TRANSPORT & LOGISTICS
Reverse Logistics in the Supply Chain
a report by
James R Stock
Professor of Marketing and Logistics, University of South Florida
James R Stock is a professor of Marketing and Logistics at the University of South Florida, Tampa. He is the author or co-author of more than 90 publications in the area of logistics. His specialities are in the areas of reverse logistics and the marketing-logistics interface. Currently, Dr Stock serves as Editor of the International Journal of Physical Distribution and Logistics Management and is a frequent speaker and consultant on reverse logistics and other logistics topics throughout North America, Europe and Africa.
”1 The concept is broad and encompasses a number of activities within logistics and other functions carried out within supply chains. A flow model of the major events or activities that occur within reverse logistics is presented in Figure 1.1 For the majority of supply chain members, product
returns are the most significant aspect of reverse logistics. The types of items that come back and require reverse logistics processing may include product returns, product recalls, end-of-lease equipment, old/obsolete items being replaced, packaging materials and myriad other items. Some statistics that highlight the importance of reverse logistics include the following. • Reverse logistics costs account for between 0.5% and 1% of the total US gross domestic product.2 • Online US retail sales were US$20.2 billion in 1999 and are expected to reach US$74 billion in 2001.3 • Average return rate for online retail sales is 5.6%, although it varies by product and time of year.4 • Twelve per cent of the US$5 billion worth of products sold online during the two-month Christmas season of 1999 were returned.5 • Ninety-five per cent of consumers would rather return a product purchased over the Internet to a physical location; 43% would always use that option if it were available; 37% of online buyers and 54% of online browsers were deterred from purchasing online because of return and exchange processes that were too difficult.6 • The cost of processing a return can be two to three times that of an outbound shipment.7 • Returns will cost catalogue and Web retailers US$3.2 billion in 2001.8 Certainly, reverse logistics is an integral component
1. James R Stock (1998), Development and Implementation of Reverse Logistics Programs, Oak Brook, Illinois, Council of Logistics Management. 2. Reverse Logistics Executive Council. 3. Forrester Research. 4. National Retail Federation. 5. Bizrate.com 6. Jupiter Research. 7. Returns Online, Inc. 8. R. R. Donnelley Logistics.
BUSINESS BRIEFING: GLOBAL PURCHASING AND SUPPLY CHAIN STRATEGIES
TRANSPORT & LOGISTICS
Figure 1: Reverse Logistics Within One Portion of a Typical Supply Chain
Product Sale, Use or Consumption
Secondary Materials Source Separation ‘Make’ versus ‘Buy’ Hazardous Waste
Recycling Remanufacturing, Refurbishing or Repair Incineration
Source: James R Stock
of supply chain management systems because of the cost and service dimensions associated with the process. Inasmuch as product returns are a fact of life for manufacturers, traditional retailers, e-tailers, logistics service providers and others, reverse logistics will likely increase in importance.
Successes in Reverse Logistics
• Levi Strauss, in conjunction with Genco, a thirdparty reverse logistics service provider, developed a returns-processing method that computed estimated costs, generated paperwork in advance of the product being...