May 1996 € Volume 6 € Number 5

Reverse Logistics:
What Goes Around Comes Around


By Jan Young, CFPIM



What! Not another buzzword? No wait ... let me guess: Reverse logistics means the delivery man is supposed to hand me the package with all those "this side up" arrows pointing down, right?

Well, not quite, but it's understandable if you aren't familiar with the concept since it is relatively new and not yet broadly accepted. Reverse logistics, some believe, will be the hot button of warehousing and distribution in the first decade of the 21st Century, so it makes sense to start now to understand the concepts and some of their implications.


The shape of things to come
Reverse logistics is based on the fundamental idea that companies that manufacture and distribute products should also be responsible for cleaning up after themselves -- in the broadest sense of the word. This means that they should be responsible for recycling used packaging materials, reclaiming parts and even removing the worn-out product from the environment after the consumer is done with it. A few companies are now embracing the idea, many are considering it, and more are expected to get involved in the years to come.

For instance, Supplier A makes motor oil and Supplier B makes plastic bottles. An assembler combines these products and delivers them to a distributor who breaks bulk and passes them along to the retail level which sells them to the consumer. At each stage in the chain, packaging materials are either sold with the product or returned to the business they came from, and the motor oil, when worn out, is passed all the way back to Supplier A for disposition. This provides a closed loop with every level in the chain responsible for disposal or re-use of the products it introduced into the stream.

A very pretty picture, but there are both problems and economic challenges. It seems unlikely that we will ever see this theoretical model of reverse logistics completely implemented; but it also seems likely that some variation on it will be common practice in the years to come.


What will it mean?
Of course, the concept of reverse logistics has implications at every level of the stream. Those that affect distribution are of particular interest for the purposes of this column.

  • Trucking costs will increase because many waste products will be returned to their source, rather than being recycled locally. From the viewpoint of the total supply chain, the increase in freight cost may be offset by increased economies of scale at the recycling facilities. But from the viewpoint of the individual distributor, it will simply be an increase. However, the increase will not double freight costs because, to some degree, waste can be handled in return trips which are now empty.

  • If waste is being picked up along the delivery route, the trailer can no longer simply be unloaded from back to front. So we may see a change in trailer design to provide improved access.

  • Other physical handling methods will change because the packaging of materials moving up in the stream will differ from that moving down. Used oil will most likely be returned to the refinery in bulk, while new oil moves to the end user in case lots.

  • One of the very fundamental concepts of warehousing will change: Warehouses will no longer be strictly break-bulk facilities. Instead, they will break bulk in one direction and make bulk in the other. As a result, the receiving and put-away functions will become more important in relation to the picking and shipping functions. This is because when handling the waste stream, there will be many receipts for one shipment, rather than the other way around.

  • Because the receiving function will gain importance and will become more costly, there will be added pressure to implement electronic data interchange and advanced shipment notices. This technology will enable warehouses to improve efficiencies in their receiving operations.

  • In many warehouses, particularly those handling food and drug items, stricter controls will be required to ensure that new materials headed down the chain are reliably segregated from waste materials headed back up to minimize the chances of contamination. In extreme cases, separate facilities may be required.

  • Distributors should prepare themselves for possible involvement in the grading and sorting of the used materials (separation of the re-usable from scrap). The theory of reverse distribution does not specify where this work will be done, but the economics of the situation means that it will be done where costs are lowest and volume is highest. In some businesses, that points directly at the warehouse.


    Jan Young, CFPIM, is director of warehouse technology for Catalyst USA, Inc., a supplier of off-the-shelf warehousing and distribution systems. He is the author of Modern Inventory Operations, published by Van Nostrand Reinhold in 1990.

    For more information about this article, input the number 12 in the appropriate place on the Reader Service Form

    Copyright © 2020 by the American Production and Inventory Control Society Inc. All rights reserved.
    Click here to return to the table of contents.