SCM 3516 Exam 2
Marginal Cost Pricing
Sets a product's transportation price equal to the additional (marginal) cost of transporting one more unit of output. Businesses often set prices close to marginal cost during periods of poor sales.
Greenhouse Gases
The gases that prevent heat from escaping, and raise atmospheric temperature are known as greenhouse gases. Transportation is one of the primary sources of GHG. -When the fuel burns, it discharges carbon dioxide, hydrocarbons, nitrous oxide (N2O), and water vapor. These gases absorb radiation in the atmosphere, raising the earth's temperature. While the exact impact is inconclusive, a warming of 0.1-0.3°C per decade is predicted, even if the concentrations of all greenhouse gases and aerosols had been kept constant at year 2000 levels. (Source: IPCC) If CO2 concentrations double, it could lead to melting of ice sheets and glaciers; rising sea levels by 3-5cm per decade
Pricing
How a business approaches its pricing strategies depends on the market structure it operates in. A market structure attempts to explain pricing behavior in terms of: -Number of competitors -Degree of product differentiation -Barriers to entry, etc.
Freight Documentation
Important documents - invoices, export, import documents and bill-of-lading. Controls the cargo from origin to destination. Missing or incorrect documentation leads to delays and additional costs. Importers-and-exporters take assistance from freight forwarders to handle the documentation (3PL, 4PL, 5PL)
Centralized Return Centers
•Consistency in disposition decisions and minimizations of errors •Space saving advantage for retailers who want to dedicate as much of the shop floor to sellable merchandise as possible •Labor cost reduction - due to specialization, CRC employees can typically handle returns more efficiently than retail clerks can •Transportation cost reduction - empty truckloads used to pick up return merchandise •Faster disposition times - it allows the company to obtain higher credits and refunds •Easier to identify trends in returns
Concerns in RL
•Returns arriving faster than disposal •Large amount of returns in the inventory •Unidentified or unauthorized returns •Lengthy processing times •Unknown cost of returns
How many Incoterms are there
-13 incoterms in 2000 -11 incoterms in 2010 -11 incoterms in 2020 (DAT -> DPU)
Commodity Rates
-Can be constructed on a variety of basis -Most common: specific rate on a commodity between specified points via specific route and direction -Takes priority over class and exception rates -Disadvantage - reverts to publication of multiplicity of rates and adds to complexity of the pricing system.
Air Emission Reduction Initiatives
-More fuel efficient engines -Design innovations in the aircraft body -Use of lighter materials -Improvements in airport operations ---Adopting practices that may minimize fuel use; reducing the average taxi time for aircraft can lead to lower emissions
Most Common Mistakes in Pricing
-Over-reliance on cost-based pricing -Slow reaction to changes in market conditions -Ignoring marketing mix (4 Ps - product, promotion, price and place) -Prices not tailored to services and markets -'One price for all' does not work in transportation industry! -Failure to price consistently with strategic plan
E-commerce More Return Stats
30% of ecommerce products are returned (Covid-19 affected this % to some extent) 67% of shoppers read returns policy before buying Inconvenient returns deter 90% of shoppers 79% of shoppers want free return shipping
Maquiladora
A U.S. manufacturing or assembly operation located along the U.S. - Mexican border, or in a place specified by the Mexican government U.S. raw material and component parts are sent to Maquiladora, where the semi-finished or finished product is manufactured or assembled Advantage - U.S. pays no duty and gets lower labor rate main production at these facilities: -garment assembly and textile products -electrical and electronic accessories -assembly of furniture and related products
5PL
A fifth party logistics provider will aggregate the demands of the 3PL and others, for negotiating more favorable rates with airlines and shipping companies obtains a higher degree of resource utilization
2PL
A second-party logistics provider is an asset-based carrier, which actually owns the means of transportation. Eg, water carriers Carriers in the service of transportation transport & warehouse management
Need for transportation planning
A well-functioning freight transportation system is essential to any successful economy, and therefore planning to keep it efficient is important Despite the current economic conditions and cries for reducing import-export activity by protectionists, global trade remains a large activity
Pricing Models
Based on Cost of service 1. based on marginal cost 2. based on average cost Cost of service measures what it costs the producer, to produce that service. Based on Value of service 1. Product's value 2. Based on seller created groupings (3rd degree price discrimination) 3. Differential pricing (based on person/ company, commodity, time or place) Value of service is what the consumer is willing to pay for that service. The difference between the two is the range of potential profit or loss.
