Reverse LogisticsGroup 4:

Nripesh SenPratik PoddarPratyusha DashPreetish SwainPriyaranjan MohantyRahul Jain

“Reverse Logistics is the process of moving

products from their typical final destination to another point, for the

purpose of capturing value otherwise unavailable, or for the proper disposal of

the products.

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» Forecasting» Carrying costs» Processing costs» Warehousing» Distribution» Transportation» Personnel» Marketing

IMPACT OF REVERSE LOGISTICS

Comparison between forward and Reverse logistics 4

Workflow 5

» Processing returned merchandise - damaged, seasonal, restock,

salvage, recall, or excess inventory

» Recycling packaging materials/containers

» Reconditioning, refurbishing, remanufacturing

» Disposition of obsolete stuff

» Hazmat recovery

6Typical Reverse Logistics Activities

Impact of Reverse Logistics on Brand 7

0%

20%

40%

60%

80%

100%

120%

85% of customers WILL NOT shop again if the return process is not convenient

0%

0%

0%

1%

1%

1%

1%

95% of customers WILL shop again if the return process is convenient

Impact of a negative returns experience.

Impact of a positive returns experience.

Business Drivers of RL

Internal

External

Operational Strategic

Legislation

• WEEE directive• Potential EU legislation on re-use

of packaging material• RoHS directive• Sarbanes-Oxley

Business Strategy• Customer Retention/Loyalty• Corporate citizenship• Market/customer behavior analysis• Reduce risk for forward channel• Drive sales• Feedback to new product development/IT

• Recover assets• Recapture value• Control gray market• Global Labor Cost

Economic BenefitsCustomer Service Initiatives• Return of defective products• Product disposal after end-of-life• Product upgrades• Product recall• Warranty returns• Product defect analysis

Source: Infosys & Cisco Systems

Key Parameters for RL supply chain

» Rate of returns?» Cost to process a return?» Time to get the item back on the shelf if

resaleable?

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Costs above the cost of item

» Merchandise credits to the customers.» The transportation costs of moving the items from the

retail stores to the central returns distribution center. » The repackaging of the serviceable items for resale.» The cost of warehousing the items awaiting

disposition. » The cost of disposing of items that are unserviceable,

damaged, or obsolete.

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Costs in RL Supply Chain» Process inbound shipment at a major distribution center =

1.1 days» Process inbound return shipment = 8.5 days» Cost of lost sales» Wal-Mart: Christmas 2003 - returns = 4 Days of Supply for all

of Wal-Mart = 2000 Containers» PalmOne - 25% return rate on PDAs» Wal-Mart: $6 Billion in annual returns = 17,000 truck loads

(>46 trucks a day)» Electronics: $10 Billion annually in returns» PCs: $1.5 Billion annually = approx $95 per PC sold

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RL Adds to Bottom Line

» Your Company Manufactures 1 Million Units Per Year» Revenue per Unit is $1 or $1,000,000» Profit per unit is 5% After Tax or $50,000» Return Rate Average is 10% or 100,000 units» Returns Represents $100,000 of Sales or $50,000

negative to bottom line» Reverse Logistics Recovers 80% of the Returns or

$80,000 to company bottom line» Company’s After Tax Profit is $30,000

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What Value Can Reverse Logistics Deliver? 13

Function Key Objective How Reverse Logistics Can Help

Finance Maximize profitability

• Control costs with efficient operations• Recover value from returns

Sales Grow the business

• Make returns process painless, to increase customer satisfaction

• Support growth by making product available to surgically resell

Marketing Build the brand • Control the gray market

Quality Improve customer experience

• Feed returns data back upstream to drive process and product design improvements

CEOAll of the above,+ Corporate Social Responsibility

• Ensure environmental protection• Leverage returns to accelerate giving back to the

community

Returns: An Operations Perspective

» Emerging industry in infancy stage

» Many skill sets involved, deep knowledge of some skills

» Person on Warehouse floor –needs tools

» No Schooling for Reverse Logistics

» No rules or standards» No methods» Few Best Practices» Few comparisons

» How do we know WHAT we should be doing?

» How do we know HOW WELL we are doing?

» Where are the opportunities to improve PROFITS?

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Some Key Challenges Operations people face:

So many people, from so many departments, at so many locations, from different

companies, needed to process one return.

For the group managers, returns is a small, annoying part of their group – Most of a

Return is someone else’s problem /fault.

Turn Around Time is often very slow and difficulties often arise that add days to the

processing of a Return.

Stressful work environment due to frequent issues that need to be resolved ASAP

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Some Key Challenges Operations people face:

Difficulties arise with process Hand-offs between groups, Outsourced providers and

multiple data systems

Collect little data about a Returned unit; it often has errors, so it may get handled

incorrectly or we have to believe what the customer tells us

Often time consuming or difficult to track down the status of a unit

Senior staff spend considerable time solving processing problems or escalated issues

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Best Practices

» All Returns under control of ONE GROUP.

» Very Defined Business Processes

» Process Mapping – companies that develop process maps saved up to 40%

» Map all processes and add timelines

» Automate processes where possible

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Flipkart Reverse Logistics

• eKart's reach - 150 Cities, the largest such network set up by an online retailer in India

•  eKart currently offers services such as delivery logistics, reverse logistics and pay on delivery

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How does Flipkart handle its returns? 19

Product is Defective/Damaged/Quality

IssuesWrong Product

Customer is not willing to buy anymore

Exchange of Product (Ex: Old phone exchange with

new phone)

When?

The Return Process 20

Shipping back to the vendor

Agent Verifies the product to be returned

Agent assigned to return location

Validation of request and Return Initiated

Return Request by customers

Thank you.

Any questions?