What makes it problematic and challenging? Why operations managers have to care about it?

There is a clearly situation where people are getting more willing to return the merchandise or any other
stuff/product purchased whether online or offline but not satisfy them due to lack of quality or unfit in
terms of size or other logical reasons. The number of product shipping back to producer/retailer are also
increasing significantly over the time. This phenomenon take place not only in retailer industry but also
happen in other industry including circular economy which focus on keeping resources in use for as long
as possible, extract the maximum value from them whilst in use, then recover and regenerate products
and materials at the end of each service life.
There are different challenges in reverse logistic compare to forward logistic (HRM p 461):

Issue Forward Logistics Reverse Logistics

Forecasting Relatively More uncertain
straightforward It is more difficult to forecast in term the amount of
product returned
Product quality Uniform Not uniform
Product quality vary significantly, but seldom they are in
100% as the new product
Product packaging Uniform Often damaged
It is often customer don’t care about packaging, the most
important thing for them is product can be returned to
producer/retailer
Pricing Relatively uniform Dependent on many factors
Pricing can be varied accordance with location and
product condition
Speed Often very important Often not a priority
Focus on intact product returned, not speed
Distribution costs Easily visible Less directly visible
It depend on nearness of customer and retailer location
Inventory Consistent Not consistent
management It depend on amount of returned product and seasonal
factor

Operation managers has responsibility to ensure reverse flow of the product run smoothly. They should
also care about ways to tackle those challenges in order to increase customer satisfaction and company
profit as well. He or she should develop system which can improve the process of returning back of
product in efficient way. However, operation manager also should put concern on the following issues
that need to be dealt with:
1. The cost of reverse flows is usually high, while comparably, the residual value of goods is usually
low. There should be effective cost and benefit measurement.
2. Many circular economy initiatives are not viable economically because they rely on existing
logistics capabilities and infrastructure.
3. Scale really matters in the reverse loop, improving the marginal cost for collection, transportation
and sorting operations

Can it be applied to any industry? What factors should be considered in developing reverse logistics?
Reverse logistic can be applied in any industry as long as it has product characterized by economic benefit
and salvage value can be measured and be reused by the firm.
In developing reverse logistic system, OATAO lists six critical success factor:
1. Good input controls: consists in the identification of the state of the materials to be returned, and
with the decision if the material can or cannot be reused
2. Standardized and mapped processes: the shift of focus in reverse logistics, i.e., where it stops
being a sporadic and contingent process, and becomes a regular process, that requires adequate
documentation through processes mapping and formalization. Hence, offering the possibility to
identify improvement opportunities
3. Reduced cycle time: It is the decrease of time between the identification of recycling needs,
disposal and return of the products and their effective processing
4. Information systems: the process of reverse logistics needs the support of information technology
(IT), in order to enable the compliance of the requirements necessary for its operation. Among
the functionalities required can be listed: trustable and centralized information, tracking, faults
evaluation, etc.
5. Planned logistics network: consists in the adequate logistics infrastructure needed to deal with
the flows of used material income and flows of processed material output. It involves installations,
systems, and resources (financial, humans and machines), amongst others
6. Collaborative relations between customers and suppliers: since there is a series of agents involved
in the process, many questions related to the level of trust between the involved parts arise.
Information such as, stock levels, sales forecasting and restocking times, must be shared amongst
the members of the network so that the system works efficiently.