Why should businesses go green
Build public image -Increased sales - consumers choose to deal with responsible companies It creates healthy environment for employees, and reduces unnecessary waste -Installing energy saving lighting, heating and ventilation can significantly reduce costs Legal and 'green' tax advantages
Benefits of Adopting Green Initiatives
Environmental benefits -Improve air and water quality -Conserve and restore natural resources -Enhance and protect biodiversity and ecosystems Economic benefits -Reduce operating costs -Create and expand markets for green product/ services Social benefits -Enhance human comfort and health -Heighten aesthetic qualities -Improve overall quality of life
Rate Making in Practice
General rates -Class, exception, and commodity rates -Each designed to simplify the potential complexity of trillions of possible rates
Rail Emission Reduction Initiatives
Improvement in car capacity - newer and improved freight cars allow an average train carry 3500 tons of freight, up 56% over 1980 and up 18% over 2000. Use of hybrid-electric and generator-set ("Genset") switcher locomotives. Technology - on-board computers to monitor engine performance, train tonnage, grade, speed, etc. to optimize speed, brake use, and fuel consumption. Driver training
Customers Growing Consciousness
In Nov. 2018, IRI found that 75% of shoppers across Europe prefer to buy products with environmentally friendly packaging. An international study in 2017 by Unilever, revealed that a third of consumers (33%) are now choosing to buy from brands they believe are doing social or environmental good. Another study in 2015, found that 73% of millennials are willing to spend more money for sustainable products. As a result, "companies that can tout their green supply chain practices are rewarded with both efficiency and a public relations boost."
Disposal bans
Many products are banned from being placed in a landfill because they present a health risk. Examples include: cathode ray tubes (CRTs) in computer monitors, motor oil, household batteries, household appliances, tires, and some medical and electrical equipment.
Size of Reverse Logistics
National Retail Federation (NRF) reported that the overall value of returned merchandise in the United States during the past year (2020) was $428 billion (up from 309B in 2019), and returns from online purchases accounted for $102 billion (up from $41Bin 2019) of that total There was an increase in returns of online purchases as the pandemic forced more consumers to shop online
Transport cost of a product
Pricing typically depends on distance, time, nature of a product, and weight. NMFC identifies four criteria to determine product's classification group: -product density (lbs/cu.ft.) -stowability -handling -liability. Cost, market value and potential use of the product influences prices
RL Activities for Products and Packaging
Product •Return to Supplier •Resell •Salvage, Reclaim material •Recondition •Refurbish, Remanufacture •Recycle •Donate •Landfill Packaging •Reuse •Refurbish •Reclaim material •Recycle •Salvage •Landfill RL and green logistics both involve: -remanufacturing -recycling -reusable packaging
Responsibility & Obligations addressed by Incoterms
Provide an internationally accepted definition of: -the responsibilities of the buyer and seller -the allocation of delivery costs -the assumption of delivery risks created to adapt to the most contemporary commercial practices should be referred to as 'rules'
Rail environmental impact
Rail is the least environmentally damaging mode of land transportation. According to EPA, freight railroads account for only 0.6% of U.S. greenhouse gas emissions from all sources and 2.2% of emissions from transportation-related sources. Over the past quarter century, freight railroad's fuel efficiency has increased by 85%, reducing greenhouse gas emissions by 20 tonnes a year On average, railroads are four times more fuel efficient than trucks. Moving freight by rail instead of truck reduces greenhouse gas emissions by 75% Diesel locomotives release pollutants in the air -trains carrying coal release coal dust from uncovered cars into the air, water and onto the land. Accidents / train derailments further add to the impact on human health, local water supplies, and on the environment. Noise is produced by the engines or by the interaction of the wheels with the track
