Nowadays competition is getting hard. Customer demands higher service level, government applies tighter environmental regulations and not all the production is sold and it is returned to the manufacturer. This problem can partially be solve with better demand estimation, but it is not easy. We don’t know the future, we cannot know what will happen and how much will we sell. And companies have to avoid stock out and backorder cost. So what can they do? Firms are now using the so called “Reverse logistic”, it means bringing back to the factory products that haven’t been sold by the retailer, distributor or wholesaler, and even bringing back spoiled products that can be reused, repaired or break into pieces to sold or reuse again.
But… “How can manufacturers best manage the risk? It is worth their time and resources to develop a reverse logistics solution. By maintaining control over returned product, they would improve customer satisfaction ratings with their largest retail customers; increase recovery rates on returns by as much as 60 to 80 percent of wholesale cost; potentially reduce their carbon footprint; and reduce regulatory risk”.
By: Navin Dodani
Source: Inbound Logistics