The Most Important Model Of Modern Enterprise

Published Date: 02 Nov 2017

INTRODUCTION

The most important model of modern enterprise management is; businesses can not exist as only and autonomous beings and should take place within a supply chain direction. Business management is in the age of Network Competition. Instead of brand and store competitions, now the supply chain competition is experienced.

Quinn (1997) described the supply chain as related activities of material and raw material to the end user at all stages which are; research and procurement, production scheduling, order processing, inventory management, transportation, warehousing and customer service. Information system and management should be addressed in the supply chain for the monitoring of these activities

Supply Chain Council described supply chain as a concept covering all types of operations including the production and distribution of the final product, from the stage to the supplier's supplier and customer’s customer. (http://www.supply-chain.org: 30.09.2012)

Requirement to identify key supply chain processes and manage them should be known for successful supply chain management instead of function-based administrations in enterprises. According to the Global Supply Chain Forum, key supply chain processes are identified. These processes can be ordered as following (Cooper et al., 1997);

• Customer Relationship Management,

• Customer Service Management,

• Demand Management,

• Order Management,

• Production Flow Management,

• Supply,

• Product Development and Commercialization,

• Returns

The process of "Returns" is defined as "Reverse Logistic " in literature. In this study, the importance of reverse logistics,  system structure,  functioning,  advanced logistics and differences also reverse logistics in terms of business and customers will be discussed.

Importance of Reverse Logistics

"Reverse Logistics" is defined in different ways in the literature. The first definitions of reverse logistics were made by Lambert and Stock (1981, Rogers and medically-Lembke, 2001). Reverse logistics is defined as "Going in the wrong direction in one-way" because of the importance of product transmission in one direction (forward logistics). During the 1980s the concept of reverse logistics, as opposed to the primary stream, has been limited by the movement of the right product from customer to the manufacturer.

In 1998, Stock has defined reverse logistics as: "product returns, source reduction,  recovery, material substitution, re-use of materials, destruction and incineration of waste, repair and maintenance of the role of logistics in production again". (i-bid). According to Fleischmann (1997), reverse logistics is a process that covers all logistics activities from used product no longer need, until the product in the market that can be used again.

According to this definition, reverse logistics provides the physical transport of used product towards the end user to the manufacturer. The next step is to transform recycled product into a reusable product by the manufacturer.

Dowlatshahi (2000) has named the reverse logistics as products or parts have been sent from consumption point to accept process systematically, possible recovery for remanufacturing or disposal of manufacturer.

Giuntinu and Andel (1995), examined reverse logistics management within 6 parts. Accordingly, the reverse logistics, can be expressed by the following basic steps:

Acceptance: Taking the recovered product from internal or external customer. At this stage, the company's order-entry or accounting systems are utilized. (Recoverable items are considered current assets, items in stock or fixed assets inthe customer ).

Reuptake: The physical handling of the product phase of the customer.

Revision: The company will decide what to do with the product that have been withdrawn from the stage (the company examines the physical product  and remanufactured products in stock revise).

Renewal: Repair of the returning product or illustrate (the company may select producing the product again, repair the product or re-use).

Transportation: The product is moved from the supply chain organization.

Re-engineering: The phase that management controls reverse supply chain to be better of the return process.

Table 1 collectively shows the elements of reverse logistics description.

Importance of Reverse Logistics

Re-use of products and materials is not a new situation. A metal scrap collection, recycling waste paper, glass bottles deposit are made applications for a long time. Withdrawal of products that are used in these examples are economically more advantageous compared to the destruction. In recent years, environmental concerns increased the demand for re-use.

Responsibility for the collection of many products in Europe- such as automobile, electronics- are given to producers. National collection and recovery systems are installed in many countries with legal pressures. For example,  National system process is successfully implemented to 90% of damaged cars in traffic accidents in the Netherlands’ automotive sector. (Hillegersberg et al., 2001).

The most obvious example of reuptake is experienced in the automotive industry. 20% of the glass, 30% of the paper products, and 61% of aluminum cans were recycling in the United States. 95% of 10 million cars and trucks enters into recycling every year and 75% of these instruments are recycled for reuse (Gungor and Gupta, 1998).

