Reverse Logistics Summarisationof Reverse Logistics:As defined by Karen Hawks inReverse Logistic Magazine 2006, reverse logistics is “…the process of moving goods from their typical final destination forthe purpose of capturing value, or proper disposal.
Remanufacturing andrefurbishing activities may also be included in the definition of reverse logistics.”The above definition denotes thatonce the product has been delivered to the consumers, any management or procedurecarried out after that, comprises of reverse logistics. Nowadays, reverselogistics has become an integral part of manufacturers’ and businesses operations;this is owed to the fact that today’s customers expect a significantly higherlevel of product and/or service. According to the article “Why Reverse Logisticsis Important” on the AER Worldwide website, published in March 2016, “Reverse logistics are the means to havingan efficient supply chain and, therefore, efficient asset recovery.” Asset recoverycan be simply defined as the process of maximising value of un-used products orproducts that have reached the end of their life-cycle.
The article continues to drivehome the point of reverse logistics being vital in extracting the maximum valuefrom a product after its delivery; be it through offering a repair service, aninsurance policy etc. Reverse logisticscan also be considered a part of asset recovery by encouraging customerloyalty. A customer’s experience with a business will be a more positive one,if a company focuses on the original product that was returned by saidcustomer. Reducing disposal costs is another benefit of implementing reverselogistics. A company can send parts and merchandise to the manufacturer and extractas much value as possible from them. One of the main difficulties andquestions that arise when implementing reverse logistics is, “Are theadministrative and information systems able to accommodate the reverse logisticsprocess?” An article published on The Material Handling & Logistics websitetitled, “The Seven Deadly Sins of Reverse Logistics” states that, “Most information and administrative systems installedby firms were done so with forward distribution in mind.
” This means the reverse product flow receives lessattention, and although the forward product flow and reverse product flowincorporate the same processes such as warehousing, transportation andinventory control, they are not identical in their execution. It is in the bestinterests of the companies that they ensure the differences are incorporatedinto the information systems, and are able to accommodate both types of flows. Another question that arisesregarding reverse logistics is, if the revenue generated through asset recoveryjustifies the costs of processing returns? This is a very vital questionbecause a company’s main goal is always to maximise revenue; it is essential thatcompanies must determine precisely which products to refurbish or re-use, and theexact costs of these processes. This will help the companies to figure out thequantitative value reverse logistics provides, and in terms of assetmanagement, they will know the amount, type and timing of the products that arereturned. ChosenExamples of Reverse Logistics: The first example is the vast,global recall Samsung Electronics Co had to carry out regarding its Galaxy Note7 product; it is estimated that over 2.5 million units were recalled. This was dueto the fact that there were 35 incidences of the Galaxy Note 7 phones explodingor catching fire.
This is where according to many experts, Samsung ElectronicsCo failed to successfully implement its reverse logistics processes. The authors of the Wall StreetJournal article titled, “How Samsung Botched Its Galaxy Note 7 Recall”,published on September 2016, stated that, “But the effort has been doggedby conflicting information and Samsung’s failure at the outset to coordinateefforts with U.S. safety authorities, according to former officials with theagency.” Thisresulted in delays regarding the provision of replacement devices for customersin the US; this was also detrimental to Samsung because the company was aimingto close the gap with Apple Inc. in the US marketplace.
The chairman of the CPSC(Consumer Product Safety Commission) Elliot Kaye, implied that the reasonbehind the delays and difficulties in the recall were due to the fact that thecompany decided to pursue these endeavours within its own means. She statedthat in general, it is not advisable for companies to go about these highlevels of recalls by themselves. The company continued to assure its customers that theycould request a Galaxy Note 7 with a different battery, refund or replacementof the returned device.
The President of Samsung Electronics America, TimBaxter addressed the customers in a video statement and made his request. “To our Note 7 owners, if you have not yetreplaced your original Note 7, please, please power it down and return it…” Healso asserted that replacement phones would be available by 21 September 2016. Customers faced other complications when returningand replacing their smartphones, even though U.S carriers had begun the processof doing so.
Unlike Apple Inc, Samsung does not possess a great number of itsown chain stores; the company mainly relies on third party retailers to sellits goods. This introduced significant complications in the supply chain management,such as the company’s asset and inventory management processes. When criticisedregarding its confusing method of product recall, the company declared that itwas working with its own carriers and partners in each market to resolve therecall situation as efficiently as possible. When it came to customercommunication, Samsung also dealt with that aspect in irresponsible ways. Thecompany released a statement on its website on September 2, 2016, explaining thatthere were battery issues with the phones, but did not bother going into detail,nor advising customers to turn off their phones. Providing inconsistent informationand advice to customers wanting to exchange their devices, was another issuethat the company created. There were instances where customers were told they wouldbe provided with loaner phones, although this was not an official policy.
In global terms, the recall process was also a mess;the company sent out recall notices in all the 10 countries where the GalaxyNote 7s’ were sold. According to Christina Warren, author of the Gizmodo.com articletitled, “Samsung’s Galaxy Note 7 Recall Is a Nightmare So Far” (9 September2016), revealed information provided to her by a “tipster” that really put the competencyof the company in a very dour light. In the words of the tipster, given the aliasof Matty, “When I say I would like toexchange it for another Note 7, the look of confusion on his face hit prettyhard and fast…A quick scurry to the back to talk to his management and it’sdecided that they have no information from Samsung on how to do that…” Thesecond example is the one million units of its Easy-Bake Ovens, Hasbro had torecall in July 2007.
The unusual fact about this case was that this was thesecond time in 2007 that Hasbro implemented the recall process. In February of thatsame year, Hasbro recalled just about less than a million units of that product.The U.
S based CPSC received 249 complaints of children getting their hands stuck,and 77 of them reporting burns. One case was sosevere, that a 5-year old had to have her finger amputated. In a written statement sent to CNN, Hasbro spokesman WayneCharness said, “We are voluntarilyrecalling this oven because of the potential for entrapment or burns and wewant to make sure that the ovens are immediately taken away from children andreturned to us.” Oneof the most concerning aspects of this debacle, was the company’s stubbornsilence on many of the issues involved with the recall process. For instance,Hasbro refused to comment on whether the customers affected by the productwould be legible for compensation. A report published on the CNN website on July19, 2007, by Amy Sabha, titled, “One million Hasbro Easy-Bake Ovens recalled”, wentinto depth regarding this situation. According to the report, Hasbro added asafety grate to the model after the February recall, but was forced to contactCPSC after the second recall due to the instances of major injury.
Hasbro didhowever, ensure customers that if they sent back the product, the deliverycharge would be paid for by the company, and they would receive a $32 voucherfor other Hasbro products. This is a verysimilar example to the Galaxy Note 7 case, however unlike the consumers of the smartphone,several of the Hasbro consumers were hurt physically. This adds another layerof distrust and scepticism regarding the safety qualities of the products,especially since the Easy-Bake Oven was recalled previously, and Hasbro thenadded safety mechanisms to apparently stop the problem. This level of failurein product remanufacturing does not create loyalty within the customer base.
Samsung Galaxy Note 7 and Business Services: The most effectiveway to explain the Galaxy Note 7 recall saga is through understanding howbusiness services played a part in that process. This is because one of themain aspects business services concentrate on is the role of a customer as asupplier in a reverse logistics operation.