Reverse Logistics: Inefficiencies in the Return Process

Reverse Logistics: Inefficiencies in the Return Process

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Reverse Logistics: Inefficiencies in the Return Process

Introduction

            Reverse logistics is concerned with all the operations that deal with the recycling of materials and manufactured goods. It refers to the procedure of relocating goods from their characteristic last destination for acquiring value, or appropriate discarding. Redeveloping and renovating activities also may be captured in the description of reverse logistics. Mounting environmental concerns and development of sustainable supply chain ideas and practices have increased the relevance of reverse logistics. Among the key reverse logistics process are different management, vending of excess and returned equipment and equipment from the leasing activities. Ordinarily, logistics is involved with activities that unite the product with the customer. Conversely, reverse logistics is involved with taking the resource backwards in the supply chain. For this particular paper, the focus of the study on reverse logistics will concentrate on the pharmaceutical industry.

The starting point for reverse logistics is where conventional or forward supply chains end. Consumers first buy a product such as a magazine or a meal. After consuming the product or using the service, conventionally, the practical life of the product is complete. Consumers have to deal with the choice of appropriately disposing of waste materials. Disposal choices by consumers after purchasing a product have a potentially significant long-term effect on the ecological system (Grant, Trautrims, & Wong, 2013). Such decisions may be influenced by numerous influences, such as expediency of types of disposal, campaigns advocating a specific type of disposal method, or financial motivations. In the absence of an economic incentive in reverse logistics, it is far more complicated to convince companies to contribute (Inderfurth, Kleber, Minner, & Teunter, 2003). From an economic perspective, stipulations for and endorsement of reusing by governmental bodies is often not economically feasible, if no economic value is attached to the possible environmental effect accruing due to alternative approaches of disposal (Grant et al., 2013). In reality, depending on different aspects, such an initiative may result n greater looses for the organization as well as the manufacturer.

Problem Definition

Sustainability is a major problem for most pharmaceutical companies across the world. This problem has been worsened by the increased calls for greater accountability and a concern for the environment. In the face of these changes, companies are forced to adopt different concepts and practices that can allow them to survive and thrive. Reverse logistics is one of these practices. However, the process of implementing reverse logistics within different entities in the pharmaceutical industry is relatively difficult (Inderfurth et al., 2003). Various changes have to be made, the human resources aspect has to be prepared to handle new responsibilities as well other numerous issues. Therefore, the main problem is the implementation of the concept of reverse logistics. It is imperative to note that successful implementation is the desired outcome in this study (Lackes, Reese, & Dyckhoff, 2010). A key problem associated with reverse logistics is the expenses involved in establishing such a department as well as the rate of technological change (Bonev, 2012). The issue with reverse logistics as far as implementation is concerned is establishing and following the value of the reused units. The expenses involved in the process are diverse and include sending technicians to handle customer calls on site. In conventional logistics, the issue of cost is very direct. However, in reverse logistics, there is an issue of tear and wear as well as defective units. The problem is that defective systems do not have full value. The unit has definitely deprecated in value since it is not new (Grant et al., 2013). However, it is not worthless because the organization can simply replace one sub-component and restore its utility. Applications that handle reverse logistics have to consider the useable features of the item. This is a characteristic example of how reverse logistics is vastly different from forward logistics (Blumberg, 2005).

At the core of reverse logistics is recycling. The fundamental purpose of recycling is to reconsider disposed products or packing with the intention of using them as raw materials in new products or wrapping. A main worry is that the whole product and packaging is destroyed in a landfill if the organization does not consider recycling (Lackes et al., 2010). In particular, the immediate value of a soda bottle or used computer is normally oblivious to either end users or manufacturers; the motivation to reuse such items is relatively low (Grant et al., 2013). Value would significantly increase in the event that such residual products can be perceived as a possible raw material for another product. For recyclables to gain value as a probable new raw material, it is imperative that supply and demand for the product is established (Inderfurth et al., 2003). At this level, the concept of reverse logistics makes perfect sense.

Problem Analysis

Remanufacturing or recycling is different from conventional one-way production in numerous ways. These differences are also linked to production obstacles and are necessary elements to achieve an effective recycling system such as acquisition and reallocation. These obstacles in reverse logistics have been identified by researchers. The issue with reverse logistics is mostly focused on the limited control over timing, quality and quantity of the returned materials. This limited control is caused by the uncertainty in the life of a product as well as the rapid rate of technological shift (Blumberg, 2005). The restricted controls in timing, quality and quantity of the returned products make up the biggest difference between a conventional production-distribution system and an effective product recycling system. Dealing with these control problems is noted as the solution to developing profitable recycling. Additionally, there is also doubt concerning the demand of recycled goods (Inderfurth et al., 2003). This ambiguity is caused by the following aspects. The speed of technical advancement that can lower the need for a specific product drastically. The sharp differences in supply and demand complicate the situation for several remanufacturing companies to balance these two aspects (Grant et al., 2013). It is relatively difficult to maintain a close monitoring over the supply and demand especially with the complications created by reverse logistics. In an effective market economy, market prices for used products are established by demand, and this affects the supply of such materials. During episodes of high demand, prices would mount to the level that many profit-oriented organizations would extend economic incentives to suppliers of used products for constant supply of such products. Nevertheless, in episodes of low demand, recyclables attract lower prices and therefore, the supply of recyclables drops. In both situations, market prices are an indicator of the levels of supply and demand (Grant et al., 2013). However, the fluctuations in supply and demand might disrupt efforts by organizations to develop a continuing reverse logistics approach.

