How To Use Reverse Logistics To Reduce Production Costs

How To Use Reverse Logistics To Reduce Production Costs

How To Use Reverse Logistics To Reduce Production Costs

When running a business, particularly when organizing its operational flow, it is not uncommon for companies to utilize procedures. There are many effective methods an enterprise can decide to implement, such as reverse logistics. This operation refers to the reuse of products and materials. Rather than disposing resources, they can be reused and redistributed to maximize business profits.

Whenever a product is recalled, or a product is returned, working parts and materials can be refurbished. Investment into sourcing the raw materials and reprocessing them again is avoided, reducing the production cost. At its simplest, recycling is reverse logistics in practice.

For anything to operate at ideal efficiency, careful planning needs to be undertaken. In order to correctly implement reverse logistics, a series of holistic approaches to technical, operational and strategic capabilities needs to be evaluated. But simply saying you need to synchronize the supply chain with existing operations, is much easier than actioning it.

Firstly, scalability and flexibility elements must be considered. Unsurprisingly, anything done at high volume, yields greater cost processing returns. This also leads to understanding that a policy at one business, may not necessarily be applicable in another if the size of the enterprise differs. Furthermore, flexibility is important in understanding how expansion is possible within the existing business framework.

Usually when reverse logistics is implemented, a separate refurbishment and material distribution workflow is created. With the rise of artificial intelligence, it is possible for this labor to be outsourced with mechanical robots or other web-based technologies. Doing so requires clear transparency into the product life-cycle of components. Of course, investment into developing these new mechanical procedures may be required, but the return on investment is high when utilized in appropriate circumstances.

As a business expands, reverse logistics becomes a needed exploration. Quality control parameters will always endeavor to ensure a product and/or service is up to scratch. Regardless, product recalls can still occur. Reverse logistics will always save money whenever there is a product recall.

 

Benefits

As with any business, the major motivator will stem from maximizing profits. As previously mentioned, reverse logistics does this by reducing material cost, by reusing or repurposing materials, which in turn lowers the overall production cost.

A further benefit is in reducing environmental impact. Corporate social responsibility is crucial in important ethical decision making and for positive perception to generate goodwill between customers. Many companies set targeted sustainability goals as a form of self-promotion.

Other specialists argue that greater customer focus can be placed with less resources applied to product manufacture, rather refurbishment. Customer service is always important for repeat customers. Whenever consumers feel strong support, it instills a sense of peace of mind. Shoppers are more likely to purchase your good because of the support features.

 

Disadvantages

A few disadvantages with reverse logistics may also exist, which we won’t heavily emphasize here. This could manifest if a third party is involved in operations or if production cycles times increase. It may also be possible that labor costs negate any additional savings.

 

Examples

Apple is a successful example of reverse logistics. Many complex technical components require copious effort. Instead, Apple offers trade in incentives when purchasing products. Discounts are applied to reduce the final price whenever an old Apple product is exchanged. This then allows Apple to reuse parts from older generations in newer products.

Many postal companies choose to reduce their environmental impact by reusing shipping boxes. Because of the high-volume recyclable products used in postal services, recycling services are now being offered by UPS in America.

One final example is H&M which accepts used clothing for a discount, depending on location and volume. The overall arching aim is the goal of an all-recycled clothing line.

Andrew

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