Terms of trade
Shows where the exporter's responsibilities end and where the importer's responsibilities begin. A set of harmonized selling terms is set by International Chamber of Commerce (ICC), widely known as Incoterms (legal and approved rules of transportation)
Trucking emission reduction initiatives
US EPA's Smartway Partnership Program -For improvement in design and operation of truck fleets. -Initiated in yr. 2004 -Is a market-driven partnership aimed at helping businesses move goods in the cleanest most efficient way possible SmartWay strategies include: 1. wind deflectors on the tops, sides, and rear of trucks, to reduce aerodynamic drag 2. Installation of trailer skirt 3. fuel-efficient tires and tire inflation systems to reduce rolling resistance 4. use of speed governors 5. hybrid powertrain systems additional initiatives: -Truck stop electrification -Modal shift -Smart Logistics -Carbon tax -Driver Training Measures to reduce fuel use and emissions from trucks at a high level include: -Enhanced maintenance -Idling control through technologies and behavior -Fuel, oil and lubricant improvement -Fleet and engine modernization upcoming green trucks: -walmart's concept truck -tesla's semi -volvo's concept truck -toyota's hydrogen cell technology ---all are possible due to e-highways
Bill of Material
a detailed list of the raw materials, sub-assemblies, parts and the quantities of each needed to manufacture an end product
Transportation Planning
identifies problems, generates and evaluates alternatives, and develop a course of action involves assessment, design and location of transportation facilities
Carrier Selection
step 3 of global planning procedure: transport decisions After the modal selection has been made, managers turn to selecting individual service providers within the mode. Like the modal decision, carrier selection is also based on a number of criteria and carrier capabilities. Difference between modal and carrier selection: -Number of options available -Frequency of the decision Carrier Selection Criteria -Geographic coverage -Average transit time -Reliability (on-time pickup and delivery) -Technical capabilities, ability to share information -Equipment availability and capacity -Product protection/carrier's freight damage experience -Carrier's financial stability and freight rates
Mode Selection
step 3 of global planning procedure: transport decisions Decision criteria: 1. Product characteristics - size, durability, value 2. Modal service capabilities - transit time, reliability, accessibility, capacity, safety (TRACS) 3. Supply chain requirements for speed, service, cost Decision must also align with corporate strategy, control risk and required level of customer service
Sustainable transportation
the capacity to support the mobility needs of a society in a manner that is least damaging to the environment
1PL
A first-party logistics provider is a firm or an individual that needs to have cargo transported from a point A to a point B. The term stands both for the cargo sender and the cargo receiver Cargo owners with manufacturing and retailing services Manufacturer or trader managing their own logistics
4PL
A fourth-party logistics provider is an independent, singularly accountable integrator. It includes 3PLs, to design, build and run comprehensive supply chain solutions for clients lead logistics providers and consultants that build and execute supply chain solutions
Average Cost Pricing
A pricing strategy that regulators impose on businesses to limit their price equal to the costs necessary to create the product/service. This implies that businesses will set the unit price of a product relatively close to the average cost needed to produce it. AC = total cost/ Q. Average cost pricing forces monopolists to reduce price to where the firm's average total cost (AC) intersects the market demand curve.