Due to changing conditions, businesses develop strategies for reverse logistics and make long-term plans according to that conditions. For example, BMW's strategic goal in the 21st century is to design fully recoverable cars (Dowlatshahi, 2000). Reverse logistics are used in many industries, including steel, electronics, computers, chemicals, pharmaceuticals, medical devices, outside the automotive industry, BMW, Delphi, DuPont, General Motors, HP can be included among large firms which are implementing reverse logistics.

  Logistics costs constitutes about 9,9% of the U.S. economy (Rogers and medically-Lembke, 2001). However, determining the exact amount of reverse logistics activities is quite difficult due to lack of follow of reverse logistics companies.

As a result of the information received from companies,- Rogers and Tibben-Lembke's (2001) study- reverse logistics costs are estimated about 4% of the total logistics costs. In this case, it can be said that reverse logistics costs are up to half of the U.S. GDP. Overall level of spending as vary according to the sector, company's position in the chain and selected channel, reverse logistics activities play an important role in the economy and can be said to increase its importance.

Reverse Logistics Principles, Systems and Operations

Products, components, equipment and materials may be subject to reverse logistics in the supply chain with the reasons stated below (Brito, 2002):

Production Returns: There might be reasons of returns such as inadequate quality and remaining products as a result of production.

Product Recall: Sometimes faulty products can be noticed after entering the product into supply chain might recalled.

Commercial Returns: Submissions based on some of the commercial agreements or returns, when supply does not match demand in terms of product quality and timing.

Warranty & Service Returns: Products covered by the warranty can return in order to be repaired or replaced with their equivalent.

End of Use & End of Life Returns: Turnswhich are about reproduction for use of the product or at end of life in accordance with the purpose of recycling or disposal.

Reasons that push companies and other organizations back to achieve success can be economic reasons, legal obligations, or environmental concerns and social responsibility (Brito and Dekker, 2002):

Direct and indirect Economic Reasons: Remanufacturing or recycling the product back to obtain a new product are more profitable due to both raw material, appreciation and for the requirement of less energy consumption. In addition, the indirect economic reasons can be mentioned. Managament can take place in reverse logistics due to strategies, market and competitive conditions. Firms in this direction can create strategies to prepare future legislation. In terms of competition, this decision can be taken in order to prevent other firms from entering the market in the long run, or to take the technology. Firms may implement reverse logistics activities to create the image of environmentally friendly in the eyes of the customer and to be in closer and better relations with customers.

Laws: Firms, may be involved in reverse logistics due to the need of the legal compliance.

Responsibility: Reverse logistics applications can be made​​ due to the principles and values​​, environmental concerns.

Reverse logistics appears to be a combination of these factors mostly for companies. In product re-uptake process, options of receiving product back is very important thing to be known for a company. However, the needed information should be reached in order to correct this analysis. With the participation of all possible agents in the supply chain, information collected in four classes must obtain as follows (Thierry et al., 1995):

Information about the composition of the product: This is about material types, values, and potential hazards. The technical feasibility of getting back product in different options must be known.

Information about the return to the severity of the flow of and uncertainty: Manufacturers must determine the uncertainty of each type and severity of the return flow. Each return flow, will be at a different characteristic.

Information about the market for re-processed products, components and materials: Manufacturer should also review potential markets in each product buy-back option. Products and materials may be used by the company itself, another company inside the chain (eg suppliers) or a company outside the chain.

Information about take back of actual product and waste management operations: In all recovery and waste management options, questions in the form of what amount of product processed; what are the costs and benefits; what is the overall environmental impact of the process, need to be answered.

Reverse logistics, contains the flow of used products from manufacturer to the end user. When the product returned to the manufacturer in supply chain, it can be talked about a few alternative ways to be followed to distribute it again (Rengel and Seydl, 2002):

Sales with Outlet: It is implemented by the more brand-sensitive companies. The manufacturer takes back products, and after procedures, sell these products in their outlet stores.

