Understanding the similarities and differences between reverse logistics and green logistics helps identify optimal solutions to achieve a balanced approach developing strategies to maximizing benefits throughout an organization.
Historically, academia began noticing reverse product and material flows as they surfaced in the 1970’s (Peterson, 2005, p. 8). It was realized that the reverse flow of product was much more complex than forward flows. “Because of the environmental focus of this era, the topic of reverse channel management was often labeled green logistics or environmental logistics” (Peterson, 2005, p.8).
Today, green logistics is defined as “supply chain management practices and strategies that reduce the environmental and energy footprint of freight distribution” (Rodrigue, et al, u.d., para 2). Reverse Logistics is defined as “the 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” (Rogers and Tibben-Lembke, 1998, p.2). Reverse logistics is green by design as it manages returns to resell, refurbish, recondition, remanufacture, cannibalize for parts, or recycle products to minimize landfill waste.
In the aftermath of UPS launching a new ad campaign with the tag line “carbon footprint reduced, bottom line gets a boost, that’s logistics”(Meyer, 2011, para 1) there has been confusion by some that reverse logistics and green logistics is one discipline and interchangeable in an organization (Meyer, 2011, para 5-6).
“The process of collecting used products and materials from customers to be reused, recycled, or up-cycled into other products. This process treats these materials as valuable industrial nutrients instead of disposed of as trash. This is the complement to the traditional supply chain, [logistics] and distribution system used to produce and deliver products to customers” (Meyer, 2011, para. 6).
The reverse flow of product in the supply chain is a complex operation that evolves and changes throughout the product life cycle. These changes will impact the decision making on how a return should be handled and how much expense should be invested. To further complicate the reverse flow, there are a multitude of categories surrounding returns that make it difficult to determine how to achieve maximum value recovery requiring flexibility to maximize returns while reducing environmental impacts. “Reverse logistics is a fairly reactive approach responding to internal and external customers” (Steele and Rodriguez, 2008, para.2).
Manufacturing is often plagued with shorter product life cycles that are marketed through retail stores and web with growing market segment of consumers purchasing products from mobile devices creating a need to manage returns quickly and efficiently not only to capture value and benefit the environment, but to meet customer expectations by providing efficient, socially responsible post-sale service to maintain customer loyalty. “Consumers are increasingly demanding scorecards for climate change impacts, energy consumption and emissions, the pressure is on to responsibly manage returned assets” (Ryder Exchange, 2013, para. 4). Post sales service has been recognized by many companies as the differentiator to win customer loyalty and gain repeat business.
Differences and Similarities in Reverse Logistics and Green Logistics
The most significant difference is that reverse logistics concentrates on saving money and increasing value by reusing or reselling materials to recover lost profits and reduce operational costs. Green logistics concentrates on transportation issues, recycling and re-use. “Green logistics is about using material friendly options for transportation and centered on saving money but places priority on the company’s image” (Nylund, 2012, p. 49). DeBrito (2003) clarifies that green logistics focuses on the forward flow of the supply chain while reverse logistics is viewed as sustainable development. “The prominent environmental issues in [green] logistics are consumption of non-renewable natural resources, and both hazardous and non-hazardous waste disposal” (DeBrito, 2003, p. 22). Green logistics is often known as ecological logistics defined as “understanding and minimizing the ecological impacts of logistics” (Rogers and Tibben-Lembke, 1998, p.102-3). These activities are designed to measure environmental impacts on transport reducing energy consumption, and reducing the use of materials.
Recycling, remanufacturing and reusable packaging is the area where reverse logistics and green logistics intersect (Peterson, 2005, p. 9). While reverse logistics will examine how waste is disposed reducing landfill waste, the focus in reverse logistics is the cost and availability of landfill space, rather than conducting specific studies on the organizations environmental impacts. The drivers for reducing waste in reverse logistics are associated with increased regulation, increased landfill costs, or economic benefits of using fewer raw materials (Rogers and Tibben-Lembke, 1998, p101 – 112). Figure 1 is a clear illustration of functions and how they relate to reverse and green logistics strategies.
Figure 2 identifies the areas of reverse logistics and green logistics that positively impact the total carbon footprint. The white blocks identify the mindset of functions from a reverse logistics point of view while the green blocks reflect a green logistics perspective. Although the some of these functions seem identical, positively with an outcome impacting the environment, the mindset can be very different. This difference in how a decision is made to facilitate reduction of the total carbon footprint is a factor in balancing organizational reverse or green logistics solutions. Recognize that green logistics is a narrow concentration where certain criteria that is not necessarily reverse logistics. Redesigning packaging to use less material falls under green logistics rather than reverse logistics unless that packaging is designed to be re-usable. (Rogers and Tibben-Lembke, 1998, p. 103). This packaging example could be considered green reverse logistics.
