Corporate Governance,
Corporate Social Responsibility and Environmental Issues have a rising impact
on operations. The expansion of market from globalization is more competitive
than ever and there is an ever-growing pressure for cost reduction. The author
argues that it is essential to address both operational and tax aspects
simultaneously when optimising the cost effectiveness of the supply chain. The
design of a reverse chain strategy is challenging. Embedding that strategy into
an organisation, processes and technology is the following hurdle to take.
Ensuring integration of that strategy with tax policies and processes is the
final challenge.
Reverse Logistics is an
undervalued part of supply chain management. Market research shows that reasons
for this are:
• Perceived small impact
on profit margins – minimal interest of top management
• Insufficient time
commitment• Logistics departments view the area of Reverse Logistics as a Sales department priority
• No combined part of the corporate supply chain design targeted to Reverse Logistics; and
• Lack of awareness of the high value potential of integrating operations and tax matters.
From a value
perspective, customer experience and value recovery from returned goods drive
revenue growth. By reusing and recycling returned products or package
materials, value is recovered and waste costs reduced. In addition, value
increase from a sustainability perspective leads to human, environmental and
economical benefits. Proactive recalls and proper disposal avoid potential
environmental or human harm, preventing the company from possible legal claims
and feed into a positive and transparent
corporate image. Almost 60% of the producers consider Reverse Logistics as an
important to extremely important aspect of their overall business system.
However, only 32% is really satisfied with its Reverse Logistics operations. 20%
of the retailer respondents indicated to manage Reverse Logistics as a profit
centre (see contrast to Producers perspective, across). In addition, also
retailers show a clear gap between importance and satisfaction of Reverse
Logistics management: 60% rate the importance as high against 20% rate
satisfaction as high.
For LSPs, control and
efficiency are the two main leading differentiators for the reverse chain. An
unexpected 40% of LSP respondents state that they do not have or are not aware
of a specific Reverse Logistics strategy. This is a high rate in respect of the
90% of LSPs that rate the importance of Reverse Logistics to the company as high
and treat Reverse Logistics as a profit centre.
Producers have started
to manage products throughout their entire life cycle. In the last two years
half of the producer respondents (50%) have undertaken design changes to enhance
Reverse Logistics. Challenge for designers is to integrate profitable
end-of-life strategies during early design phase. Improving the performance of
Reverse Logistics programs requires considering approaches like Design for Disassembly
and Design for Recycling. Such initiatives can reduce costs and environmental
& social risks during recovery and/or disposal. Designers can rethink the
overall supply chain through a cradle-to-cradle approach, promoting the view
that production techniques should be essentially waste free. Cradleto-cradle
has the ambition of creating an industry that is ‘sustaining’, not only sustainable, by using safe materials, renewable
and efficient energy, products & systems designed for value recovery and “across all design
principles”.
Environmental politics
has existed within IBM since 1971. Today, IBM commits itself to having a leading
position for environment awareness in all its operational activities. IBM and
Geodis have a longstanding partnership. They started to collaborate in the 50’s and one of their
contracts, started some years ago, is for the Reverse Logistics of IBM’s ‘end-of-lease’ personal computers. For
this contract, Geodis arranges customer collection of ‘end-of-lease’ personal computers
throughout Europe and brings them to an Asset Recovery Center run by Geodis. In
this center, Geodis performs the following activities: Receipt and
identification of computers; Data wiping of hard disks; Verification of assets
and testing computers; Refurbishment and repair of computers; Upload of software
and configuration of computers; Dismantling and harvesting parts of the
computers that cannot be repaired or sold; Disposal of computers; Preparation
for shipping of computers once IBM has sold them and fulfilment of orders.
In this process, 85% of
the received computers in the center are resold and all the parts utilized for
repair come from the dismantling of the machines that cannot be repaired/ re-sold.
This process strongly favours sustainable development. This year, the millionth
machine is going to be processed under this contract. For this operation Key
Success Factors include: Responsibility and control over end to end process; Hybrid
strategy: both efficient and responsive; Quality of rework; Flexibility in
capacity; Dedicated division for reverse logistics; Clear disposition trees; Process
visibility.
BHSG & DHL
Willem van Rijn is the
only importer for the brands Bosch, Solitaire and Neff in the Netherlands. Up
to January this year, they operated as a separate legal entity but has now been
incorporated in the Bosch and Siemens Home Appliance Group (BSH Group). The two
main product groups for the Dutch consumer market are electrical and kitchen retail
products.
Logistics Service
Provider
For many years the
majority of the supply chain activities were outsourced to DHL (both in respect
of the forward as well as reverse flow of goods). DHL operations and management
of Willem van Rijn meet on a daily, weekly and monthly basis to discuss topics
of importance for the daily operations. Operational DHL personnel have been
loyal during the extensive collaboration. Continuous learning with improved collaboration
are both important foundations for success.
Returns
A small percentage of
total products are actually returned by customers. Packaging damage and product
damage are two main reasons for returns. Product returns that only need repackaging
are stored by DHL in a separate part of the DHL warehouse and DHL takes care of
the repackaging. Product recalls take place very occasionally, when products
need to be resent to the factory (abroad) to resolve a technical shortcoming. Products
which are returned by the consumer are seldom received by Willem van Rijn.
Retailers are taking care of almost all type of consumer returns: damaged
products are resold in ‘B-stores’, malfunctioning products are dealt by the service
company of BSH Netherlands and unrepairables discarded to the NVMP (Dutch
Foundation for the Disposal of Metal and Electrical Products), and end-of-life
products are being collected by the retailers and municipalities. Willem van
Rijn only takes care of the financial settlement of product returns as well as
the payment of ‘verwijderingsbijdrage’ (a Dutch disposals-related tax) to the NVMP (Dutch
Foundation for the Disposal of Metal and Electrical Products).
Driven by cost and
Corporate Social Responsibility, a unique collaboration has been set up with
Electrolux for milk-run transport. For the supply to customers (mainly retail
stores) throughout the Netherlands the same logistics service provider was used
and a strategic partnership has been initiated for the delivery of both
Electrolux and Willem van Rijn products to common customers. This decision has resulted
in economies of scale and less kilometres to be covered in delivery of the same
amount of products. Limitations to further synchronisation of the logistics
between two parties evolved from different delivery guarantees (Willem van Rijn
guarantees a 24 hour delivery; Electrolux guarantees a 36 hour delivery).
Key success factors
• Strategic collaboration
with competitor concerning milk-run transport;
• Introduction of new
products in assortment at one point in time;• Re-selling of returned products;
• ‘One number planning’ across the organisation;
• Compliance with Labour regulations for product return handling (Dutch Arbo Law);
• Continuous improvement evolving from partnership with logistics service provider;
• Item level product recognition.