Why Companies take products back
The main reasons to become active in reverse logistics are: •environmental laws that force firms to take back their products and take care of further treatment •economic benefits of using returned products in the production process instead of paying high disposal costs •the growing environmental consciousness of consumers
Green initiatives
'Green' meansmaking the environment more pleasant for yourself, energy efficient, and eco-friendly. By Green Initiatives, we mean adopting practices that may off-set the Greenhouse Gases (GHG) emitted by human activities (from complex production processes to simply driving a car!) Green Initiatives are efforts aimed to offset GHGs emitted by human activities that range from complex industrial production processes to simply driving a vehicle. All modes of freight transportation have taken these initiatives seriously and have deployed ways to reduce their carbon footprint
Class rate system
-Rather than have a unique price for each and every commodity, products with similar freight characteristics are assigned to common freight 'classes'. -There are 18 different classes identified by a numeric value. They range from a low of class 50 to a high of class 500. -The logic is - the lower the class, the lower the rate. - -The governing publication for the class rate system is the National Motor Freight Classification. -In the simplest terms, low-value freight that is easy to handle, unlikely to damage will receive lower class ratings -Expensive, fragile, and light weight freight that is susceptible to damage, will receive a higher rating. -In addition to the class rating assigned to a product, carrier pricing is driven by shipment weight as well. The rule is higher the weight, the lower the cost per pound.
Exception Rates
-These are a deviation from the class rate; changes (exceptions) are made to the national classification. -Exception rates are published when characteristics of an item in a specified geographic area differ from those of the same products in other areas. -Used for particular transport conditions -Examples: high volume or intense competition in an area may require lower price.
Global Planning Procedure
1. Prepare order -Manufacture -Fulfill order -Pack goods 2. Prepare for exports -Trade terms -Insurance -Payment terms -Documents --Long before global freight is loaded and transported to its destination, key decisions must be made and requirements completed. --This step includes 'transaction' and 'communication' channels 3. Transport decisions -Select mode, carrier, and route -With the key export activities addressed, the next phase of global planning focuses on the selection of modes, carriers, and routes by which goods will be delivered
Market Structure in Transportation Industry
1. Pure competition (many companies) -Many sellers with same product/service, no one influences price, unrestricted entry; Producer can sell all at one market price, but none above that 2. Oligopolistic (small number of large companies) -few large sellers, substitutable products, competitors compete on price and service, e.g. LTL 3. Monopolistic (large number of small companies) -many small sellers, some product differentiation; compete on service; no one controls a significant portion of market, e.g. TL 4. Pure monopoly (one company) -One seller, no close product substitutes or competitors; too little output and excessively high profits.
Competition in Markets
1. Relevant Market Area -Relevant market is the market where the competition takes place. -The elements to be taken into consideration when defining the relevant geographic market include the nature and characteristics of the concerned products, the existence of entry barriers, consumer preferences, etc. -Market structure for the entire industry (mode) cannot be classified without viewing structures in particular market areas. E.g: railroads carry thousands of goods between hundreds of locations - there cannot be one generic structure to its pricing. The market structure in transportation must describe the situation at any one point, with a given commodity. To determine pricing in transportation, it should be: -Mode-specific -Route-specific -Commodity-specific -Shipment size-specific 2. Contestable Markets -Theory of contestable markets refers to a market in which there are only a few companies that, because of the threat of new entrants, behave in a competitive manner. -A perfectly contestable market is not possible in real life. Conditions for Contestable Market -No barriers to entry -No sunk costs, no economies of scale -Consumers able and willing to switch -Carriers are not able to respond to new entrants' prices Some degree of contestable markets proved to be correct in the early days of deregulation. Today, existing carriers have been able to remove the threat of new entrants and have weakened this theory. Example of Contestable Market -Contestable markets are characterized by "hit and run" competition; if a firm in a contestable market raises its prices much beyond the average price level of the market, and thus begins to earn excess profits, potential rivals will enter the market, hoping to exploit the price level for easy profit. -When the original incumbent firm(s) respond by returning prices to levels consistent with normal profits, the new firms will exit! -Low-cost airlines remain a commonly referenced example of a contestable market; entrants have the possibility of leasing aircraft and should be able to respond to high profits by quickly entering and exiting!
