Section 8.3: Reverse logistics management

Watch this video for a simplified introduction to the idea of reverse logistics and how it functions within a circular economy: “Reverse Logistics in Circular Economy” – Surus Inversa.

In a classical economy, when a manufacturer’s product moves through the supply chain network, the goal is to reach the end-user. Any process or management after the sale of the product involves reverse logistics.

An example of reverse logistics is the treatment of defective products. Customer return the defective product to the seller. The firm would then have to organize shipping of the defective product, testing the product, dismantling, and repairing it, or else recycling or disposing of the product. The product thus travels in reverse through the supply chain back to the manufacturer. The diagram above illustrates the general flow and activities of reverse logistics within a supply chain where the bold arrows indicate the return flows and reverse process.

When companies opt to recovery products voluntarily, to retain any usable materials from the defective product, we call this process reverse logistics.

While doing reverse logistics can add to a firm’s costs, it can also results in savings. For example, environmental legislation on product disposal and recovery can impact a firm’s economic income. A famous example of this is the European ELV (End of Life Vehicles) and WEEE (Waste Electrical and Electronic Equipment) directives.

ELV – End of Life Vehicles
The ELV  directive aims to achieve environmentally friendly dismantling, reuse and recycling of used or crashed vehicles to reduce the amount of valuable materials being sent to landfill. To do this, the directive:
– imposes and enforces a ban on the use of hazardous substances/materials in new vehicles
– mandates that manufacturers are required to set up collection systems; dictates that ELVs are to be transferred to authorized treatment facilities at no cost to the final holder / owner, and that producers are to meet all or a significant part of the costs.
– provides stipulations on the storage and treatment methods of ELVs
– set s out the requirements and targets for reuse and recovery, with a preference for recycling options

WEEE – Waste Electrical and Electronic Equipment
WEEE constitutes at least 4% of the municipal waste stream within the European Union, and is increasing by up to 5% per year. Since more than 90% of WEEE is disposed without pre-treatment is has become recognized as a significant environmental threat (leaching of heavy metal content over time).  The WEEE directive aims to encourage manufacturer responsibility based initiatives and take back schemes to reduce EEE wastes. 
The directive achieves this by:
– ensuring that producers undertake financial responsibility for the logistics, treatment, recovery, and disposal costs of their products
– mandating that producers are required to document for all end of life treatments for their products
– stipulating requirements for the separate collection of WEEE from private households equating to 4kg/inhabitant/year.
– details specific materials recovery targets for recycling and reuse

Therefore, companies can recover value and seek new business opportunities through reverse logistics by recovering key parts and components and using materials for new products. Watch the following video to understand how a carefully managed reverse supply chain can yield important benefits for businesses: “Managing the Reverse Supply Chain” – Liquidity Services.

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Supplementary Resources

Olariu (2013) “Conceptual issues regarding reverse logistics”

Olariu (2014) “An overview of retail reverse logistics” 

Brzozowska and Starostka-Patyk (2008) “Environmental management and reverse logistics”

Gonçalves-Dias, Souza, and Santos (2006) “Reflections on Design, Sustainability and Reverse Logistics: PET packaging recycling in Brazil”