This paper focuses on highlighting the importance of Reverse Logistics in Food Industry. The food industry has perishable nature of items due to which there is always a chance of products returning to the manufacturer. Another important issue in the Food industries is the packaging material of the food items which must be dealt by the manufacturer to fulfill his duty towards the society and environment. Due to these aspects there is a need that food companies must possess a structured mechanism which could handle the product recalls (products returning to manufacturer) and the packaging material. This paper accentuates the need for Reverse Logistics process in Pakistan's Food industry and highlights the potential benefits the companies could have both in terms of cost reduction and public image by adopting Reverse Logistics. This paper also identifies the reasons why a product recall occurs in food industry and also the potential effects of recalls and packaging material on the environment. It also explains some initiatives taken by Companies in the West in this regard. This paper focuses on three aspect of food industry for which a Reverse mechanism is necessary. The three aspects are Rotten/Discarded food items (Food waste), Packaging material waste and Product recall.
Reverse Logistics is relatively a newer concept. Many a time companies focus their energies and assets to forward operations neglecting the value that reverse operations can bring which are sometimes necessary for a company to survive (Bernon, Rossi and Cullen, 2010). In the last few years reverse logistics has become an important consideration in global competition, forcing companies to adapt a number of policies and practices. The result is that the optimization of reverse logistics processes, by taking into consideration financial, environmental and regulatory issues, which make a rapidly evolving research, field (Xanthopoulos et al., 2012, de Brito, 2004)
Reverse Logistics has been defined as “It is 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 capturing value or proper disposal” (Council of Logistics Management). “Reverse Logistics aims at the backward flow of material which starts from consumer to the producer and defectives appearing during the manufacturing process with a goal of maximizing value from items which requires proper disposal” (Rogers & Tibben, 1999).
Forward Logistics strategies cannot be applied to reverse logistics because of the differences between them. Even though companies are beginning to recognize the value added potential of reverse logistics, they mostly fail to recognize the different dimensions of the reverse process. Often, they attempt to incorporate it within their forward logistics operations (Knemeyer, Ponzurick, & Logar, 2002). Stock and Lambert (2001) have highlighted the dangers of equating forward logistics to reverse logistics by stating that “most logistics systems remain ill equipped to handle product movement in a reverse channel.”
The specific problems due to which Forward logistics mechanism cannot be used for reverse logistics are returned products are hard to be forecast, a number of distribution points with special equipment are required, and product life cycle cannot be exactly known. (Vaidyanathan and Yadong, 2007; Pokharel and Mutha, 2009).
Petersen and Kumar (2009) calculated the return rates to be greater than 25% of total sales which accounts for approximately $100 billion in lost sales in US and a reduction in profit by 3.8% per retailer or manufacturer.
Reverse Logistics is required in the food industry to provide quality and safe food to customers without any kind of threat on human health and environment. The major drivers for reverse logistics are volatile food markets, shorter product lifecycles, returns of faulty products, non compliance with good manufacturing practices, failure to maintain food processing facilities and equipments, non compliance with own SOPs, in ability to track products through supply chain and environmental legislations. The main focus of reverse logistics is on management of waste, material recovery using recycling and part or product recovery using remanufacturing, refurbishment and reuse ( Pokharel and Mutha (2009), Nunes et al. (2009))
Reverse Logistics can help a company to achieve the goal of Green Supply Chain and to perform its duty as a responsible member of the society. To have an effective Green Supply chain Management, it is required that the flow and reprocessing of end of life products should be done effectively and efficiently and the recycle material should be incorporated in the main manufacturing stream (Olugu et al., 2010b; Nunes et al., 2009)
Importance of the study:
The potential neglect of the reverse logistics process can reduce the amount of value the firm may extract from returned product, negatively impact customer relationships, and possibly increase reverse logistics costs due to inadequate management oversight of the process (Souza et al., 2006).
Interestingly, effective reverse logistics is believed to result in direct benefits, including improved customer satisfaction, decreased resource investment levels, and reductions in storage and distribution costs (Andel, 1997; Giuntini & Andel, 1995b).
Nevertheless few companies give product returns proper management attention and even fewer realize the potential hidden in them (Stock et al., 2002). Most often companies have not even mapped processes related to them (Stock, 1998). For instance Stock (1998) and Merrit (2001) came to know that large companies have an increased rate of returns because of the return policies being very lenient and therefore, the returns problem is more critical in such companies.