Secondary markets selling: Companies that buy the products at a low price, operate this market. Firms sell the products through their own shops in this market, or other retailers.

Reproduction or renovation: Manufacturer identifies the problem, repair it. Although the level of quality is sometimes lower, the basic features of the product is maintained.

Donor agencies: In some cases, give the product to specific organizations would be an alternative. This option also provides tax advantages at the same time.

Recycling: Ecological motivation has an effect behind recycling. Manufacturers are forced to adopt environmentally friendly programs by some of the laws and groups. Reuse or recycling are applied to reduce the amount of material used in the product.

Internet auction sale of returned product: This application is expected to increase gradually.

Burying: The destruction must be the last option. Even if, the product is eradicated, this destroy should be applied with a minimum cost or energy recovery (incineration).

A good reverse logistics application reduces the risk of the customer and will also enhance the competitiveness of the company. Because, the customer knows to give the product back when needed, and this increases the confidence in the company. Reverse logistics, also increases the flexibility of the firm. Many companies have unsalable product stocks. If these components and materials become easily fissile, the company will also increase the chance of being successful in the market.

Reverse Logistics Activities

All of the product recovery options contains collecting products, reprocessing and redistribution stages. The main difference shows itself in re-processing stage. The product recovery process is as follows:

Repair: The purpose of repairing is to make re-run or re-use the product which was already a returned or used product. Usually, quality of the product that has been repaired is slightly lower than the quality of the new product.

Repair process of item includes the repair and replacement of broken or damaged parts. Repairs are usually require quite limited level assembly and disassembly.

Product Innovation: The purpose of the product renovation aims to bring the used product to the specified level of quality. Quality standards are not strict as well as the new product. Used product after with disassembly is seperated into modules, critical modules are checked and replaced if necessary. Appropriate modules are mounted to renovated product.

Sometimes old modules in the process of product innovation change with modules and components which are technically better and product development (upgrades) are performed. Military and commercial aircrafts can be shown as example products in the process of innovation. Product innovation improves the quality of the product and extends the life of the product.

Re-production: The purpose of re-production is to make used product suitable as the quality standards applied to new product. Used product is completely disassembled. All modules and components are passed over control. Worn out, obsolete or technologically outdated components and modules are replaced with a new one. Repairable parts and modules are fixed and passed from the test. Appropriate parts, sub-assemblies and modules are mounted. Product development can be achieved during reproduction.

Product Cannibalism: The majority of used product is re-used in the three types of buy-back option mentioned above. In cannibalism, only a small portion of the product is used again. The aim is to return usable limited series of a part for used products or components. These parts are used again in repair, renewal or reproducibility of other products or components.

Recycling: The purpose of the buy-back optionals mentioned above is, protection of functions and characteristics of used products and components as possible. Features and functions of the product and components are lost in the recycling. The aim of recycling is utilized used products’ and components’ materials again. Recycling is applied to a large number of used product. For example, in many countries such as the United States, the United Kingdom and Germany, almost 75% of discarded cars’ all the metal parts are recycled.

Comparison of Advanced Logıstıcs with Reverse Logistics

One of the issues in Advanced and Reverse logistics is about to integrate these two distribution or not. As a note, both distributions contain some differences and in contrast distribution, you do not have to have a reflection of advanced symmetric distribution. Figure 2, represents the simplest possible form of both distributions with streams. In order to establish an efficient distribution network, some certain features need to be evaluated that defined below (Fleischmann et al., 1997):

Who are the people conversely involved in the distribution channel? Personnel as well as some members may involved in advanced logistics or new members may perform specific tasks in reverse logistics.

Which functions in conversely distribution channel will be fulfilled in where? The possible product functions test, parsing, product shipping and processing have to be determined in network design stage.

What is the relationship between advanced and reverse distribution channel? Even though the same personnel are used, there will be complexities at routing level in their integration. Because different functions will be performed in two distribution.

Table 2 shows some characteristics of reverse logistics and forward logistics also the comparison made in terms of priority.

