The Need for Reverse Supply Chain Management

Why has reverse supply chain management become so important nowadays? The main reason why companies have started to give importance to reverse supply chain is because it reduces the operating costs if it reuses its products or components. Most companies have started to realize the importance of reusing their components or products, and as a result of this, reverse supply chain has become an important part and parcel of business management.

Due to modernization in every sphere, there is an increased demand for new and better products. This has resulted in the need to clear the distribution channel more and more, requiring bringing back the obsolete, outdated or unserviceable items. A good example of this would be the case of "Xerox," which replaces or upgrades hundreds of office printers and equipments, every month all over the world.

There are also cases where major companies were forced to set up a reverse supply chain system due to environmental constraints and regulations. For example, since the year 2003, the European Union has brought about a legislation that requires every tire manufacturers who have factories in Europe to arrange for the recycling of one used tire for every new tire they produce and sell. Additionally there are some companies which are using reverse supply chains as a part of their new business plans.

Most large manufacturers and technology companies have after market services. This forms a substantial portion of their revenue. Due to fierce competition most industries and companies offer and provide timely and efficient service to their consumers.

Today companies and business firms have realized the potential of better management of the reverse supply chain system because this requires higher customer service, which results in higher customer satisfaction, and consequently a revenue opportunity for their business. Of course there some firms which have set up reverse supply chain systems purely for altruistic purposes. For example, Nike, the shoe giant, encourages its customers to bring their used shoes back to the stores from where they had purchased the same. These stores ship back these shoes to Nike, where they are shredded and donated to make basketball courts and sprinting tracks. This company also donates yearly funds to build and maintain these courts. This is a way of advertisement because by doing so, companies enhance the value of their brand in the minds of their customers, which encourages them to purchase their products.

In order to successfully implement the reverse supply chain management systems, companies should make a change in their existing supply chain management systems. The first and foremost step for setting up a successful reverse supply chain management system of a company would be to define the rules of the reverse supply system and to understand the areas where the reverse supply chain will make and contribute profits.

The focus should be kept on the expected business outcome of the reverse supply chain process, and only then the policies and procedures should be framed by the company in order to support the outcome. There are many companies which accept all types of returns, while some do not. For successful implementation of the system, a lot depends of the type of the product that will be returned back. Therefore, while framing the return policy, every company should clearly mention the type of returns that are acceptable to them. Mostly customers return their products either for repairs or for replacement. The dealers, retailers and channel partners return the goods due to excess supply or products which have reached their expiry dates. Some manufacturers also recall their products and equipments from the market or the consumers.

Thus all companies should educate their customers, retailers, dealers and channel partners about the return procedure of the goods and also establish new points and channels for contact with them. This will go a long way in successful implementation of the reverse supply chain management of the company.