How to manage reverse logistics

How to manage reverse logistics

Reverse logistics has become an area that retailers and manufacturers cannot ignore. A significant percentage of products are returned by customers. Despite the fact that managing these returns incurs substantial costs through logistics, inventory and disposal, many companies appear to employ inadequate processes for dealing with these returns.

Reverse logistics is a broad area and as such this tool focuses on the management of retail returns. In particular the tool views the management of the reverse logistics process from a holistic supply chain approach rather than simply starting after the point of sale.

Given the tightness of margins in many organisations, it is worth emphasising that the improved management of these returns can have a significant impact on bottom line performance. There can also be a significant impact on environmental concerns as well, since reverse logistics operations can involve a large amount of lorry movements and consequential CO2 emissions. This tool enables companies to audit their returns management activities and identify where opportunities exist to reduce costs and waste and improve customer service.

Chartered Global Management Accountants can play an important role in this area by using their analytical skills to highlight the financial benefits to be gained from making improvements to reverse logistics processes and by recognising the importance of supply chain accounting and inter-organisational accounting. Techniques such as quality costing and transparent performance measurement systems have a significant role to play. Much of the diagnostic and performance aspects of the tool are based on activities taking place across organisational boundaries with particular emphasis on relationships with suppliers and customers.

The tool covers cost and performance management, avoidance of product returns, process management, the physical network, inventory management, information and communication technology, material handling, containers, sustainable distribution and compliance with legislation.

© 2012, University of Sheffield and Cranfield University, used by permission. All rights reserved.

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