Table 2: Comparison of Advanced and Reverse Logistics (Tibben-Lembke and Rogers, 2002)

Reverse logistics due to the uncertainties contained is a more difficult type flow for estimates, plans and controls. There are uncertainties about the amount and timing of the returning product, moreover, a different rate of return is allowed for each product produced by the firm.

Advanced logistics flow from an origin to the many distribution point, reverse logistics applies vice versa. Returns can take place via retailers however, forward and reverse logistics sometimes have same distribution points, it does not mean that they are integrated.

In Advanced logistics, the quality of the product and packaging are same and certain, this also makes it easier to move. However, products can not be packaged fully in turns back. At the same time, returned products were not in large quantities up to the new products, packaging for easy transportation for them (pallets, containers) are not available. The lack of packaging or the lack of a proper sample make identification difficult for the manufacturer of the product and staff in process.

The quality of returning product is not a standard, so, suppliers may apply different prices depending on many factors and the amount of product purchased by customers.

Costs are identified and fixed in Advanced logistics. Accounting systems are defined to monitor the costs will be along forward flow channel. However, different costs of the reverse logistics will arise in different ways in advanced logistics. Table 3 makes a comparison of the forward and reverse logistics costs. One of the most significant costs in reverse logistics is shipping cost, regarding the activity. Less amount of shipping and lack of proper packaging leads to an increase in transportation costs. The cost of inventory is variable, inventory costs are expected to be lower because of lower cost amounts.  However, the lack of proper packaging, deterioration and seasonal fluctuations can reduce the value of the product in second-hand markets.

Many of the assumptions that apply traditional methods of inventory control, can not be applied in reverse logistics. Variables such as product inputs, selling price, demand increase the uncertainty of the environment in reverse logistics channel.

It is easy to make agreements with parties in the supply chain which are suppliers and sellers, in advanced logistics. But, the product is not a sample in reverse logistics, agreements will be more complex for reasons such as quantity and price uncertainty, demand variability.

Monitoring the flow in reverse logistics is more difficult than forward logistics. Because the firms' IT systems are not designed to follow-up returns. This is making difficult to follow product arrivals even, makes it very difficult for plans in short-term operations. The appropriate use of information systems in central collection systems will enable planners to make longer-term and effective plans.

Knowledge of these differences on the forward and reverse logistics provide convenience to companies and researchers about imagining proper reverse logistics operations.

Administrative Practices for Reverse Logistics

System created by firms for reuptake product, common suggestions are listed below for system’s success (Thierry et al., 1995):

Difficulties have been encountered often in achieving the correct and necessary information. However, firms can be obtained the required information by collaboration with implementing units providing repair centers and waste management for suppliers. Required basic information are: product characteristics, used product supply, re-processed product demand, demand and supply for pairing information. The creation of a new information system is often required to obtain this information.

There are different product recovery functions. Option selection will depend on the technical feasibility of the process, accessibility in accordance with the used product, the demand for the reprocessed product, law and the reach of the company's know-how.

Proactive companies put reuse objectives for operations and try to achieve it. For example, BMW aims to reuse 80% of plastics. Setting measurable objectives is required for an effective system to apply.

In many cases, product may need to be redesigned for recovery processes. Approaches such as; design for disassembly, recycling and reproduction, Principles such as: standardization of materials and components, coding of them, recycling of content, modular design, selection of durable and reusable materials are applied.

Product recovery processes, requires the cooperation manufacturers and other organizations in the chain. Coordination should be ensured with repair centers, re-processing units, waste management that implements the units and should be in close relationship with suppliers.

Cooperation can be done among the same firms in the market in the recycling process. Joint projects can be performed on Recycling Research. Firms which are able to implement product recovery processes to existing systems successfully, should perform: the right knowledge acquisition Products and processes, if necessary, re-design, cooperation with other companies, ability to accurately predict and control the supply of used product, create demand for reprocessed products, prove that re-processed products are as good as the new product.

Product re-uptake processes will have quite effect on production, logistics and other processes. In this area, necessary strategic regulation and changes are required to make. Companies may have to win some new features and capabilities.

