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In todays marketplace, most of the retailers consider returns of merchandise as individual transaction and disjointed transactions. The most important challenge for retailers and vendors is to process the returns which allows quick, efficient and cost-effective collection and return of merchandise. It facilitates demand for customer requirements a high standard of service which includes perfection, accuracy and timeliness. At the time of resell it is the responsibility of logistic companies to shorten the link from origination. If we follow the best practices of returns management retailers can achieve the returns which address both the operational and customer retention issues that are associated with the returns of merchandise. If we go beyond the connection between the reverse logistics and customer retention it has become a key component in Service Lifecycle Management (SLM). To achieve greater efficiency in operations a business strategy is designed aiming at customer retention by bundling companies services data together.
Reverse logistics is more than just returns management and it is explained as the activities that are related to returns avoidance, gate keeping, disposal and all other after-market supply chain issues. In present situations returns management is being recognized as competitive positioning which provides an important link between logistics and marketing. The broad nature returns management impact suggests that by improving internal integration efforts the firms would get benefit. In particular internal integration improves the ability of the firm by reacting it to and plan for the influence of external factors on the returns management process. Around 7% of the enterprise gross sales are captured by return costs in the third-party logistics providers. Most of the reverse logistics contracts are customized to fit the size and type of company contracting. In this business the third-party logistics themselves realize around 12% to 15% profits. "Many studies have shown that an average of 4% to 6% of all retail purchases are returned, costing the industry about $40 billion per year." http://en.wikipedia.org/wiki/Reverse_logistics
RATIONALE OF THE STUDY:
It is complicate and expensive to manage reverse logistics (returns). For companies returns are a significant problem if we consider both business-to-consumer (B2C) environment and business-to-business (B2B) environment. U.S. reverse logistics cost estimates in the range from $35 billion to $100 billion per year.
Clearly, returns are an issue ripe with potential, but we find that, short of using rudimentary functions in their ERP, few companies have attacked the reverse logistics problem with technology. Returns still remain a secondary problem consideration for example order management and fulfilment because companies continue to prioritize their supply chain through related IT investments on outbound projects. Though most organizations live with labour intensive, manual but they are often undisciplined and inefficient in returns management processes. Without question we believe reverse logistics must, and we predict it will, become a higher priority for companies with large and complex returns problems.
Many growing large number of companies today see competitive and strategic value in managing returns in house especially in retail and high-tech but however they also recognize that they lack adequate systems to manage effectively.
Several areas of opportunities are provided if we choose the returns process that are automated like:
Cost reduction - We can find returns cost savings in three things i.e. people, processes and inventory. Better decision making should be made at the point of authorization to accept a return or not and suppose if it is accepted which one is best to route it.
Customer Service - Any customer who is buying from companies and he will continue to remain or buy with them if it is very easy to purchase. If we see companies like REI or Nordstrom with effective and flexible returns programs attract repeat buyers because of the trust they create on the customers.
Efficiency - In a company the one thing is that returns are not at all predictable. Even it is highly inefficient and disruptive to use manual returns processes. Efficiency will be killed if we use wasted freight and duplicate efforts.
Control - It is not at all possible to effectively control a manual returns process. Management will make poor decisions if they have limited data like information and rudimentary tools that help to guide the process without tools. Tools that provide process discipline and guidance will drive other benefits that go a long way to improving process control.
SCOPE OF THE STUDY:
The scope of this study is explore how the tracking and tracing technology can be used in reverse logistics operations like GPS, bar codes and RFID (Radio Frequency Identification) tags for returns, recalls and recycling. In the reverse logistics system a practitioner approach can also be used to explore and examine the functions of management and the interrelationships regarding the use of technology to capture data for products flowing.
1.4 LIMITATIONS OF THE STUDY:
The study was mostly restricted to a sample population who were easily accessible, predominantly Bangalore, Karnataka.
Personal Interviews were restricted to a few important questions and were intended to get the personal views and opinions of the respondents.
The lack of willingness to share the information on the part of the respondents.