Britto and Decker (2003) stated in their paper titled “A Framework for Reverse Logistics” that reverse logistics are done due to pressures from regulatory agencies, customers and corporate social responsibility movement.
According to the paper "An Overview of Some Reverse Logistics Practices in the United States" by Olorunniwo and Xiaoming 2011, Reverse logistics cost is less than 5% of total logistics cost.
A survey conducted by Mckinsey showed that green supply chain management is one of the top two strategic priorities for global corporations (McKinsey, 2011).
A 1998 U.S. based study estimated that reverse logistics costs accounts to four percent of all the logistics costs in the country, or half percent of the U.S. GDP (Rogers and Tibben-Lembke, 1998). Pishvaee, Kianfar and Karimi (2009) states that “Planning and implementing a suitable reverse logistics network could bring more profit, customer satisfaction and a nice social picture for the companies”.
Steele &Rodrigues (2008) states that “The reverse logistics operations in many companies have provided improved service at reduced costs”. Researchers have pointed out many benefits that could be gained with RL, namely efficient resource utilization and environmental protection. (O.Lavastre, A.Gunasekaran, 2012)
Abraham (2011), studied take-back initiatives through 36 manufacturers (21 local and 15 international) in the market of personal computers in Brazil. Organizations not often take returns as part of their centralized cost structure (Biederman 2006:2) and run the risk of increasing costs by not addressing this component of the supply chain (Pogorelec, 2000:68)
The main issues that need to be addressed in a particular food company are the rotten or spoiled food items and packaging material of those items. Now this rotten food can be dealt in two ways, either it could be called back by the manufacturer or it can be disposed off right away. If it is to be disposed off, the typical way used is Landfills. Landfill is the final disposal of solid waste on land and involves controlled environments for the burying of waste (Rogers & Tibben-Lembke, 1998:259).These rotten food items are buried in landfills which give rise to methane which is a potential source of ozone depletion.
Another issue is of packaging. The packaging material is also not properly disposed of. Mostly it is burnt irrespective of what kind of material it is. Most of the food items have a plastic covering on them. Incineration is the “destruction of solid, liquid, or gaseous wastes by controlled burning at high temperature. Hazardous organic compounds are converted to ash, carbon dioxide, and water. Burning destroys organics, reduces the volume of wastes, and vaporizes water and other liquids the wastes may contain. The residue ash produce may contain some hazardous material” (Enviro-Glossary, [s.a.])
The literature that is available on Reverse Logistics is mostly from the manufacturing firms. Due to lack of literature available on reverse logistics in food industry, the companies don't have the slightest notion of how this process can enhance their business and be beneficial for the environment at the same time. While recalls of many product types have been on the ascent over the past decade, rigorous empirical research which characterizes the strategic and operational nature of these failures and factors that influence the relative speed of current industry and regulatory systems to handle the recalls, is extremely constrained (Hora et al., 2011; Roth, Tsay, Pullman, & Gray, 2008ab).
Pakistan's Food Industry:
The Pakistani Food industry is expanding. There are many companies in the market which are competing against each other for only 1 food item and there are numerous food items in the market. The food industry of Pakistan has 4 phases: production, process, transportation, and distribution. Thus it involves everyone from a small farmer to a retail distributor. The food industry has employed more than 20% of country's working population. In the recent years there has been a great boom in the food industry of the country. Big names in the food industry include Nestle, Pakistan food and beverage company, Unilever Pakistan, etc. other than these names there are companies like Shan Foods, Gourmet Foods, National Foods, K&Ns etc. the food and its allied industry considered Pakistan's largest industry. It is estimated that there may be around 80000 small businesses and more than 2 million micro-enterprises many of which are food companies .The local food companies in Pakistan like Gourmet foods don't have any kind of RL mechanism. No proper legislations have been implemented particularly for food recalls or the proper disposition of recalled products or for the proper disposition of packaging material. It is high time that companies focus towards these issues of product recalls and returning of packaging materials as this is a need of the hour. The focus of this research would be the Local food companies.
Why Don't Pakistan's Local Food companies have an established Reverse Logistics System? Are they aware of the need and potential benefits of having a Reverse Logistics Process?
