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PRESENTED TO:PRESENTED TO:

Ma’am Sara Zafar Ma’am Sara Zafar 

PRESENTED BY:PRESENTED BY:Armaghan haider Armaghan haider 

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REVERSEREVERSE

LOGISTICSLOGISTICS

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Channel FlowsChannel Flows

• Physical possessionPhysical possession

• OwnershipOwnership

• PromotionPromotion

• NegotiationNegotiation• FinancingFinancing

• RiskingRisking

• OrderingOrdering

• PaymentPayment

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Channel Flows for returnedChannel Flows for returned

merchandisemerchandise

Product returned generate largeProduct returned generate large

number of costs which include:number of costs which include:

• FreightFreight

• RefurbishmentRefurbishment

• Inventory holdingInventory holding

• Opportunity cost of lost salesOpportunity cost of lost sales

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Channel Flows for returnedChannel Flows for returned

merchandisemerchandise

• Some retailers due to high cost put tighter control on returns.Some retailers due to high cost put tighter control on returns.

• E.g 10% restocking fees on returned electronic products.E.g 10% restocking fees on returned electronic products.

Poorer brand reputation.Poorer brand reputation.

• Surprising example of refurbishment…….greeting cardSurprising example of refurbishment…….greeting card

industry.industry.

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What happens to aWhat happens to a

returned product?returned product?

The unit can end up in one of theThe unit can end up in one of thefollowing ways:following ways:

• Dispose of products by sending to centralDispose of products by sending to central

processing facility.processing facility.

• Repackaging them and selling.Repackaging them and selling.

• Remanufacturing.Remanufacturing.

• Selling to broker.Selling to broker.• Donating to a Charity.Donating to a Charity.

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What makes reverseWhat makes reverse

channel flow costs high?channel flow costs high?

• Process returns manually.Process returns manually.

• Reverse logistics costs are notReverse logistics costs are not

incurred in a unified way.incurred in a unified way.

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Reverse logistics flowsReverse logistics flows

Physical possession:Physical possession:

• Manufacturers have several decisionsManufacturers have several decisions

to make about physical flow of to make about physical flow of returned product.returned product.

• Failing to which may result ……Failing to which may result ……

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Physical possessionPhysical possession

• Some manufacturers think they canSome manufacturers think they canuse outbound distribution centre foruse outbound distribution centre for

inbound returns.inbound returns.• This typically does not work well This typically does not work wellbecause…because…

Economies of scale.Economies of scale.

Warehouse personnel leaves returnsWarehouse personnel leaves returnsas after thought.as after thought.

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Ownership flowOwnership flow

• When product is returned consumersWhen product is returned consumers

get a refund.get a refund.

• Manufacturer must set policy of retailersManufacturer must set policy of retailersright to return merchandise for refund.right to return merchandise for refund.

 This policy varies across firms e.g In This policy varies across firms e.g In

book selling.book selling.

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Promotion FlowPromotion Flow

• Repackaging the refurbished products.Repackaging the refurbished products.

• Sell through a different channel e.g eBaySell through a different channel e.g eBay

auction.auction.What promotions do?What promotions do?

Make products sellable again.Make products sellable again.

Differentiate to minimize cannibalization.Differentiate to minimize cannibalization.

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NegotiationNegotiation flowflow

• Manufacturers need to negotiate andManufacturers need to negotiate and

even on maximum number of unitseven on maximum number of units

retailer is permitted to return.retailer is permitted to return.

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Financing flowFinancing flow

• Financing costs rise due to returns.Financing costs rise due to returns.

One study report it take 30 to 70One study report it take 30 to 70

days to get product back in market.days to get product back in market.

• So manufacturer must financeSo manufacturer must finance

temporary unsellable inventory.temporary unsellable inventory.

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Risking flowRisking flow

• Poor demand forecasting, leads to returns isPoor demand forecasting, leads to returns isrisking cost.risking cost.

Payment flowPayment flow• Decisions must be made about restocking fee toDecisions must be made about restocking fee to

charge.charge.• E.g 10%,15%E.g 10%,15%

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 Tools for managing/lowering Tools for managing/lowering

cost of reverse logisticscost of reverse logistics

• Contracting with third party reverseContracting with third party reverse

logistics specialist firm.logistics specialist firm.

• Investment in customer services toInvestment in customer services to

prescreen customer orders.prescreen customer orders.

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Benefits of wellBenefits of well

managedmanagedprocess.process.

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 .…..THE END