2.1 RETAIL INDUSTRY IN INDIA:
In India the retail sector is growing at a phenomenal pace. According to the Global Retail Development Index 2012, among the top 30 emerging markets India ranks fifth in retail industry. There has been a recent announcement by the Government of India with Foreign Direct Investment (FDI) in retail allowing 100% FDI in single brands and multi-brand has created positive sentiments in the retail sector.
In this sector there are many factors that are contributing to this boom. For example we can see the increase in the consumerism with a capacity to spend on luxury items and increase in spending power in the hands of Indians. Many Indians now a days are travelling to abroad and are exposed to many different cultures, way of life and thus there is an increase in the usage of brands. There is an increase in the India's consumption and the increase is due to change in diversity of culture, religion and the family values that encourage spending on most of the occasions.
Currently the size of India's retail sector is estimated at around $450 billion and it accounts for around 5% of the total market share in the retail sector. For 2012 Fitch rating agency has assigned a stable outlook to the retail sector in India. Retail companies are going to benefit from the factors like expected sales, growth-driven expansion and efficient working capital management. It has been estimated that the retail sector in India will continue to grow at 10-12 percent per annum, which is considered as extremely encouraging for the country's economy which is projected to grow at 6%.
2.2 GROWTH, OPPORTUNITIES & CHALLENGES OF INDIAN RETAIL INDUSTRY
Indian retail sector is growing. For this many shopping centres, multiplex- malls and huge complexes are opened which offer shopping, entertainment and food all under one roof. In terms of format and consumer buying behaviour the concept of shopping has altered which shows that there is a change in revolution of shopping in India. This indirectly has contributed to very large-scale investments in the real estate sector. Many major national and global players has started investing in Indian infrastructure and construction which helps in the growth of real estate business. The trends that are driving the growth of the retail sector in India are:
Low share of organized retailing
Fall in the prices of real estate
Increase in disposable income and customer aspiration
Increase in expenditure for luxury items
The increase in the population of young working is the credible factor in the prospects of the retail sector in India. In India the increase in the pay packets, increase in nuclear families in urban areas along with increase in working-women population. The emerging opportunities in the services sector are also one of the reasons in growth of retail sector. These key factors have been the growth drivers of the organized retail sector in India which now boast most of the retailing preferences of life like Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many more. By this we can say that the retail sector in India is witnessing complete change as traditional markets are making way for the new formats like moving to departmental stores, hypermarkets, supermarkets and specialty stores.
In India rural markets are emerging as a huge opportunity for retail industry which is reflected in the most categories of consumption. Presently ITC is experimenting by opening e-Choupal and Choupal Sagar in rural areas which is very helpful for the farmers of India.
The Hidden Challenges:
Modern retailing concept is all about having directly with customers the first hand experience which provides them a pleasant experience that the customers would like to enjoy again and again. The main challenges of the day in retail industry are retail differentiation, merchandising mix, supply chain management and competition from suppliers. In India, as we are moving to the next phase of development in retail industry, each company is going to offer variety and experimental shopping. The main key observations by customers are that they find it very difficult to find the uniqueness in the present retail stores. The basic problem for this is the retail differentiation.
The next main problem is supply chain logistics in setting up organized retail operations. India basically lacks a strong supply chain when compared to other countries like Europe or the USA. Even the present existing supply chain has too many intermediaries. Typical supply chain looks is as shown below:
Manufacturer ƒ National distributor ƒ Regional distributor ƒ Local wholesaler ƒ Retailer ƒ Consumer
This states that most of the global retail chains have to build a chain of supply network from starting onwards. Even the fragmented supply chain, the trucking system and transportation system is outdated. The concept of container trucks, automated warehousing is not yet taken root to India. The result is significant losses or damages during shipping.
One of the biggest challenges that any multi store retailer is facing is the Merchandising planning. Getting the right mix of product is a combination of customer insight, allocation and assortment techniques which is considered as store specific in the organization
The private label will continue to compete with brand leaders. So supplier's brand will take their own way because they have an established brand image for the decades. The reasons that can be accustomed are better value vs. Price, customer experience, aspiration, accessibility of supplier's brand, innovation.
