1. Reverse Logistics

2. Outline What is RL? Why important? RL Elements RL and product design
Forecasting in RL
CLSC/ RL Networks
Types of RL Networks

3. What is Reverse Logistics?
“…the movement of goods from a consumer towards a producer in a channel of distribution.” – Pohlen am Farris (1992)
“The process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finish goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value of proper disposal.” – Rogers and Tibben-Lembke (1999)
… but it does not always end at the point of origin…. there are multiple other dispositions in a reverse logistic flow.

4. What is RL? Reverse logistics is not green logistics.
RL could be very un-green
Poor planning of flows back to the producer
Inefficient selection of transportation modes
No recycling/ reuse of products
Returns are just thrown away …

5. What is RL? Closed-Loop Supply Chain (CLSC)
Stresses the integration of reverse flows with the forward streams.
Considers the product’s life cycle
Cradle to cradle

6. Why is RL important?
As in the case of green logistics, RL can be part of the Image and customer requirements/ company strategy.
Companies that are good at processing returns and/or managing End of Life (EoL) items have a better profile/image.
Competition accepts returns, must perform to compete in that market .

7. Why is RL important? Profits: Legal Disposal Issues/ legislation
U.S. companies spend $Billions processing returns. 
Profit derived from materials that were previously discarded.
Legal Disposal Issues/ legislation
As landfill fees increase, and options for disposal of hazardous material decrease, legally disposing of non-salvageable materials becomes more difficult.
Jurisdictions that require recovery or take back of products

8. RL Elements Reasons to return Manufacturing stage
QC rejects
Wrong parts
Surplus
Distribution stage
Product recalls
Stock adjustments
Functional returns (reusable containers, pallets)
Past expiration date, past season
Consumer/ user returns
No reason
Did not meet expectations
Warranty returns
Service returns
End-of-use
End-of-life

9. RL Elements Characteristics of the item being returned
Ease of disassembly: is it easy to remove some parts or not, like removing chips from old computers which may be re-used.
Ease of transportation
Homogeneity of constituting elements: consists a product out of one component or multiple: this plays a role in recycling where one wants to obtain homogeneous components in order to use them as feedstock for new materials. Plastics are notoriously difficult to separate, which limits recycling.
Presence of hazardous materials.

10. RL Elements Characteristics of the item being returned
Intrinsic deterioration: how fast does the product age during use.
Homogeneity of deterioration: do all parts age equally?
Economic deterioration (due to new products arriving on the market): products may become obsolete because their functionality becomes outdated, like computers. This offers a potential for re-use in a secondary market or for parts recovery.
Intensity and duration of use: It makes a difference if the use is constant for a long time or short / occasional.
Reparability: can a product be easily repaired or upgraded to a better condition? Is an easy fault diagnosis possible?

11. RL and product design
There is an interrelation between the choice of product technology/design and the RL system/ capability. Example: Tires
Tire retreading is a common recovery process for tires.
Rubber is replaced. Retreaded tires are cheaper.. As a result, they are widely used in large-scale operations such as trucking, busing and commercial aviation. In some applications, a tire can be retreaded up to 10 times.
Not all tires are re-treadable
Manufacturers control the tires that can be remanufactured by their design

12. RL and product design
Questions that a firm considering remanufacturing faces:
Is it worth to produce a more expensive re-manufacturable product, knowing that the remanufactured product can only be sold to a lower end of the market (I.e., lower price)?
How do technological improvements change the remanufacturing capability/ marketability?

13. RL and product design General questions about RL faced by designers
What are the dispositions at EoU and EoL?
Can we use some of the components in future products?
Take back regulatory issues
Design for reparability
Design for ease of disassembly
What percentage of components can be reused, recycled, burned…

14. Forecasting in RL Issues: Uncertainty and Lack of Supply Control:
It has often been claimed that reverse logistics environments are characterized by a high level of uncertainty.
While in traditional supply chains demand is typically perceived as the main unknown factor, it is the supply side that significantly contributes to uncertainty here.
In used products, quantity and quality may be uncertain and difficult to influence.