The new IT system should be able to monitor and control the processes and activities. Transportation plans should be regulated in accordance with the forward and reverse logistics. Production control system should overcome on the uncertainties; the amount, timing and quality. Inventory control system needs to be adapted to the new situation. Employees are expected to have knowledge about the process.

RESEARCH INTERESTS AND PROBLEMS

2.1. Reverse Logistics, Research Interests and Problems

Enterprises are required to make re-arrangements to implement reverse logistics activities in existing systems, processes and decision-making stages. Regulations that require all of these areas are emerging themselves as problems to be solved in businesses.

Production environments in which reverse logistics is applied and returned products recovery are provided to manufacturer, production, inventory, distribution and marketing decisions should be taken as in the traditional production systems. Reverse logistics should be examined through topics associated with manufacturing, relationships with other partners in logistics. Network, outsourcing, adaptation of information technology to reverse logistics and potential contributions, reverse logistics and e-commerce relationship should be examined in reverse logistics within the scope of as well as many sub-headings. Here, most commonly encountered and processed problems in the literature of reverse logistics are mentioned.

2.2. Reverse Logistics Network Design

The main activity in reverse logistics is collection of recovered products and re-distribution of processed products. This standard is quite different from the forward distribution. Which products to be collected should be known, product packages is often problematic, required to cooperate with the sender and products typically are low. In this respect, determining the number of network layer, the number and location of warehouses and intermediate points, how many dots to use the process of collecting, logistics of the merging back and forth stream, financing issues of the network should be evaluated (Brito et al., 2002).

Supply chain in reverse logistics has many more elements in addition to all members in forward logistics, third parties called as secondary markets, serve as the point of demand, waste to landfill areas, associations and institutions.

" When will product back ", "Where the items should sent ", "What should be the strategy of choice for companies to maximize profits" and other questions are questions need to be answered to design a reverse logistics network (Lourenço and Soto, 2002).

Reverse logistics network can not be expressed simply like forward logistics. A product that is received from the customer or collected may follow many different route according to its situation. In addition, the situation of whether all products or components are valuable in order to move to the production company or not, will make the problem even more complex.

2.3. Inventory Control Recovery in A Production Environment

A high level of uncertainty about recovery in production environments makes production planning issue more complex and also makes inventory control process difficult.

Guide et al. (2000) has identified characteristics that make managing, planning and controlling recovery systems difficult in supply chain functions (Lourenço and Soto, 2002):

Uncertainty about amount of time and the return,

A need to balance the returns with the demands,

Need for disassembly of recoverd products,

Requirement of reverse logistics network,

Complexity of material matching the constraints,

Stochastic routing of needed materials containing the high volatility time problem for repair and re-manufacturing operations

The purpose of inventory management in re-production environment is to to provide the required level of service with minimum cost by controlling orders from outside and parts at every stage of the recovery process of the resulting product, making the necessary control and planning (Fleischmann et al., 1997). Returning the product in terms of quantity, quality and timing are difficult to control, increasing uncertainty production environment and stock planning even more complicated.

Recent developments in information technology will assist in controlling the system. It is possible to reduce the uncertainty wity the electronic data collection and analysis systems. By providing continuous observation of the returned products, it is possible to obtain information about the status of the products and   statistical data for reliable estimates.

2.4. Production Planning Recovery in a Productıon Environment

Implementation of the traditional methods of production planning and scheduling in product recovery systems is very limited due to the differences. For this reason, new methods should be developed or these methods should be applied after making the necessary modifications to resolve the differences.

The recovery options will change based on the returning type of product, quality level, demand for the new product, accordingly the difficulty of production planning will complex and vary (Fleischmann et al., 1997). Circumstances in which; returning products used as packaging (pallets, boxes and glass bottles), recycling of materials provided, when production planning may be performed relatively easily, if it is need to dismantle, specific plans must be made for the renewal of the product.

The most complex case occurs in re-production stage. Need to separate the process of repairing in each product return and the need for the coordination of several independent activity make production planning complicated. Most of the time, in contrast to traditional production, well-defined and determined plan production steps can not be made.

