Reverse Logistics: Imperative for green and smart businesses

Reverse Logistics:
Imperative for green and smart businesses

ver wondered what you should do with the products that have outlived their life with you? Your desire for an upgrade or replacement may not always be well timed with an exchange offers available. How much of one’s household can one offer on forums on Facebook or Carousel, or on Quickr and Olx? This also holds true for institutions, when there are electronic goods, hardware and furniture lying around in dumb yards waiting to find a taker; this is money locked in, adding costs and not giving any return, only depreciating or rotting.

This, in my view, warrants a bigger question: who owns the good and who should be accountable for its value? Is it you? Is it the company from whom you bought it? Who should be held accountable if the product is not well disposed of or recycled, or if the complete value of that product is not extracted? The branding literature is increasingly talking about the detrimental impact of litter on the brand of the organisation. An increasing shift of power in favour of customers and near omnipresence of social media are adding to the VUCA world we live in; this is compounded by the alarms raised by environmentalists. Should all this be a wakeup call for organisations to consider the critical role of reverse logistics?

Conventionally, logistics has been viewed as a set of processes, driven by customer demand, that convey goods from suppliers through manufacturers and distributors to the final customers. However, this is not where the story should end. Physical goods do not just simply vanish once they have reached the customer, nor does the value held by them evaporate. Many goods should ideally move beyond the conventional definition of supply chain, thus triggering additional business transactions: used products are sold on the secondary market, outdated products are upgraded, failed and defective components are replaced or repaired, and used products are recycled into raw materials.

Given the changing business model from conventional brick and mortar to online, there is a need for complete accountability for the purchase and movement of the good to rest with someone — either the marketplace provider or the manufacturer-seller. This becomes increasingly important as most of us now aspire to buy not just a product but a holistic service.

Integration of reverse logistics in the overall strategic business planning has a multitude of benefits for both the customer and the manufacturer:
- Economic Sense: Although reverse logistics entails many additional processes in the supply chain, there is a definite business opportunity in there. This can be seen in the mushrooming of start-ups wanting to collect your old products, refurbishing them and selling them in mainstream markets.

- The glue with the customer is much stronger: With data analytics, it is easier for companies to track the experience with a product and service; in the same light, it is equally easy for a competitor to know about their non-consumers and tap into the competitor’s market by providing a more holistic service, which is possible through reverse logistics. However, if the incumbent firm were to use reverse logistics coupled with big data driven insights, it could very well pre-empt the needs of the customer and be a step ahead as a solution provider.

- CSR coupled with business potential and enhancement of corporate reputation: For the risk averse, reverse logistics can be embraced purely as a CSR initiative; however, in the long run, there are direct and indirect benefits that can lead to potential business opportunities.

- Potential damage to the product and corporate brand:  The power of social media should never be underestimated. With one wrong association or one unaddressed problem, customers have the potential to put the company on the back foot. Thus, it becomes extremely important for firms to assume complete responsibility and accountability for their products or services. This could be done entirely by themselves or through third parties. Thankfully, with the advancement of corporate law, it makes sense for businesses to resort to intermediate forms of governance to manage reverse logistics.
Companies are beginning to realise that the product has the potential to generate revenues multiple times, possibly in different markets. New contextual product distribution, marketing and brand management thinking are essential. Information technology is a great enabler in this. Timely and appropriate availability of detailed product, process and market data allows companies to manage the corresponding processes in a conscious way.

About the author:
This article has been written by Prof. Saumya Sindhwani, Assistant Professor of Strategy (Clinical) at the Indian School of Business.

Also read: The Growing Relevance of Reverse Logistics in India | Fighting Fraud in the Reverse Logistics Boom | Institute in Focus | Reboot Systems’ Refurbished Computers: A Frugal Solution for Digital Divide