Reverse Supply Chain To Recapture Value From Used Goods

By Author: martin well
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Wikipedia defines supply chain as “a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.”However, in today’s business environment supply chain is no longer a one-way process i.e. from supplier to customer. It is a two way process with products moving from the customer back to the distributor or the manufacturer. Known as reverse supply chain it is defined as “the series of activities required to retrieve a used product from a customer and either dispose of it or reuse it.”

Reverse supply chain is a recent development that began as an inevitable procedure in the face of environmental regulations and consumer pressures. In many enterprises and organizations, reverse supply chain is now an important part of business. Companies started taking keen interest in reverse supply chain when they faced dead end with respect to the new range of goods that emerged at the end of the ...
... forward supply chain. This included failed, obsolete, unsold, and recalled goods, waste materials, and containers. They saw opportunities of making profits from the new spectrum of products and hence set up reverse supply chains to recapture value from these products.

In the article "The Reverse Supply Chain" Guide and Van Wassenhove mentions five important sections of the reverse supply chain namely product acquisition, reverse logistics management, inspection and disposition, reconditioning and distribution and sales. Let’ look at it in detail to understand the process of reverse supply chain.

Product Acquisition
This phase involves the retrieval of products irrespective of whether they are used, unsold, recalled, failed or obsolete.

Reverse Logistics
This phase involves the transportation of the acquired products to some facility for examining, testing and sorting.

Inspection and Disposition
Since the purpose of reverse supply chain is to recover the maximum value, the products are graded into various groups.  Those that are new are returned to the forward supply chain, others for recycling, reconditioning, and so on and so forth.

Reconditioning
Certain products though used are still usable. Hence, they are reconditioned. These products are completely remanufactured and labeled ‘factory reconditioned’ and sometimes resold with warranty.

Distribution and Sales
As mentioned above, unused and recalled products return to the forward supply chain while the reconditioned products go to the secondary markets.

Though forward supply chain management systems and reverse supply chain differ in their characteristics, they are similar when it comes to value generation. Hence, today reverse supply chain is as important to companies as forward supply chain.

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