Reverse Logistics

Reverse logistics and the return portion of the supply chain is often an overlooked and mismanaged process. Companies tend to focus their efforts on the forward portion of supply chain management, while failing to take advantage of the many opportunities that reverse logistics presents (Benton, 2007). What these companies do not realize is that the effective management of reverse logistics has the potential to make them more profitable, and to add value to many other parts of their supply chain. In the case of Johnson Automotive, we will analyze their current supply chain processes to determine their effectiveness while answering the following questions:

1. What is reverse logistics?

2. What are the key elements of reverse logistics in the automotive industry?

3. How can Johnson optimize its reverse logistics channel?

What Is Reverse Logistics?

The Reverse Logistics Association (2008) defines reverse logistics as “all activity associated with a product/service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources”. Because all of these processes take place post-sale, this portion of the company’s activities could simply be viewed as a cost center. This could not be further from the truth. The objective of any intelligent business manager should be to optimize all activities and ensure that the maximum value is achieved for every Dollar that is spent by the company.

Some of the activities associated with reverse logistics are remanufacturing, recycling, reconditioning, warranty management, call-center management, and transportation.

The main goal of reverse logistics is to facilitate these activities in a manner that helps the company to meet its corporate objectives.

That is why the design of the reverse supply chain processes is so important. Every company needs specific processes that are aimed at increasing value for the company and its customers based on the type of industry in which it operates and the type of products that it supplies.

The major stumbling block for most companies that are attempting to optimize their return supply chain is the chaotic nature of reverse logistics. Volume within the return supply chain is highly variable and difficult to predict or control (O’Reilly, 2005). In addition, returning the product in a timely manner is often not of major importance to the end users and retailers. Therefore, any processes that rely on the availability of cores or supplies will have to be flexible enough to handle variations in supply.

In the case of Johnson Automotive, we will focus primarily on instituting processes that will help to the company to create competitive advantage with its reverse logistics operations. Johnson currently supplies paint, batteries, and electronics to a major auto manufacturer. In order to help Johnson maximize the potential of its return supply chain, we will focus on returns management and environmental responsibility while adding value to the traditional forward supply chain.

What Are The Key Elements Of Reverse Logistics In The Automotive Industry?

Much of the automotive parts sector is focused on remanufacturing. Auto parts represent the largest remanufacturing sector in the US other than the Federal Government (Seitz, n.d.).

The focal point of the return supply chain for many companies in this industry is retrieving cores from the end user and processing them so that they are ready for the rebuilding process.

The automotive industry is unique in this regard. The inherent problem with this type of arrangement is that the cores used for rebuilding will vary greatly in quality depending on where and how they were used.

This means that remanufacturers have to ensure that they have effective processes in place for obtaining, grading, and sorting cores to support their remanufacturing operations.

Because of the parts that Johnson Automotive supplies, it is not a remanufacturer in the traditional sense. The parts that Johnson supplies will require their own unique processes to ensure that maximum value is extracted from their return supply chains. Paint is a material that is not able to be remanufactured. There is no real way to recover paint once applied to a vehicle; therefore, recycling is not an option either. The main focus of reverse logistics for paint will be to process customer returns in the most effective way.

Paint that is returned from the buyer for any reason will need to be quickly broken down into its component chemicals and reintroduced into the manufacturing process. This will have two distinct benefits for Johnson. The first is that the company will save on material costs by reusing the base chemicals. The second is that the company will avoid the significant costs related to the storage and disposal of the hazardous materials.

Batteries, like paint, have the potential to impact the environment in a negative way. Batteries contain hazardous materials that require special, cost-intensive,