2.3 SUPPLY CHAIN MANAGEMENT IN INDIAN RETAIL INDUSTRY
Poor supply chain and logistics management are the most important challenge faced by the present organized retail sector in India. This can be understood by the fact that the logistics management cost component in India is as high as 7 to 10 percent against the global average of 4 to 5 percent of the total retail price. Hence the margins in the retail sector can be improved in the range of 3 to 5 percent if we concentrate on the supply chain and logistics management.
The supply chain management (SCM) in any organization is the logistics aspect which mainly gives importance to value delivery chain. The major participants or the parties that participate in the retail logistics process are Manufacturers, Wholesalers, Third Party Specialists like Shippers, Order Fulfilment House etc. and the Retailer. The logistics is defined as the total process of planning, implementing and coordinating the physical movement of merchandise from manufacturer to retailer to customer in the timely, effective and cost efficient manner whatever is required. In the value delivery chain logistics is considered as order processing and fulfilment, warehousing, transportation, customer service and inventory management as interdependent functions. It oversees inventory management decisions as items travel through a retail supply chain. If a system of logistics works well as it was designed then the retail firm can reduce the stock outs, hold down inventories and improve customer service everything all at the same time. To move or store products more effectively better Logistics and Supply Chain is required for a retail to organize. Efficient logistics management prevents needless movement of goods, vehicles transferring products back and forth, frees up storage space for better utilization of products. Most of the Retail analysts are saying that on-time order replenishments will become even worse once the Wal-Mart and Bharti combinely start their operations in India. Because the American retailer works almost entirely on cross-docking and is likely to demand even higher service levels including potential levies for delays in shipment.
In supply chain and logistics management the efficiency and effectiveness can also be understood by the fact that they maintain inventories that are lower in modern retail stores than traditional retail stores. In India, inventories are kept for three weeks in the traditional kirana stores whereas in a modern retail store like Hypercity, it is nine days and it is almost two weeks for Food Bazaar. Now, it is beneficial for both the manufacturer as well as the retailer. In India if we go through the following supply food chain, we find many reasons that can be improved by best utilizing the supply chain and logistics.
2.4 Reverse Logistics & SCM:
Reverse Logistics offers several advantages to the company in terms of both tangible and intangible benefits. In the first instance, companies are able to retrieve defective equipments and parts which are either salvaged or refurbished and thus reclaims value out of the defective parts. Secondly, the packaging and defective materials are collected and recycled thereby generating scrap value back for the company. Thirdly unsold and obsolete equipments are collected back from point of sale which encourages the distributors and stockists to confidently buy stocks from the company knowing that he can always return unused inventory and not stand to loose in the bargain. Distributors are more likely to be open to stocking all fast moving as well as slow moving stocks.
Reverse logistics has been successfully adapted as marketing strategy. Refurbished computers are sold at cheaper prices by all leading brands and the demand for such laptops seems to be growing. The spare parts used by the computer manufacturers to service the laptops and computers on warranty or on sale, include refurbished parts.
Literature Review is the process of reading, analyzing, evaluating and summarizing research articles. The findings of a literature review may be compiled in a report as part of a thesis. A literature review may be purely descriptive or it can give a critical assessment of the literature in a particular field to identify where the gaps are contrasting the views of a particular researcher. It also helps in evaluating and display relationships between the different concepts, so that we can state our objective and form our hypothesis for study.
3.2 IMPORTANCE OF LITERATURE REVIEW
Literature review is the most important part of any dissertation or research paper due to several reasons. Literature review helps in strengthening the dissertation to establish the objectives for our study by considering the perspectives of other authors. This proves a point that a significant amount of literature has been developed by researchers which helps in extending our research by reviewing it and establishing our objectives for study. Literature review is about getting aware of the work done by researchers in the past, which helps in hypothesis formulation for the thesis.
