Reverse Supply Chain Management

Dr. Peeyush Mehta Vipul Mathur

Definition of RSCM
A set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide costs while

satisfying service level requirements

Relevance of RSCM
The amount of product returns can be very high, with some industries experiencing returns at over 50% of sales. Sales opportunities in secondary and global markets have increased revenue generation from previously discarded products. End-of-life take-back laws proliferated in foreign countries requires businesses to effectively manage the entire life-cycle of the product. Consumers have successfully pressured businesses to take responsibility for the disposal of their products that contain hazardous waste

Process steps in RSCM

Acquisition of products from customers

Reverse logistics: Process of retrieving the product from consumer for the purposes of capturing value or proper disposal
Inspection & disposition Reconditioning Distribution & sales

Process

Examples
Printing industry: Repurchase of old edition, unsold books. Computer industry: Resale due to fast moving technology

Automobiles: Resale due to new models availability e.g. Maruti True Value scheme
Electronic industry: Mobile phones, televisions etc. repurchased to recover electronic parts

Time value of product returns

Marginal Value of Time (MVT)
The loss in value per unit of time spent awaiting
completion of the recovery process

MVT (%)=

Decrease in value of product

Time

Example: Time sensitive consumer electronics products such as PCs can lose value at rates in excess of 1% per week, and the rate increases as the product nears the end of its life cycle

Shrinking pipeline for product returns

RSCM decisions
Efficient RSCM: A supply chain designed to deliver product at low cost
Best for Functional products Suitable for products with High MVT

Responsive RSCM: A supply chain designed for speed of response

Best for Innovative products
Suitable for products with Low MVT

Efficient RSCM: Centralized model

Responsive RSCM: Decentralized model

* evaluation of products at retailer or reseller

Trade offs
Efficient RSCM
Designed for economies of scaleboth in processing and transport of product at the expense of long delays
Suitable for low MVT

Responsive RSCM
Improve asset recovery by reducing timePreponement
Issues: Technical feasibility; cooperation between manufactures and resellers.

Suitable for high MVT