MNC’s are being forced to set up reverse supply chains because of environmental regulations or consumer pressure. From 2003, for example, European Union legislation will require tire manufacturers operating in Europe to arrange for the recycling of one used tire for every new tire they do. Companies are taking the initiative, seeing opportunities to reduce their operating costs by reusing products. For instance, Kodak remanufactures its single-use cameras after the film has been developed. Over the past decade, the company has recycled more than 310 million cameras in more than 20 countries. Companies are using reverse supply chains as integral parts of new businesses. Bosch, for instance, has built a successful business selling power hand tools.
Whether a company is establishing a reverse supply chain by choice or necessity, it will face many challenges. It will have to educate customers and establish new points of contact with them, activities to outsource and which to do itself, and in general figure out how to keep costs to a minimum while discovering innovative ways to recover value. It may also have to meet stringent environmental level.
As rational decisions about the structure of a reverse supply chain, it’s best to divide the chain into its five key components and analyze options, costs, and benefits for each:
Our research suggests that this task—retrieving the used product—is key to creating a profitable chain. The quality, quantity, and timing of product returns need to be carefully managed. Otherwise, companies may find themselves flooded with returned products of such variable quality that efficient remanufacturing is impossible.
Products need to be transported to facilities for inspection, sorting, and disposition. There is no one “best” design for a reverse logistics network; each has to be tailored to the products involved. Bulky products like tires, for instance, will require very different handling than small but cameras like fragile products. They should consider not only the costs for shipping and storing but also how quickly the value of the returned products will decline and the need for control over it. In many cases, it will make sense to outsource the logistics to a specialist.
Inspection and Disposition
The sorting, and grading of returned products are labor-intensive and time consuming. But the process can be simplified if a company subjects the returns to quality standards and uses sensors, bar codes, and other technologies to automate tracking and testing. A business should seek to make disposition decisions—based on quality, product configuration, or other variables—at the earliest possible stage in the returns work. That can eliminate many logistics costs and get remanufactured products to market faster.
They may capture value from returned products by extracting and reconditioning components for reuse or by remanufacturing the products for resale. Reconditioning...