In an environment where people are considering implementation of the reverse logistics process, the problem of fitting it within the conventional forward logistics system is challenging. Reverse logistics is still a relatively new aspect in the logistic environment. Nonetheless, the necessity for rapid and competent reverse logistics cannot be overlooked if an organization is interested in growing and developing (Bonev, 2012). Reverse logistics is normally perceived as an expense to the organization. It holds the potential of being transformed into a profitable venture since recycling used products can assist in lowering the operational costs. Reverse logistics is very challenging especially in the planning phase. This is another reason why it is very unpopular across most organizations (Inderfurth et al., 2003). It is not difficult to predict the reverse channels of the products and to estimate accurately how much products will be returned. It is similarly accurate that reverse logistics is often more complex and loosely structured than the ordinary supply chain (Gupta, 2013). This occurs because of the differences in product superiority, defect rates and greatest lifespan of the products. Nonetheless, dismissing these facts will not resolve the problems – it serves to complicate the whole situation and make it expensive (Blumberg, 2005). Alternatively, if the reverse logistics flow is recorded and designed in a regular fashion, it is easier to anticipate and manage the changes in a way that is cost-effective and in line with the organizational objectives. The challenges of implementing reverse logistics emerge in the development of a structured flow of channels for different situations that can assist in dealing with recycling problems without increasing expenses, as well as other resources (Bonev, 2012). Most of the organizations lack the information, infrastructure and human resource required for reverse logistics processes, for instance, recording returns and administering software that addresses returns (Grant et al., 2013). In these instances, alternatives such as outsourcing companies to run the reverse logistics processes are very cost-effective and successful.

Establish Your Goals

One of the core goals of reverse logistics is to realize greater economic value in all the organizational processes. Since all profit-oriented organizations are interested in minimizing their operational costs, concepts such as reverse logistics are considered important and useful. Another goal of reverse logistics is to combine the environmental and organizational interests (Mangan, Lalwani, Butcher, & Javadpour, 2012). Since the last decade, companies have struggled to maintain an environmental friendly image by reducing the pollution caused by chemical manufacturers (Inderfurth et al., 2003). Product recovery efforts in the unconventional manner possess a scope of lowering the burden on manufacture and being economically profitable. Mounting cases of drug recalls such as Vioxx and Tylenol have lowered the reliability of such organizations especially among the consumers. An added problem influencing the industry is that of forgery. Figures from the World Health Organization indicated that counterfeit drug sales contribute approximately 40 billion annually (Blumberg, 2005). This has increased the call for measures that can avert widespread risks to the consumer as well as the environment. Given that drugs are high value chemicals necessary for the health of consumers, the suitable administration of medicine returns, expired supplies and drug recalls is essential through the adoption of well-organized reverse logistics systems in the pharmaceutical sector.

An area of mounting concern, both domestically and internationally, is the possible negative ecological consequences of drug waste disposal. Inappropriate waste disposal contributes towards environmental damage, in addition to other inadvertent consequences. Optimally, all organizations should seek out financial, market-environmental and communal goals concomitantly using structural change and successful governance. Nevertheless, corporate governance has a tendency of concentrating mainly on increasing shareholder wealth. To the level that environmental goals are mismatched with capitalizing on shareholder wealth, it is improbable that environmental objectives will be achieved. Conversely, corporations may pursue environmentally friendly objectives if users embrace such efforts.

Possible Solutions

One of the possible solutions towards implementing reverse logistics is the recycling of different products. Most of these by-products occur automatically along the different stages in production. Subsequently, the by-products are valuable materials that can be reused with economic benefits (Blumberg, 2005). However, basic recycling is not a complicated procedure. Conversely, in the presence of government a subsidized recycling initiative, the relationships among variables is significantly altered. Federal recycling initiatives create a condition where the source of recyclables is relatively constant with little space for changes in demand. Consumers including individuals and companies place their used products out for collection regularly, in spite of the market price for wastes. Therefore, during instances of oversupply when prices have dipped, large amounts of surplus used materials would exist. The used products have to be warehoused, or pooled with the other trash (Inderfurth et al., 2003). Storage is a challenge for products such as newspapers that disintegrate rapidly when exposed to natural causes, therefore lowering the value of the products as a raw material to practically nothing (Grant et al., 2013). The expenses of a storage warehouse, together with the expense of financial assets contained in recyclable records would lower the profit margins of such an operation.

Analyze the Solution

Pharmaceutical companies and vendors who sell the products are dedicated to taking unusable and expired items products from the public platforms apply reverse logistics extensively. Approximately, 3% of medical products released from pharmaceutical storage are returned for redistribution or disposal purposes (Bonev, 2012). Some significant issues for the reverse logistics of recycled medications include the safety of the drugs, maintaining low costs using technology and robotics, and following the profits from the first interception until the final location. Supply chain transparency is also vital for any pharmaceutical organization as forgery and stolen medicine persist as serious concerns in the industry. With the use of biotechnology in the pharmaceutical engineering, reverse logistics for medical products.

