Development of Methodology for Measuring and Reducing Value Recovery Time of Returns

Returns are becoming inevitable across all industries. Consequentially, the importance of reverse logistics (RL) as a potential profit making center in an organization has grown drastically in the past few years. A typical reverse supply chain (RSC) starts from the "gate keeping" process where the products are checked if they are eligible to enter the RSC. It is ensued by a series of operations like the "collection and transportation", "sorting", "storing" and "asset recovery". The last operation is usually "transportation and distribution" to the concerned destination. We define the time taken by the returned product to traverse from the first operation in the RSC to the last one as the "cycle time of value recovery" of the product. A large value of this parameter has significant implications for the company. Firstly, it directly impacts the bottom line viz., money that is locked in the form of returned assets. The assets could be obsolete products, defective products, non-defective products, capital equipments like machinery, tools etc. Secondly, it has an adverse indirect effect on the corporate image of the enterprise. Today, more and more companies are utilizing their RL operations as a key differentiator for market sustenance. They realize that performing consistently to meet the customer expectations will bolster their customer retention process. This paper develops a methodology to measure and reduce the time taken by a returned product to traverse through the reverse supply chain. We focus specifically on key lean techniques that have a direct impact on the cycle time of value recovery of returns. For each operation in the RSC, we analyze its process flow chart to identify the possible delays, storage and transportation. We suggest solutions that reduce the time taken in delays and storages for all the operations in the RSC. This will account for the reduction in the cycle time of value recovery.