Although reverse logistics concerns itself with product design, the focus is not necessarily on the reduction of material waste, but a design for service. There should be consideration to achieve a balance. Every activity in both the forward and reverse product cycle impact reverse logistics strategies and costs in some way. “Every reverse logistics professional has been frustrated when told to reduce costs but also to expedite handling, repair, and shipping” (Steele and Rodriguez, 2008, para 14).
A reverse logistics process can take many different forms and has many different possible opportunities to manage the product and re-introduce it to the supply chain. In reverse logistics consideration is given to the collection and transport of returns. One the return is received, there are many areas where the product may move such as testing, refurbishment re-use of parts, od recycling back to raw material. A greening process is simplistic in that it begins at the source with supplier conditions and can work its way through manufacturing, packaging, and distribution channels (Nylund, 2012, p.51-52).
Maximizing Reverse and Green Logistics Strategies
The Aberdeen Group conducted a study (2010) evidencing that reverse logistics focused on improved the bottom line. In this study the turnaround time for return parts and repair operations when from an average of 17 days to just over 4 days slashing repair costs by 10% while increasing average customer satisfaction from 81% to 93% (Dutton, 2010, para 1-3). The commonality between companies who achieved the most significant improvement were those who developed standardized returns and repair processes, had the ability to recover costs from suppliers, maintained real time data reporting, had transparency throughout the supply chain (Dutton, 2010, para 3 – 16).
Recycling and reuse is the most significant area where reverse and green logistics coincide and happens to be the most challenging for many companies. Some companies may choose to hold onto old product lines with the hope there will be a customer seeking obsolete parts and products while others have policies that products not sold within a specific time frame should be sent to a secondary market, or slated for disposal (Steele and Rodriguez, 2008, para. 12-14). A case study with Estee Lauder reveals a balanced approach to green and reverse logistics by implementing and blending strategies in both reverse and forward flows of product. The company was plagued with returned and excess product that was finding its way to landfills. Although the company wanted to reduce landfill waste, they also wanted to reduce the expenses associated with landfill space and sought ways to capitalize with their customer base through green initiatives. The company invested $1.3 million to inventory management technologies that collected and gathered information. The company was able to save $500,000 in labor costs associated based on manufacturing strategies designed to limit excess product as well as maintaining open communication channels with customers for valuable feedback. The information obtained in managing returns, was used to identify an opportunity to develop a new product line $250 million from returned cosmetics (O’Connell, 2007, p. 30-34).
For a company to be successful in green initiatives it should both positively impact the environmental footprint and achieve cost savings. Phillips produces a wide range of electronic consumer goods. Many of their product lines such as electric toothbrushes, shavers, and baby bottles must be disposed of with strict environmental guidelines for managing those returns. Phillips partnered with Ryder hat helped achieve an 80% ratio of refurbishment and re-use of returns (Partridge, 2011, para. 41). Ryder assesses the product return to determine if the product is resalable or malfunctioning and decide on whether it is cost efficient to repair them for resale or dispose of them. If the product can not be resold, they disassemble and sort parts reusing what they can, and working with recyclers for responsible disposal in an environmentally friendly way. Ryder’s focus is to provide the greatest value to Phillips from returned assets while maintaining green logistics initiatives. Some of the variables used in balancing reverse logistics and green logistics strategies has been making decisions on returns based on the value of the product. “A product that sells for less than $100 at retail, is not worth refurbishing”(Patridge, 2011, para 44). The visibility by implementing inventory controls throughout the forward and reverse product life cycles has contributed to Phillips ability to make better decisions on how to maximize returns and reduce environmental impacts. Transportation was considered with a goal of reducing the number of trips to manage both forward and reverse logistics costs and reduce their card footprint. By partnering with Ryder, there was one facility to manage returns of all product lines eliminating multiple shipments. Packaging on all product lines is manufactured from recycled cardboard and paper (Partridge, 2011, para. 38-50).
Balancing Reverse Logistics and Green Logistics
With an increasing consumer awareness of greenhouse gasses contributing to climate change, global consumers are demanding socially responsible and sustainable business models that will slow the effects of climate change. Consumers also want superior service and post –sale support. These two areas are often conflicting as the demand of one area may impact the demand of another. Nylund’s case study (2012) comparing the marine manufacturer, Wartsila, and the furniture manufacturer, IKEA, in their green and reverse logistics initiatives. The most significant factor driving Wartsila was time. The company provides the customer an option of deliveries based on turnaround time that drives their distribution. When time is available, the company will consolidate shipments and select green transport when possible. When consumers need replacement parts quickly; couriers are used to deliver merchandise from a central location as soon as possible. Although Wartsila makes an effort to use green initiatives, the component in decision making is always turn around time delivering the product as quickly and cheaply as possible. IKEA, has the luxury of time, therefore, they are selective utilizing haulers that are committed to green transport, will often delay shipments to have full load capacity, and have designed more compact shipping pallets and containers to increase load efficiency (Nylund, 2012, pg 59-66).
