Business requirements for reverse logistics are complex, and can change as relationships with customers, distributors and contractors shift over time.
Larry Laux is senior vice president at IFS North America
Reverse logistics is a poorly-understood concept in business, and what is even more poorly understood is the role that technology has in facilitating this important process.
Reverse logistics gets its name because it is the opposite of forward logistics. As a business sells products, they can have the products moved from a warehouse directly to the consumer or to distributors. Reverse logistics, as the name implies, is exactly the opposite. It is a nuanced and complex process that presents a manufacturer with a number of problems that fortunately can be solved by the correct application of business software. These problems include:
Problem 1: Tracking Value – One major challenge is determining and tracking the value of the unit. So let’s think of an easy example – a registration system for a flexographic press. Let’s say a technician is dispatched to replace a system at a customer site.
A brand new system might have a value of $5,000. In forward logistics, cost is a simple number. But what happens when the engineer in the field swaps out the good assembly for the defective one? Now, he is supposed to send the defective one back so that it can be repaired. But the defective system doesn’t have full value. It is not worth $5,000, because it doesn’t work. But it is not worth $0 either because the company might be able to change one little sub-component and make it a useful unit for the repair pool.
Software that handles reverse logistics has to take into account the useable status of the item and track the unit on a basis that is valued at less than full cost but more than zero cost. And so that is just one small example of some of the interesting characteristics of a reverse logistics operation that really isn’t the same as forward logistics.
Problem 2: Tracking warranty and routing status – Things get even more complex when a reverse logistics value chain includes third party repair by an OEM or items under warranty.
Sometimes a part may be under warranty from your supplier that is either in force for a longer or shorter period than the one that you yourself offer. Reverse logistics software is able to track those secondary warranties back to the OEM and generate the appropriate claims for warranty service provided. Using the right software, a company involved in reverse logistics can claim millions of dollars in warranty reimbursements back from their supplier that they weren’t able to track otherwise just by being able to say units that were acquired on a particular day are still within the two year warranty. Here is the evidence. Please make an adjustment in financial consideration.
Reverse logistics software can also handle automated routing of items within a repair facility and to other repair facilities, whether they are third Party providers or not.