Key Logistics Channels
1. Transaction channel activities: a) Terms of trade b) Terms of payment 2. Communication channel: -Maintains visibility and control on freight as it moves. 3. Distribution channel: -Manages disruptions, visibility problems by effectively choosing the mode, carrier and route!
rate and price of a transportation agency
A rate is an amount that can be found in a rate tariff book, as payment to a carrier for performing a given transportation service. -The rate is a lawful charge that a carrier can impose on a given commodity movement. A price implies a value that is determined based on prevailing market forces; it suggests a dynamic environment that is receptive to changes in customer demand and carrier supply.
United States and GHG Emissions
Although the United States accounts for approximately 5% of the world's population, it produces an estimated 21% of the world's GHG emissions Transportation sector contributes 29% of the overall US emissions
Terms of Payment
Cash in advance: favorable to the exporter. Letter of credit (LC): ensures exporters gets paid and the importer received the goods as expected. Sight draft: exporters retain the title until the shipment reaches destination and payment is made. Time draft: exporter extends credit to the importer. Open account: favorable to the importer; goods are available before payment.
Barriers to Good Reverse Logistics
Companies often lack good reverse logistics practices in them due to: •Relative lack of importance to returned products •Unclear company policies •Lack of systems to process the information •Management's inattention •Insufficient Financial resources •Insufficient Personnel resources •Legal issues
Challenges in Global Transport
Compared to domestic freight movements, global transportation experiences: -Longer and more variable transit times -Risk of in-transit product damage or loss -Higher delivery and accessorial service expenses -Greater in-transit inventory carrying costs -Trade level fluctuation -Shifts in regional sourcing -Carrier consolidation -Security risks All the above challenges have a direct impact on the capacity, flow and cost of global freight It is important to weigh these challenges against the obvious labor cost benefits or moving production off-shore
Shipping Emission Reduction Initiatives
Design Improvement - to increase ship fuel efficiency Operational - adjusting ship routes to avoid poor weather conditions and improving port operations to reduce idling times Technological - powering ships through non-toxic coatings and active removal systems to remove marine organisms from the ships' hull to smoothen it Shore-side powering or cold ironing Alternate sources - wind, solar, natural gas etc Zoning for low sulphur content (compulsory to use ULSD)
Transportation Planning and Execution
Global transportation involves more than the physical flow of goods. As in any supply-chain, the flow is supported by effective information exchange between the exporter and importer. Key Logistics Channels are set-up
Manufacturing in Foreign Trade Zone
Globally, FTZs exist; an area within which goods are landed, handled, manufactured, and re-exported without the intervention of customs authorities. It eliminates trade barriers These facilities are under CBP supervision
Reverse Logistics and the Environment
Environmental considerations have a greater impact on many logistics decisions. For example: -Many products can no longer be placed in landfills -Firms are forced to take back their products at the end of their useful lifetime -Decrease of landfill availability -Increase in Landfill costs Through effective reverse logistics operations, companies can produce and cut out inefficient returns processes that result in unnecessary transportation moves, helping to reduce carbon emissions and improve air quality
Modes of Transportation
Five modes of freight transportation: 1. Trucking - carry the largest share of goods by weight for distances less than 500 miles 2. Rail - dominates the market for distances between 500 miles and 2,000 miles. 3. Water - moves approximately 80% (by volume) of foreign trade. 4. Air - accounts for nearly 26% by value. 5. Pipeline - make for about 7% of the total by value
Trucking environmental impact
For smaller distances, nearly 70% of all freight (by weight) is transported in the U.S. by trucks. Trucking poses threat to the environment, causing both air pollution and noise Environmental damage occurs when incomplete combustion of gasoline or diesel releases potentially deadly gases, the greenhouse gases.