The continuous presence of expired and low quality drugs points towards a market flooding of counterfeit drugs that serve no purpose in the market. Insufficient marketing and administration of these surplus drugs in the public has created disposable and expired medicines that are incessantly sent back to the manufacturers. The market flooding has also been linked to a strict and low-coverage pricing strategy that allows players to manufacture a wide array of redundant drugs that are not restricted by price. Enhancement in the regulatory and pricing policies, increasing consumer consciousness on drug consumption and the collective procurement of drugs were identified as measures that can enhance rivalry and quality among actors and lessen market flooding (Blumberg, 2005). It was noted that the current platform for performance in the supply chain is frail and allows the consistent existence of expired supplies and low quality medicines in the public. Consequently, the stakeholders proposed a need to increase consciousness among supply chain players concerning quality policies, enhancing product tracking by adopting IT innovation, improving the detection of low quality and expired drugs by releasing details of such medication to the public and evaluating and amending existing government rules and resources as far as administering product quality. Among incompetence in the system, it was established that bureaucratic delays in repayment put off appropriate return of medicines and therefore, contribute to increased market flooding. Unpopular acceptance of first-class product returns was attributed to the expensive nature of reverse logistics that puts off investment in profitable returns as a long-term strategy. In this regard, it is necessary to embrace a cost-benefit analysis of effective returns process.

Implementation

Reverse logistics has the appearance of an unnecessary function within the normal logistic processes. The main objective is to deliver the product to the end user, instead of the reverse. Nevertheless, any processes that occur after the product is sold fall under the system of reverse logistics. For example, product defects are solved by returning the item to the manufacturers (Bonev, 2012). This implies that the seller has to send the product for further testing, renovation, recycling or disposal. This also implies that the products would go through the reverse process down the supply chain network. This is where reverse logistics applies.

The number of recalled and returned products that need to go down the supply chain in an opposite fashion to the ordinary chain network is significantly greater than most people assume. The range of returned products can vary from 3% to 60% depending on the sector and the company. One of the ways through which reverse logistics is implemented is through streamlining the turn-in procedures. Nearly all companies possess the basic turn-in procedures. However, the problem is their efficiency (Kleber, 2006). Through reverse logistics, it is possible to enhance the productivity of an organization’s manufacturing and executive lines. Improving the delivery of products and services within pharmaceutical companies is affected by numerous factors that reflect on the overall organizational reputation and performance. In the current marketplace, many organizations handle merchandise returns as separate and disorderly transactions. The problem for organizations is processing returns at a proficiency scope that permits rapid, resourceful and affordable collection and delivery of merchandise. Customer requirements accelerate the demand for a high level of service that incorporates precision and suitability. The logistic company is responsible for reducing the connection from return origination to the time when it is resold. Improving the performance in these different areas is important in the realization of reverse logistics when implemented correctly.

Conclusions

This paper discusses reverse logistics implementation and obstacles experienced in a pharmaceutical recycling industry. Certainly, this organization encounters obstacles conventional manufacturing companies do not tackle. The problems initially mentioned by researchers such as Lundmark and other authors that encounter by recyclers in general, were also established as challenges by the examined companies reusing medical manufacturing devices (Bonev, 2012). Additional challenges alternating in significance and incidence were established during the data collection session. One challenge is concerned with the reckless handling of the recycled materials, both during disassembly and during delivery to the recycling firm. A potential solution that appears easy to implement, at the very least, theoretically, is to brief technicians as well as the necessary logistics firm the best way to tackle and package materials. The majority of the professional companies understand that vigilant dismantling, warehousing and delivery of materials containing medical devices are very important (Kleber, 2006). Reverse logistics is translating into an independent operational process in the logistics industry mainly because of the massive volume and the tasks related with processing returns.

References

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Blumberg, D. F. (2005). Introduction to management of reverse logistics and closed loop supply chain processes. Boca Raton: CRC Press.

Bonev, M. (2012). Managing reverse logistics using system dynamics: A generic end-to-end approach. Hamburg: Diplomica Verlag.

Grant, D. B., Trautrims, A., & Wong, C. Y. (2013). Sustainable logistics and supply chain management. London: Kogan Page.

Gupta, S. M. (2013). Reverse supply chains: Issues and analysis. Boca Raton, FL: CRC Press.

Inderfurth, K., Kleber, R., Minner, S., & Teunter, R. (2003). Reverse logistics in a pharmaceutical company: A case study. Rotterdam: Econometric Institute.

Kleber, R. (2006). Dynamic inventory management in reverse logistics. Berlin: Springer.

Lackes, R., Reese, J., & Dyckhoff, H. (2010). Supply chain management and reverse logistics. Berlin: Springer.

Mangan, J., Lalwani, C., Butcher, T., & Javadpour, R., (2012). Global logistics and supply chain management. New York: Wiley.

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