Warsila reported in this study that they kept returns for parts up to thirty years with no consideration on warehousing costs. The primary focus on customer service relies entirely on the customer writing a note on their form identifying the reason for return. There is no reverse logistics process to recapture value. If the customer reports the wrong part was sent, the product immediately returns to the shelf without assessing the product. Warsila identified themselves as struggling with reverse logistics management (Nylund, 2012, p66). Ikea has a returns management program to assess damage and decide whether to place the product back on the shelf for resale, in the corner for marked-down clearance, or scrap. IKEA’s model is designed to move products quickly having them out of the warehouse in under 6 weeks (Nylund, 2012 p.66-70).
Both Warsila and IKEA are committed to improving their green logistics, but both have different constraints, organizational goals, and customer expectations that drive the way they balance green logistics strategies. Warsila did not have a formal reverse logistics program, but indicated they were struggling to improve this area of business. IKEA has a formal reverse logistics program that examines organizational and environmental impacts choosing where it is both optimal and cost efficient to concentrate green initiatives (Nylund, 2012, p70-75).
An organization should have a clear understanding of their product lines from end to end throughout the forward and reverse product cycles. Understanding the differences between reverse logistics management and green logistics management will help an organization visualize how a decision in one area will impact the entire organization, as well as consumers. Organizations developing sustainable business models can develop a scorecard that will quantify variables that impact the environment and achieve cost savings. To avoid bad financial decisions, the impact on operations in both reverse and green logistics strategies must be considered from all aspects of the operation. “Turning green to gold will happen only in organizations who have the management sophistication and experience to develop the new vision, and who can find a way to gather the facts and details needed to launch effective initiatives” (Steele and Rodriguez, 2008, para 21)
DeBrito, M. P. (2003). Introduction. In Managing reverse logistics or reversing logistics management (pp. 17-37). Rotterdam: Erasmus University.
Dutton, G. (2010, July 4). Reverse Logistics: Money Tree or Money Pit? Retrieved May 17, 2013, from http://www.worldtradewt100.com/articles/reverse-logistics-money-tree-or-money-pit
Meyer, D. (2011, October 7). In supply chain logistics management, there’s a reverse gear – and it’s green: Part 1 [Web log post]. Retrieved May 17, 2013, from http://valuestream2009.wordpress.com/2010/10/07/in-supply-chain-logistics-management-there%E2%80%99s-a-reverse-gear-and-its-green-part-1/
Nylund, S. (2012). Reverse logistics and green logistics (Unpublished master’s thesis, 2012). Vaasan Ammattikorkeakoulu Vasa Yrkeshogskola University of Applied Sciences. Retrieved May 16, 2013, from https://publications.theseus.fi/bitstream/handle/10024/46993/Reverse%20Logistics%20and%20green%20logistics.pdf?sequence=1
O’Connell, A. (2007, November). Improve your return on returns [Editorial]. Harvard Business Review, 30-34. Retrieved May 19, 2013.
Peterson, A. J. (2005). An examination of reverse logistics factors impacting the 463-L pallet program. Manuscript submitted for publication, Air Force Institute of Technology, Wright-Patterson Air Force Base. Retrieved May 17, 2013, from http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA437509
Rodrigue, J., Slack, B., & Contois, C. (n.d.). Green Logistics. Green Logistics. Retrieved May 14, 2013, from http://people.hofstra.edu/geotrans/eng/ch8en/appl8en/ch8a4en.html
Rogers, D. S., & Tibben-Lembke, R. S. (1998). Going backwards: Reverse logistics trends and practices. Reno, NV: Reverse Logistics Executive Council.
Steele, K., & Rodriguez, E. (2008, July/August). Reverse Logistics – Turning Green to Gold. Reverse Logistics Magazine. Retrieved May 16, 2013, from http://www.rlmagazine.com/edition12p28.php
Jennifer Bilodeau, a Reverse Logistics specialist, formerly supported the Department of the Defense in day to day management of both inbound (return) and outbound distribution of goods throughout the command. She was recognized for exemplary performance throughout the base relocation effort working with internal/external stakeholders managing multiple projects assessing tangible goods for movement to new facilities, acquiring replacement items, as well as recapturing value from left behind products. In this role she oversaw reverse logistics operations including repair and warrantees, secondary markets, deconstruction and re-utilization of parts, as well as final disposition instructions.