The reverse supply chain is a business initiative that many companies are beginning to explore due to its environmental and cost-saving benefits. What is the reverse supply chain, how can companies use it, and what must they consider when deciding if this type is supply chain is right for their business? We answer these questions in this week’s Breakaway Blog post.
Reverse Supply Chain
What is the reverse supply chain?
The reverse supply chain is the series of activities required to retrieve a product and dispose of it or reuse it. This is typically done with end of life products, customer returns, or slow moving products.
The reverse supply chain is becoming an essential part of business for many companies. Companies realize that not only can reusing products and/or components be great for the environment but it can also benefit their company by reducing operating costs, increasing revenue, retaining customer loyalty, and creating new customers.
Reusing or repurposing used materials means that companies can cut down on manufacturing costs which leads to more profit. Additionally, companies have the option of reselling used versions of their products (if there is a market for that) which will open up their brand to consumers that may not have been able to afford their original product but would benefit from buying a used and more cost-effective version of their product.
5 Key Reverse Supply Chain Components
There are 5 key components that companies must consider when deciding whether or not to invest in a reverse supply chain.
This is the act of retrieving the used product. Companies must manage the quality, quantity, and timing of product returns in order to avoid becoming flooded with customer returns or retail returns of slow moving products.
Once the products have been returned companies must decide how to deal with the returned products. They will have to have them inspected, sorted, and delegated therefore companies must decide how they will transport the goods and whether or not it is beneficial to outsource this step to a specialist.
3.Inspection & Disposition
The process of sorting, testing, and grading the returned products takes time. Companies can develop systems using sensors or bar codes in order to automatically track all products and speed up the process. Any quality, product configuration, or other product decisions that will determine what happens to the products after they are returned should be decided early on in the return process in order to simplify and streamline the reverse supply chain.
Companies must decide how they will recondition/reuse their products. Many returned products will be in various states of quality so it is important to set guidelines early on about what products to accept and how to sort returns so that variables and costs associated with reconditioning can be reduced.
5.Distribution & Sales
Companies must decide if there is a demand for their repurposed products. Do customers want a cheaper/used model? Would it benefit the brand to inform customers of the company’s environmental initiatives associated with repurposing their products? If there is no current demand than the company must create a demand. This means informing customers, educating them, and spending time and money on marketing in order to market their reused products.
Many companies are embracing the reverse supply chain. Some are forced to due to environmental regulations or consumer pressures, while others look to this type of supply chain in order to repurpose their products, cut costs, and increase revenue.
The companies that have been the most successful with this supply chain are the ones that have coordinated their reverse supply chain with their forward supply chain. These companies make decisions with the mindset of eventually recycling their goods. By creating a fluid and cohesive complete supply chain companies are able to reduce costs and increase revenue while being environmentally friendly and expanding their business to new types of consumers.