15. Forecasting in RL
Timing of new product introductions should take return flow characteristics into account.
Parts of existing products may become obsolete with the introduction of new products.
At the operational level, forecasting is important for inventory management decisions.
Voluntary returns (less predictable)
Commercial returns

16. Forecasting in RL How to determine returns?
Variable to be predicted: return quantity per period of time
Key explanatory variable: past sales
Others:
company size and strategic focus
location/ country which relates to the method use to collect, the culture of the returners,
marketing of return policies/ incentives

17. Forecasting in RL
Forecasts use parameter estimates from these variables (for example past sales) and historical information.
If incentive is given, a x% increase in returns
In California x% of items sold are returned, in Virginia y% are returned, …
The estimation method should take into account that some items might never be returned

18. Forecasting in RL Key Elements:
Returns in any one period are generated by sales in the previous periods.
Return behavior is time dependent, customer dependent, location dependent
Again, the estimation method should take into account that some items might never be returned.

19. Forecasting in RL Example: Sales How do we estimate returns for 2018?
P1 relevant sales – eol/eou
2013 (5years) = 15% × 24,000 = 3,600
2014 (4 years) = 60% × 24,000 = 14,400
2015 (3 years) = 25% × 10,000 = 2,500
End of life/use in 2018
= 20,500
× 35% (return rate)
Expected units returned
= 7,175 units
How do we estimate returns for 2018?
Sales
(000s)  P1 P2
2011 10
120
2012 20
2013 24
110
2014
100
2015
2016
2017 30
P2 relevant sales – eol/eou
2011 (7years) =20% × 120,000 = 24,000
2012 (6years) = 25% × 120,000 = 30,000
2013 (5years) = 40% × 110,000 = 44,000
2014 (4 years) = 15% × 100,000 = 15,000
End of life/use in 2018
= 113,000
× 20% (return rate)
Expected units returned = 22,600 units
Total units = 29,775

20. Forecasting in RL
Currently working on a project with faculty from Waseda U (Japan) and Clarkson U (NY).
Need d components
Available: New items supplier and returners
Model to determine the price to offer the return sources (based on location and return rates)
New items supplier
Return source 1
Return source 2
Manufacturer
Return source 3 …… d
Return source s
market

21. Closed Loop/ Reverse Networks
Network design is recognized as a strategic issue of prime importance because…
Location of production facilities
Inventory locations and policies
Transportation strategies
…are major determinants of logistics performance, including RL.

22. Closed Loop/ Reverse Networks Types of Recovery
Product recovery: Products may be re-used in the original market or in secondary markets. Remanufactured/ repaired/ …
Component recovery: Products are dismantled and their modules or parts can either be used in manufacturing the same product or of different products.
Material recovery/ recycling: Materials are separated and treated in order to get a desired quality for reuse.

23. Closed Loop/ Reverse Networks
To successfully exploit the opportunities of recovering value from used products, design a logistics structure that facilitates flows in an optimal way.
Where/ How to collect the products?
Where to inspect collected products?
Where to process collected products?
How to distribute the recovered products?

24. Closed Loop/ Reverse Networks
Therfore the key processes are
Collection: Bringing the products from the customer to the point of recovery.
Inspection/selection and sorting: The quality of products is assessed and a decision is made on the type of recovery.
Processing (types of recovery)
Reuse as is, repair, refurnishing, remanufacturing, retrieval, recycling
Redistribution: Bringing the recovered goods to its customers.

25. Closed Loop/ Reverse Networks
Collection
Relates to the points at which generators (former users) hand over the used products.
Functions
As a storage space before being shipped
Can provide means for volume compaction and/or source separation
Designed in view of the targeted processing application.
Reuse requires that products are returned in the best possible condition and are shielded from weather damages.

