COLUMN

Growing importance
of reverse logistics
Prof Samir K Srivastava

Reverse logistics is the process of

moving a product from the consumer to
the manufacturer, or any other stage in the
supply chain, for re-use or proper disposal.
It has grown in importance due to many
reasons. One of the most prominent reasons
is the growing concern for the environment.
Consumer demand for clean manufacturing
and recycling is increasing, many times
leading to legislation as well. Consumers
expect to trade in an old product when
they buy a new one. Cost is another reason.
Research shows that reverse logistics may
be a worthwhile proposition even in the
contexts where regulatory and consumer
pressures are insignificant. It is becoming
vital as service management activities and
take-back for products such as automobiles,
refrigerators and other white goods, cellular
handsets, apparels, lead-acid batteries,
furniture, televisions, computer peripherals,
personal computers, laptops, etc. are on the
increase. Advancements in Information and
Communication Technologies (ICT) and their
utility in supporting related data collection,
transmission and processing have given it
further fillip.
Aftermarkets, product recalls and
collection of post-consumer goods by various
supply chain stakeholders is gaining interest
worldwide. Establishing a well-managed
reverse logistics system can be a value-adding
proposition for organisations and supply
chains. It can not only provide important cost
savings in procurement, recovery, disposal,
inventory holding and transportation, but
also helps in customer retention which is very
important for organisational competitiveness.
Again, since reverse logistics operations
and the supply chains they support are
significantly more complex than traditional
manufacturing supply chains, an organisation
that succeeds in meeting the challenges will
possess a formidable advantage that cannot
be easily duplicated by its competitors.

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Developing reverse logistics means that

it will be more beneficial for manufacturing
companies to implement refurbishing and
remanufacturing operations for economic
reasons alone besides meeting the consumer
pressures and regulatory norms. Once such
reverse logistics networks are set up, the
producers will have wider choices to offer
and the buyers will have wider choices to
choose from. Firms may consider under which
circumstances should returns be handled,
stored, transported, processed jointly with

Many firms in consumer durables and

automobile sectors have introduced
exchange offers to tap customers who
already own such products mainly from
marketing perspective.

forward flows (integrated logistics) and when

should they be treated separately. They may
compare cost of remanufacturing with cost of
production from virgin materials to decide on
proper input mix.
Reverse logistics did not receive the
desired attention in India earlier and was
generally carried out by the unorganised
sector for recyclable materials such as paper
and aluminium. It is gradually getting
recognised as an integral part of the business
supply chains and managements have started
to realise the need as well as complexity
involved in setting up an efficient supply and
return network in both products and services.
Many firms in consumer durables and
automobile sectors have introduced exchange
offers to tap customers who already own such
products mainly from marketing perspective.

This has led to increased focus on various Rs

(reduce, reuse, resell, repair, recycle, refurbish,
remanufacture and reverse logistics).
Presently, these returned products are
either resold directly in the seconds market
or after repair and refurbishment by firm
franchisee/local remanufacturers. They are
not remanufactured or upgraded by OEMs.
The leading car manufacturer and market
leader in India, Maruti Suzuki India Limited
was the first mover with its True Value
initiative. It has so far established 358 outlets
in 210 cities and is continuously growing.
The Indian market has relatively few reverse
logistics specialists to reduce the associated
time and costs. Wipro and Future Group
have their own inhouse reverse logistics
operations. Specialists like RT Outsourcing,
Aforeserve.com Ltd., Yantra Solutions Pvt.
Ltd., Allcargo Global Logistics Ltd, Reverse
Logistics Co., have emerged recently and are
making their presence felt.
Reverse logistics is capable of becoming
a major route to cost optimisation with the
growth of the Indian economy. Currently,
Indian reverse logistics market is estimated
around Rs 800 billion and is expected to
grow rapidly. Efforts should be undertaken
to strengthen and expand industry coalitions
and link with logistics service providers. The
Government of India is also likely to boost
the reverse logistics industry particularly
in areas like e-waste management. ICT may
also play a significant role. Indias top few
pharmaceutical companies have opted to
install the radio frequency identification
(RFID) tags during drug manufacturing.
RFID prevents production of spurious and
counterfeit drugs as it enables manufacturers
to trace and track the drugs in the supply
chain. This will ensure better management of
reverse logistics, especially in product recalls.
(The author is the Associate Professor Operations Management, Indian Institute
of Management, Lucknow)