In this case, the reproduction environment in terms of routing would be quite complex. Due to the independence of the different components and sub-assemblies, high level of coordination is required. If several parts require the same repair process, capacity problems are likely to arise.

Each topics are like: suitable products and technically done recovery option selection in this production environment, production environment scheduling, tıo be adapted to the production environment of MRP plan (Manufacturing Resource Planning) and the preparation of the plans, determination of the optimal dismantling schedule issues that need to be addressed under the heading of Production Planning.

PARTNER RELATIONSHIPS IN REVERSE LOGISTICS

3.1. Partner Relationships

Encouraging network partners to the desired behavior in product recycling and factors can be mentioned to promote collaboration. Incentive factors in the literature were examined within two parts as economic and non-economic factors (Brito et al., 2002).

Economic Incentives:

A deposit paid for products such as bottles, boxes, pallets,

Buying back option: While vendor is selling the product,  if it satisfies certain conditions at the time to return, he recommends to purchase the product at a specified price.

A lower price for the new one: vendor announces that he will sell similar or different products for less in the case of bringing the used product.

Fee: Fee must be paid in case of the return of the product.

Cost or no-Cost recovery for the Supplier: If a person wants to destroy the product, he can make free or at a cost lower than the normally paid price.

Non-Economic Incentives:

The old one for the new one: A person should bring the old product in the case of getting new product.

Lease agreements: Products are for renting, not selling.

Laws.

Environmental sensitivities of people.

Sensitivity of the people for institutions: Product take-back is made ​​for the corporation.

Practically all of these applications are often, policies should be determined for models that under what conditions should be applied to determine and applied in each case.

3.2. Reverse Logistics and E-Commerce

Reverse logistics in E-commerce is another important issue. Kokkinaki et al. (1999) studied the role of reverse logistics and reverse logistics activities of e-commerce to support the three models mentioned (Lourenço and Soto, 2002).

The most commonly used e-commerce model for reverse logistics, are electronic markets for both new and used products. There are sites also on the web, which used parts or remanufactured equipment can be found. Finally, there are web-based examples including the collection, selection re-use and re-distribution.

Electronic markets aspect of logistics covers a wide range of services such as inventory control, virtual storage, transportation, scheduling and routing, operation, location determination, the determination of the operational specifications.

E-commerce offers agreements with third-party  and other defined logistics functions to simplify the logistics operations. Table 4 summarizes the applied activities of e-commerce in reverse logistics.

3.3. Reverse Logistics Informatıon and Communicatıon Technologies

The role of information and communication technologies are quite large reverse logistics. First of all, products in the product development phase will benefit from information and communication technologies with the production characteristics of DfX (Design for X-Environment, Recovery, disassembly, etc.). (Brito et al., 2002). Logistics operations largely depends on information and communication technologies. These technologies are used for determining the position of the product in the chain and knowing the historical way followed. It is possible to establish a connection through information and communication technologies between forward and reverse logistics. Convenience in decision-making can be provided by creating virtual stores with the provision of real-time information. It will facilitate the control of monitoring stock levels, routes and product collection processes by the comparison of the scenarios with developed information and communication technologies. Information technology support is performed with the participation of the parties and long-and short-term plans (Hillegersberg et al., 2001).

There are many areas to be addressed under the reverse logistics heading as can be seen from studies on reverse logistics. Reverse logistics is a new systematic examination issue by the researchers and studies that referred to be made in the future under that headings will contribute to the development of the subject.

4. CONCLUSIONS

Firms in terms of the economic factors, environment-friendly laws, becoming an important market label of 'green' image, to achieve customer satisfaction, environment-oriented programs of governments, social responsibility, products responsibilities belong to producers until the end of product life, due to factors recovery of products is very important.

Collection and re-use of products and materials are not a new situation. Metal scrap collection, recycling waste paper, deposit of glass bottles for a long time are made applications.

However, as mentioned above, the pressures on business should be followed in systematic ways in case of bringing products in reuptake position. This will be possible only by being aware of business about reverse logistics activities and making the necessary arrangements with supporting this "reverse flow" in  processes.