26. Closed Loop/ Reverse Networks
Collection types
1. On site collection (pickup recycling, pick up old refrigerator)
2. Unmanned drop off sites (recycling or clothing collection bins)
3. Staffed and smart drop off sites
Supervisors allow for a more selective acquisition and careful separation. E.g., smart glass collection machine automatically sorts bottles
4. Temporary/infrequent and mobile drop-off sites

27. Closed Loop/ Reverse Networks
Collection Policy
Specifies the moment(s) at which a collection point is served and the volume collected per visit.
Periodic schedules: Visits to a particular collection point are planned regularly according to a fixed frequency (e.g., twice per week).
Call services (ad hoc visits): Visits will be triggered by a call from the collection point.
Triggered by a distribution schedule: Collection is triggered by a distribution schedule for the costumer at the collection point itself or for a customer at a location in its neighborhood.

28. Closed Loop/ Reverse Networks Testing
The location of the test and grade operations in the network is highly relevant as it is only after this stage that individual products can be assigned to an appropriate recovery option and to a geographical destination.
Testing collected products early in the channel may minimize total transportation costs since graded products can directly be sent to the corresponding recovery operation.

29. Closed Loop/ Reverse Networks Testing
On the other hand, expensive test equipment and the need for skilled labor may be drivers for centralizing the test and grade operations.
This centralization may be restricted by legal constraints.
Transportation of waste across borders is strictly regulated in many cases, such as between different states in the USA and between countries in Europe.

30. Closed Loop/ Reverse Networks Processing
Requires the highest investments: the costs for specialized remanufacturing or recycling equipment largely influences the economic viability of the entire chain.
In many cases, high investment costs at the reprocessing stage call for high processing volumes to be profitable.
This entails the need for a collection strategy that not only minimizes transportation cost but also, or even primarily, assures a sufficient acquisition volume.
As part of a CLSC it could be integrated with the original equipment manufacturer, integrating recovery with new product manufacturing

31. Closed Loop/ Reverse Networks Re-distribution
Highly dependent on the type of recovery
Product – move into regular forward flows, move to secondary markets.
Component – move to supplier distribution system, component resellers.
Material – bulk delivery to collectors per material type.

32. Types of RL Networks Mandated take back
This group concerns supply chains established in response to environmental product take-back legislation.
Manufacturers are held responsible for keeping their products out of the waste stream at the end of the lifecycle.
Recapturing value from end-of-life products is not likely, so companies opt for a fairly conservative approach, focusing on cost minimization.
Material recycling is the typical form of recovery.
Costs are charged to the customers either directly or via the price of new products.

33. Types of RL Networks Value added recovery
The goal is to recapture value added from used products.
Encompass multiple sorts of used product flows, from different sources and with different motivations.
The focus tends to be on the business market, due to higher product values and closer customer relations, which facilitates product monitoring during the entire lifecycle.
The test and grade operations play an important role, in order to maximize the value recovered

34. Types of RL Networks
Technology is allowing the monitoring of the products during their entire lifecycle, supporting the assignment of returned products to the appropriate recovery option.
Remote monitoring may even provide a basis for a proactive take-back policy instead of purely reactive recovery decisions

35. Types of RL Networks Remanufacturing
Careful management of the supply side is vital to ensure availability of the right recoverable products.
The test and grade operation plays an important role.
As remanufacturers have little means to monitor products during the initial part of the lifecycle the state of an incoming product is only known after inspection.
Consequently, location of this operation is an important element of the logistics network design.

36. Types of RL Networks Recycling
Material recycling chains are characterized by fairly low profit margins.
There is a need for high investments for specialized recycling installations and equipment.
The combination of high investment costs and low margins obviously calls for high processing volumes.
Testing and grading is not typicaly relevant
Pre-processing as shredding/compacting done to increase transportation efficiency.