Reverse Inventory Management & Financial Implications IP-4 Deliverable Length: See assignment details

Reverse Inventory Management & Financial Implications

Desmond K Sangbong

Reverse Inventory Management & Financial Implications

David Mkhanlall

July 9, 2015

Reverse Inventory Management & Financial Implications

Reverse logistics refers to the process by which a company recycles, refurbishes and resells products that are spoilt or old. Reverse logistics is advantageous to a company as it add them a competitive advantage over its competitors by adding them trust from their customers. Reverse Logistics is therefore a strategy that will be adopted by most companies in future as a way to add them profitability.

The concept of reverse logistics began decades back the late 1800. Reverse logistics originated from the military sector at the end of the American Civil War. According to General William, the supply chain hindered the nature of his army campaigns and he had difficulties in supplying the soldiers into the hostile communities. Later in 1872, the concept of reverse logistics began its operations in the retail market. Later on in 1942, during the world war, countries began to experience shortages in the automobile industry whereby, there were shortages of the automobile parts. For this reason, there was need to create and rebuild the automotive parts then sell them to the consumers (Corrêa & Xavier, 2013).

In 1984, McNeil Laboratories responded to the Tylenol scare by getting the tainted products off the shelves of shops and replaced them with new products. This action was all over the new and for this reason, it increased the use of reverse logistics by companies in America. The Tylenol scare was the period when the Tylenol capsules were filled with cyanide, which is highly poisonous, and the consumption of these products led to death of many people. it was after this in the year 1991 that the federal government of Germany made in a must for companies to look for ways to recycle products. The recycle program was meant to reduce the environmental reverse flows and the European Union supported this legislation. In the next decade starting from 2000, reverse logistics was more adopted by the business sector as a strategy to counter competition in various industries (Corrêa & Xavier, 2013). Until date, reverse logistics is used as a way to refurbish and remanufacture the unused products. It also acts as a corporate social responsibility by various companies.

Reverse logistics consist of various elements that fall under the umbrella of reverse logistics. One of the elements is returns. A company such Dell Company that specializes in manufacturing of electronics may supply their electronics to the final consumer. However, in the mist of the supply, there may be breakages and the consumers will return the breakages to the company. In this case, the electronics that are taken back to the company are known as returns. Another element in the umbrella of reverse logistics is recycling. Recycling is whereby a company buys back the old products from the consumers and then resells the product to final consumers. Recycling is a way that a company shows its sense of corporate social responsibility, as it will reduce environmental degradation.

The third element under umbrella of reverse logistics is buying of seasonal inventory. Sometimes the demand of the product may too low in that there will be excess inventory in the market. For this reason, the company will buy the excess inventory so that the customers will not make losses. In this case, the company will be trying to make the customers loyal. The last element is the marketing and reselling. This refers to creating secondary markets for the recovered products and remarketing them in order to create and exploit markets for refurbishing and distributing them (do Valle, et. al, 2009).

Reverse logistics has been adopted by many companies from 2000 as it acts as a way of increasing their profitability and market share (do Valle, et. al, 2009). 20years from now, reverse logistics will be a strategy that will be implemented by most companies to add them a competitive advantage. For instance, the recycling project will show the society that they consider them before making the company’s decisions on the manufacturing processes. For this reason, the society will embrace the company and this will increase the company’s profits. It will involve mostly, the buying back of old inventory as well as recycling the old products. Companies will be buying back items that are spoilt and then recycles after which they will resell the products. Moreover, with the innovation of technology, new methods of reverse logistics will be invented as well as strategies of inventory management. Companies will have better ways to manage their returns to avoid making losses.

In conclusion, reverse logistics has evolved since the 18th century and has been adopted more in business in the 20th century. Companies today adopt the strategy that enables them overcome stiff competition from their competitors. Reverse logistics is a way that companies sometimes buy or collect the old broken products they produce. They then remanufacture or refurbish the product and look for market whereby, they resell them at affordable prices. For this reason, over the next 20years, most companies will adopt this technique due to the rapid improvement of technology. Moreover, there will be new technologies that will be adopted for use in the recycling process as well as reverse inventory management.

References

Corrêa, H. L., & Xavier, L. H. (2013). Concepts, design and implementation of Reverse Logistics Systems for sustainable supply chains in Brazil. Journal of Operations and Supply Chain Management, 6(1), 1-25.

do Valle, P. O., Menezes, J., Reis, E., & Rebelo, E. (2009). Reverse logistics for recycling: The customer service determinants. International Journal of Business Science and Applied Management, 4(1), 1-17.