Forward vs. Reverse Logistics
Forward •Forecasting relatively straightforward •One to many distribution points •Product quality uniform •Destination/ routing is clear •Pricing relatively uniform •Importance of speed recognized •Inventory management consistent •Marketing methods well known Reverse •Forecasting more difficult •Many to one distribution points •Product quality not uniform •Destination/ routing is not clear •Pricing dependent on many factors •Speed is often not a priority •Inventory management not consistent •Marketing complicated by several factors
shipping environmental impact
Globally, international shipping is responsible for about 15% of the transport-related CO2 emissions. U.S. remains the world's largest trading nation - 1 in every 11 containers that carry global trade is bound for or originates in the US There are five primary sources of pollution caused by shipping: 1. Routine discharges of oily bilge and ballast water from marine shipping 2. Dumping of non-biodegradable solid waste into the ocean 3. Accidental oil spills, or other cargo 4. Air emissions from the vessels' power supplies 5. Port and inland channel construction/ maintenance
Key Elements in Reverse Logistics
Goal: Design the merchandise and systems in a manner that will minimize returns Preventive Measures: -Increase Quality and quality measures -Agreements with retailers / distributors -Customer Service - providing toll-free numbers that customers can call before returning products Take advantage of using reworked parts - Five categories to remanufacture and refurbish: Make the product reusable for its intended purpose 1) Repair 2) Refurbishing 3) Remanufacturing Retrieving reusable parts from old or broken products 4) Cannibalization Reusing parts of products for different purpose 5) Recycling Have a strategy for what to do with the returned products -Important to know beforehand what to do with returned goods -When material often comes back in to a distribution center, it is not clear whether the items are: defective, can be reused, or refurbished, or need to be sent to a landfill. Develop a good information system -Create a database at store level so that the retailer can begin tracking returned product and follow it all the way back through the supply chain -Information system should also include detailed information, such as returns rates, recovery rates, and returns inventory turnover -Useful tools such as radio frequency (RFID) are helpful
Value of Service - 3rd degree Price Discrimination
High-valued products are assessed higher prices for their movement Value of service is also defined as a situation in which a seller sets two or more different prices for two or more separate groups of buyers of essentially the same commodity or service. Three necessary conditions: -Must be able to separate buyers into groups. -Seller must be able to prevent the transfer of sales between the submarkets (buy in low price and sell in higher). -Seller must posses some degree of monopoly (i.e. ability to set prices) Another name given to value-of-pricing is differential pricing Segments buyers: -By place -By commodity -By time -By individual person/ company (Legal limitations) Charging a common price would discourage shippers that ship low value items The key to success lies in being able to determine the appropriate costs and to estimate demand elasticity in the various markets.
Cargo Insurance
Importers and exporters are exposed to countless perils and financial risks when their freight moves through the global supply chain. Trying to recover financial losses from international carriers for freight damage or loss is difficult and time consuming. -COGSA (Carriage Of Goods by Sea Act) - defines carrier's liability, up to $500/ shipping unit -Warsaw convention of 1929 (for air carriers)
Why Products are Returned
Top Six reasons for returned merchandize: 1. The customer ordered incorrect product or size 2. The customer decided the product was not needed 3. The customer cannot afford 4. The product did not match the description on the Website or in the catalog 5. The product did not fit the customer's expectations 6. The company shipped the incorrect product or size Liberal return policies have also contributed to increase in returns other reasons: Clean Channel -Clean out customer inventories, so that they can purchase more new goods. -Fresher inventories can demand better prices, which in turn, protects margin. Recapture Value and Recover Assets -Large portion of bottom-line profits is derived from asset recovery programs. -Profit derived from materials that were previously discarded.