3.3 HOW THE LITERATURE REVIEW HAS BEEN DONE
The literature review is done in the following manner:
Identifying the relevant research articles related to our area of research
Reading the research article thoroughly
Analyzing the facts, concepts in the research article
Evaluation of the research article
Summarizing the research article in a brief manner
1. Reverse Logistics: RFID the key to optimality, Journal of Industrial Engg and Mgmt
Linköping University (SWEDEN)
This paper explains that Reverse Logistics generally give efforts on activities surrounding the return and processing of returned products. They are at first usually collected at the point of sale and also in collection points, then inspected and sorted by employees to the best of their knowledge. Moreover, the employee determines if the return is accepted and the actions to be taken later on. Thereafter, a certain amount of time can pass before further actions are taken in regards to those recovered products .Due to its unique advantages such as bulk reading, fully automation and no line of sight, the required time, labour and cost for collection and sorting are reduced. To increase the value of the returned products, decisions are made whether to repair, refurbish, remanufacture, cannibalize or recycle the products.The tracking and identification characteristics of the RFID give information about the quality of the returned products, advantages on making the right decisions and also reduce thievery. So RFID-based solutions have proven to help businesses reduce costs, fine-tune inventory management, fortify theft detection, and achieve new velocity with real-time visibility into business processes across the whole Reverse Logistics Supply Chain.
2. Social media as a touch point in reverse logistics: scale development and validation
International Journal of Business Research
This paper presents the development of a scale which assesses the factors that are important for customers who are contacted by companies on social media, in the context of reverse logistics. A two-dimensional scale is developed on usability and experience. The usability dimension consists of items related to ease of use, user control, response traceability and personalization. For the experiential construct, the items are empathy, empowerment and engagement. This scale can be used for all types of internet and mobile technology-enabled communication to assess customer service.
3. The Role of ICT in Reverse Logistics: A Hypothesis of RFID Implementation to
Manage the Recovery Process
Andrea PAYARO, University of Padova, Italy.
Traditionally a product was developed to be manufactured and go through the supply chain to be sold to a customer. However, supply chains are steadily integrating more activities than those concerned with supply alone, like including service and product recovery. A hypothesis has been designed to manage the process of recovery of the products that are manufactured. Several forces drive reverse logistics for example competition and marketing motives, direct economic motives and concerns that are related with the environment. At present, in literature it is not present a model that describes which products can easily be recovered and what are the elements that determine the feasibility of recovery process. This paper aims to define the product's characteristics that influence the adoption of reverse logistics and to suggest the use of information technologies to support the recovery process. Information and communication technologies have a main role in the recovery process of electronic devices.
4. Cruising Ahead: Retail Reverse Logistics Outlook in India
Outlook, 14 Feb 2012.
Logistics is a component of integrated supply chain and is a significant contributor to the price of goods on the shelf. In India, logistics contributes 14-15 percent of the country's GDP, while in the developed geographies this percentage tends to be much lower, 7-9 percent. Here lies the challenge for Indian retailers, specifically discount retailers, for whom logistics management is a potential area to optimize cost.
Most logistics companies today provide customers real-time visibility regarding the coordinates of products in the supply chain. This is made possible by the use of technology like GPS/GPRS. The use of handheld devices for inventory control is also picking up in the industry. This helps retailers count their inventory faster and more efficiently. In some cases, a retailer's systems integrate with those of their 3 PL and 4 PL provider to enable smooth exchange of information on both sides.
In November 2011, the Committee of Secretaries of the Government of India approved up to 51 percent FDI in multi-brand retail, with a few conditions, before backtracking in the face of stiff opposition. One of the conditions was that half of FDI in multi-brand retail should go into creating back-end infrastructure like cold chains and warehouses. Also, the minimum FDI was mandated to be US$100 mn (around Rs 450 crore).
5. Green Reverse Logistics Brings Many Happy Returns
Amy Roach Partridge
Companies that combine the "reduce, reuse, recycle" mantra with the supply chain wisdom of managing costs and stamping out inefficiencies are developing reverse supply chains that help the Earth, the customer, and the bottom line.
"Reverse logistics is inherently green," explains Gailen Vick, president of the Reverse Logistics Association, a trade organization focused on educating retailers, manufacturers, and third-party logistics providers about the benefits of reverse logistics. "Repairing, refurbishing, or recycling a product instead of throwing it in a landfill automatically does good for Mother Earth."
Reverse logistics activities give companies a full green supply chain; they not only go to market with a green product, but they also have a way to get it out of the field that does not include a landfill. If a company can market a refurbished product that is just as good as a new one, it can cut manufacturing costs while promoting a green image through selling refurbished goods.
