere logistics system. It stimulated the adoption of regenerated materials in shipyards, to reduce the shipbuilding cost as well as guiding sustainable development and reducing pollutions.

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6. CONCLUSION
From the theory of reverse logistics explained above, it can be concluded that the importance of the subject it is not limited to used product market, it is equally important to all limited to used product market. It is equally important to all merchandise returns by any means. Due to discrete sources of returning the products it becomes intricate. Reverse logistics is an important element of supply chain but still not recommended as important as forward logistics. Making logistics efficient, maintaining customer satisfaction very high, creating value from returns, reverse logistics can representing these very efficiently. Though RL may be imposing by legislation, companies can see lucrative opportunities to make profit from these activities. To become successful reverse logistics, the decisions of transportation and facility locations are crucial as it directs affects cost for RL.

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7. REFERENCES
Caldwell, B. (1999), Reverse logistics, Journal of Information Week, No.729, Mass: 48-56.
Logistics & Sustainable Transport Volume:2, Issue:1

China Shipbuilding Industry Corporation. (2008) Steel Price Increasing as the High Coal Reverse logistics opportunities, Council of Logistics Management Loureno, H. (2001) Supply Chain Management: An opportunity for metaheuristics, University Pompeu Fabra, Department of Economics and Business, viewed 22 Feb 2009

L. Kroon., and G. Vrijens., (1995), Returnable containers: an example of reverse logistics International Journal of Physical Distribution & Logistics Management, 25(2): 56-68 National Development and Reform Commission of China, (2008) The Iron Ores Price is Increasing, viewed 22 Feb 2009,

Pohlen, T. and Farris, M. (1992), Reverse logistics in plastic recycling, International Journal of Physical Distribution & Logistics Management, 22(7): 35-47.
Logistics & Sustainable Transport Volume:2, Issue:1

Reverse Logistics Association, US, (2002), Define of Reverse Logistics, viewed 22 Feb 2009

Reverse Logistics Executive Council, University of Nevada, RLEC Mission Statement, viewed 22 Feb 2009, Rogers, D., Tibben-Lembke, R. (1999) Going Backwards: Reverse Logistics Trends and Practices, Reverse Logistics Executive Council.