Global trade agreements
Trade is stimulated by free trade agreements. These help open up foreign markets to U.S. exporters and reduce barriers to U.S. exports, by lifting most quota, and fee/tax limitations on trade between countries. Two types: bi-lateral and regional −Bi-lateral agreements are between two nations −Regional trade agreements (between countries in a specific region) ; ex. USMCA (before NAFTA), EU
GHG and Transportation
Transport-sector accounts for nearly a quarter (24%) of all greenhouse gas (GHG) emissions in the world. Road/ motor transportation generate 70 percent of all transport-related emissions, while air, rail and water account for the remaining 30 percent. -Maritime shipping represent half (15%) of the emissions by other modes.
Synthesis of green initiatives
Transportation is an integral part of life, yet the vast amount of GHG emitted by it, makes it critical in any meaningful GHG mitigation strategy. Combining different types of policies and initiatives can significantly reduce transportation's GHG emissions. If implemented effectively, The Center for Climate and Energy Solutions estimates that emissions can be cut by 45 to 50 percent by yr. 2030 Several design, operational and technological methods are devised and implemented to lower GHG emissions. Effective initiatives include using alternate fuels, raising efficiency standards, adopting technology, training drivers, taxation policies, and vehicle design improvements. On the passenger-side, taking more direct routes, increasing vehicle occupancy rates, modal shift, better maintenance and driver training, can help reduce the emissions
Strategies for Sustainable Transportation
Two common types of sustainability practices: -Technological (load optimization, hybrid engines, material and coatings) -Vehicular (route optimization, driver training, fuel types, new engines and designs, reconfigured product packaging)
Bill of Lading
a detailed list of a shipment of goods; it is a legal document between the shipper of goods and the carrier detailing the type, quantity and destination of the goods being carried
Air environmental impact
While air cargo accounts for a very small portion (less than 10%) of world-wide freight,it is growing rapidly. There are three major types of aircraft vessels: commercial, recreational, and military. While all contribute to GHG emissions, commercial aviation account for the majority of emissions Air transportation threaten the environment in different ways - emissions during take-off and landing, emissions during flight and their contribution to the noise, congestion, and other land-use issues around airports. Aviation is particularly alarming because planes burn vast amounts of kerosene fuel at high altitudes disturbing the upper atmospheric layers
3PL
a company's use of third party businesses to outsource elements of the company's distribution and fulfillment services logistics service providers; management of complex supply chains advantages: -cost savings -convenience -understands regulations -handles customs issues (ex lost shipments and fees) -more capacity than individual shipper -less up-front cost for the shipper disadvantages: -Loss of control over shipping functions -Loss of relevant market knowledge -In some cases, in the long-term the 3PL option may be more expensive
Zero Returns
a program where the company in question does not accept returns from its customers. Rather, it gives the retailer an allowable return rate, and proposes guidelines as to the proper disposition of the items. Such policies are usually accompanied by discounts for the retailer It passes the returns responsibility onto the retailer, while reducing costs for the manufacturer or distributor Drawback: the manufacturer losses control over its merchandise
reverse logistics
all activities associated with a product/service after the point of sale definition: Process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal Goal - to recapture value and properly dispose the product Other terms synonymous to ReverseLogistics (RL) are: -Aftermarket Logistics -Retro-logistics -Aftermarket Supply Chain -Reverse Supply Chain
Route Planning
step 3 of global planning procedure: transport decisions Carriers are primarily responsible for routing, however, shippers have an input to ensure proper consideration to: -Customer satisfaction and supply chain performance -Efficiency and product safety during transit Routing decisions should be -Coordinated with mode and carrier selection -Aligned with global sourcing, inventory, demand fulfillment strategies Importance of Route Planning -To ensure that the most cost-effective route between points of departure and destination is available. -It is frequently not possible to use the most desirable route (due to political, environmental and security considerations); this adds to the additional fuel and maintenance costs incurred by operators Route planning must take into account the following important factors: -Demand -Distance -Feasibility: Government regulations and permissions -Weather -Safety
Challenges in Reverse Logistics
•Condition and value of the item is not known •Timeliness of the response often lengthen the time for processing returns, which generates the conflict •Lack of information and visibility about the process
