Reverse logistics and the return portion of the supply chain is often an overlooked and mismanaged process.

Companies tend to focus their efforts on the forward portion of supply chain management, while failing to take advantage of the many opportunities that reverse logistics presents (Benton, 2007). What these companies do not realize is that the effective management of reverse logistics has the potential to make them more profitable, and to add value to many other parts of their supply chain. In the case of Johnson Automotive, we will analyze their current supply chain processes to determine their effectiveness while answering the following questions: 1. What is reverse logistics? 2. What are the key elements of reverse logistics in the automotive industry? 3. How can Johnson optimize its reverse logistics channel? What Is Reverse Logistics? The Reverse Logistics Association (2008) defines reverse logistics as all activity associated with a product/service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources. Because all of these processes take place post-sale, this portion of the companys activities could simply be viewed as a cost center. This could not be further from the truth. The objective of any intelligent business manager should be to optimize all activities and ensure that the maximum value is achieved for every Dollar that is spent by the company. Some of the activities associated with reverse logistics are remanufacturing, recycling, reconditioning, warranty management, call-center management, and transportation. The main goal of reverse logistics is to facilitate these activities in a manner that helps the company to meet its corporate objectives.

That is why the design of the reverse supply chain processes is so important. Every company needs specific processes that are aimed at increasing value for the company and its customers based on the type of industry in which it operates and the type of products that it supplies. The major stumbling block for most companies that are attempting to optimize their return supply chain is the chaotic nature of reverse logistics. Volume within the return supply chain is highly variable and difficult to predict or control (OReilly, 2005). In addition, returning the product in a timely manner is often not of major importance to the end users and retailers. Therefore, any processes that rely on the availability of cores or supplies will have to be flexible enough to handle variations in supply. In the case of Johnson Automotive, we will focus primarily on instituting processes that will help to the company to create competitive advantage with its reverse logistics operations. Johnson currently supplies paint, batteries, and electronics to a major auto manufacturer. In order to help Johnson maximize the potential of its return supply chain, we will focus on returns management and environmental responsibility while adding value to the traditional forward supply chain. What Are The Key Elements Of Reverse Logistics In The Automotive Industry? Much of the automotive parts sector is focused on remanufacturing. Auto parts represent the largest remanufacturing sector in the US other than the Federal Government (Seitz, n.d.). The focal point of the return supply chain for many companies in this industry is retrieving cores from the end user and processing them so that they are ready for the rebuilding process. The automotive industry is unique in this regard. The inherent problem with this type of arrangement is that the cores used for rebuilding will vary greatly in quality depending on where and how they were used. This means that remanufacturers have to ensure that they have effective processes in place for

obtaining, grading, and sorting cores to support their remanufacturing operations. Because of the parts that Johnson Automotive supplies, it is not a remanufacturer in the traditional sense. The parts that Johnson supplies will require their own unique processes to ensure that maximum value is extracted from their return supply chains. Paint is a material that is not able to be remanufactured. There is no real way to recover paint once applied to a vehicle; therefore, recycling is not an option either. The main focus of reverse logistics for paint will be to process customer returns in the most effective way. Paint that is returned from the buyer for any reason will need to be quickly broken down into its component chemicals and reintroduced into the manufacturing process. This will have two distinct benefits for Johnson. The first is that the company will save on material costs by reusing the base chemicals. The second is that the company will avoid the significant costs related to the storage and disposal of the hazardous materials. Batteries, like paint, have the potential to impact the environment in a negative way. Batteries contain hazardous materials that require special, cost-intensive, disposal methods. Batteries are, however, highly recyclable. The majority of the materials contained within a battery can be recycled and reused with relative ease. Therefore, the focus for batteries will be to recover and recycle as many old batteries as possible. By doing this, Johnson will realize many of the same benefits as reusing paint components. The difference is that battery recycling will be on a much larger scale due to the fact that all the batteries that are produced will eventually be candidates for recycling at the end of their usable life.

The reverse logistics considerations for electronics are quite a bit different than those for paint and batteries. The main problem for remanufacturing electronics is the pace at which technology

moves. By the time old or defective electronics make it back to the manufacturer to be rebuilt and resold, they will most likely be obsolete (Seitz, n.d.). Because of this, Johnson will have to find other markets for the resale of returned and defective electronics. Alternative markets, such as farm equipment, should be investigated to determine the viability of adapting out of date automotive technology to their products. Johnson could then partner with a manufacturer in that segment to supply them with electronics, thus creating an alternative market and an additional revenue stream. How Can Johnson Optimize Its Reverse Logistics Channel? Johnson can optimize its return supply chain by implementing the suggestions that we have previously outlined. If these ideas are properly executed, a competitive advantage will be created. In addition to the obvious benefit of cost reduction, Johnson could realize other intangible benefits if its reverse logistics efforts are optimized. One of the most important is public perception. By establishing itself as a leader in recycling and environmental responsibility, it will create positive publicity that could help to increase sales. It would benefit Johnson to push this green image. The manufacturers that purchase parts from Johnson could then use the campaign to increase their sales. As the demand for the car manufacturers products increase, so will Johnsons sales and profits.

In conclusion, many companies are beginning to realize the importance of reverse logistics. As the competitiveness increases in the market, these companies can tap the potential of reverse logistics to reduce costs and increase sales. That being said, the opportunities within the return supply chain are not exactly low-hanging fruit. It will take well conceived processes and

effective execution for any company to truly optimize its return supply channels.

References Benton, Jr., W. (2007). Purchasing and Supply Chain Management. New York, NY: McGraw-Hill/Irwin. OReilly, J., (2005, July). Rethinking Reverse Logistics. Inboundlogistics.com. Retrieved February 9, 2008, from www.inboundlogistics.com Reverse Logistics Association. (2008). Home Page. Retrieved February 9, 2008, from http://www.reverselogisticstrends.com Seitz, M. (n.d.). Reverse Logistics and Remanufacturing in the Automotive Sector. Retrieved February 10, 2008, from www.brass.cf.ac.uk