6. Assessing the Impact of RFID on Return Center Logistics
Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
According to this article, many manufacturers, retailers, distributors, and logistics ¬rms adopt RFID, the technology is becoming pervasive in the supply chain. Although its advocates include retail giants such as Wal-Mart, not all companies are enthusiastic about its bene¬ts. It is not clear whether RFID is a boon or a curse to the supply chain-its market growth may just be an issue of compliance. To establish the real bene¬ts of RFID, ¬eld study was conducted with GENCO, a third-party logistics company that deployed RFID in the outbound logistics operations at one of its return centers. Their analysis found that the RFID implementation had a signi¬cant impact on the GENCO outbound process. The number of customer claims fell substantially following the RFID deployment. After controlling for other factors in our model, they con¬rmed that RFID was a key factor that contributed to the positive results at this return centre.
7. IT Investment Is Key to Successful Reverse Logistics Management
According to this article, to gain better visibility companies need some kind of track-and-trace capability where goods are in the reverse supply chain process. For start up companies it is better to use bar-coding and RFID (radio frequency identification) to tag items before moving back through the supply chain process. According to the inventory fluctuations the visibility of inbound returns can be enhanced in the businesses to adjust the level staffing. When products are ready for resale this enhanced visibility helps in maximizing the value of returns by creating inventory alerts.
Reverse logistics software generate automatic compliance reports to prove that government regulations are being followed perfectly. These reports are generated by a reverse logistics system that captures product data at each stage of the technical process and then documentation is done. These automating compliance reports eliminate documentation errors and reduce staffing requirements.
8. Automating the Retail Returns Process with R-Log® Reverse Logistics Software
GENCO developed proprietary R-Log reverse logistics software which manages the reverse flow of products, information and cash from the point of receipt till final disposition. For each product R-Log houses defines the business rules that are agreed between organization and their vendors which define the appropriate product disposition method. These rules help automate formerly manual processes to virtually eliminate human error, speed up the reverse flow of products and reduce labour costs.
Benefits of R-Log includes:
Returns authorization process Automation
Validation and crediting of online customer returns
Improved reconciliation of customer, store, and vendor compliance
Virtual elimination of store labour to process returns.
To free up the store-level staff to work directly or deal with the customers
Reduced inventory, automated processing improves cash flow
Immediate application of vendor credits to the accounts payable system
Provides full visibility and control through a Web-based tool which provides returns on inventory and real-time information.
9. Reverse Logistics: Customer Satisfaction, Environment Key to Success in the 21st Century
The important challenge for retailers and vendors is to process quick, efficient and cost-effective merchandise collection and return at a proficiency level. Accuracy and timeliness are included in customer requirements which facilitate demand for a high standard of service.
Reverse logistics is entirely based upon public policy, heightened environmental consciousness and the law. The main concept that is there in reusable packaging, outdated, damaged or defective products can best be recycled or reused by the original manufacturer so that the products are not wasted. This involves a product system designs that would make recovery and reuse possible, efficient and makes it profitable. In reverse logistics, a measure of what gets thrown away is a measure of a product design and recovery process failure.
In the 21st century the success of any company is the customer satisfaction and how it is perfectly utilized.
10. Sustainable Supply Chain Strategy - Reverse Logistics in E-Retail
In this article, the rapid expansion of e-retail business mostly contributed to the increase in the awareness of reverse logistics importance. Customers who are buying through the internet do not have the benefit of a physical touching or inspection of the product which in turn this experience will lead them to some dissatisfaction with the product and want to return it as up. In recent years many companies have reported returns percentages mostly between 5 percent and 35 percent. Hard goods are normally at the lower end of the scale, while fashion clothing and footwear, where the customer will sometimes order a range of sizes if they are unfamiliar with the fit, is frequently at the higher end of this range.
In e-retail reverse logistics management software can be operated as a standalone application or as a part of an ERP. This specialised software helps them to provide the reports of all the critical functions that can be sometimes automated and provides reporting, audit functions to enable retailers to maintain better control, efficiency, effectiveness and also provides help in meeting regulatory requirements.