A reverse logistics defines a supply chain that is redesigned to efficiently manage the flow of products or parts destined for remanufacturing, recycling, or disposal and to effectively utilize resources (Dowlatshahi, 2000).
An independent reverse logistics process starts with the end user or the purchaser's decision that the product has reached the end of its life and needs to dispose of the materials (Blumberg, 2005:15). The typical activities in reverse logistics include returning to the seller, reusing, salvage (selling to secondary market), repairing, refurbishing, remanufacturing, recycling and finally disposal.
The typical supply chain actors involve Manufacturers, distributors, wholesalers and retailers. Some specialized reverse logistics players also which include 3PLs (De Briton & Dekker, 2003:19-18; Efendigil et al., 2008:271), brokers, jobbers (Efendigil et al., 2008:271) and intermediate processors (Krikke 1998:3).
3PLs provide reverse logistics services to those companies who want to outsource their Reverse Logistics processes. Brokers are entities which buy products in any conditions at a very low price and sell it again in the market (Rogers and Tibben-Lembke, 1998:225). Jobbers purchase products from the retailer and after performing repairing sell the products to customers or intermediaries (Bernon et al., 2011:492). Intermediate processors purchase recyclable materials and after processing them sell them for remanufacturing. (Krikke, 1998:3)
Del Castillo and Cochran (1996) studied the integral planning of production, product distribution and collection of re-usable containers used for distributing the products. As opposed to forward supply chain, in reverse logistics there are a large number of suppliers and the condition of returned products is unknown so the timing and number of returned products is very difficult to be forecasted. Due to this reason there needs to be a close coordination between all stakeholders.
Nagel and Meyer (1999) have discussed a method for systematically modeling end-of-life networks and showed ways of improving the existing and new systems with ecological and economical concerns. Reverse Logistics can increase sales of a company. By making it easier for customers to deal with returns, there is often more willingness to complete the initial sale (Daugherty, Myers & Richey, 2002; pp. 86). A 1998 U.S. based study estimated that reverse logistics costs amounted to four percent of all the logistics costs in the country, or half percent of the U.S. GDP (Rogers and Tibben-Lembke, 1998). Now companies are paying a lot of attention towards reverse logistics. A number of books on the challenges and opportunities of reuse and reverse logistics programs have been published (Stock, 1992; Kopicky et al., 1993; Stock et al., 1998). A number of case studies have also been reported in many industries which addresses variety of recovery options (Guide and van Wassenhove, 1999; De Brito et al., 2005; Flapper et al., 2005). Duhaime et al. (2000) have discussed the distribution and collection of returnable containers by Canada Post. Petersen and Kumar (2009) calculated rates of returns to be greater than 25% of total sales which accounts for approximately $100 billion in lost sales in US and a reduction in profits by 3.8% per retailer or manufacturer.
Krikke, Hofenk, and Wang (2013) surveyed on six dimensions of implementing RL: Waste management, recycling, reuse, reprocessing, materials recovery, and design for RL. Lai, Wu, and Wong (2013) Surveyed 209 manufacturers of the Pearl River Delta (PRD) in China. Their study gave an insight on the effects of three pressures on top mangers' stance towards reverse logistics implementation. These three pressures are from government, customer and competitor.
Reverse Logistics have emerged as an important aspect of business. Xerox (Maslennikova and Foley, 2000) has an integrated solution for reverse logistics from product development to recovery or proper disposal. Landers et al. (2000) highlights the importance of tracking component's orders in the case of a closed-loop business telephones supply chain. Recellular remanufacture mobile phones and generates a good amount of money from it (Guide and Van Wassenhove, 2003). Duhaime et al. (2000) discuss the distribution and collection of returnable containers by Canada Post. Dijkhuizen (1997) discusses the remanufacturing network of IBM. Louwers et al. (1999) discuss the setup of a carpet recycling network for part of Europe. Bartels (1998) describes the Dutch nationwide network for battery recycling. Retailers have been inclined towards the use of technology for managing the product returns. Computerized return tracking, computerized return entry, electronic data interchange and radio frequency identification are being employed in reverse logistics. Remanufactured products incur 40-60% less costs than new products and save 85% of the energy needed to start from scratch since remanufacturing expands the life cycle of the product (Kumar and Putnam, 2008). Further supply chain collaboration improves the overall performance. For example, retailers working closely with food manufactures can remove the damaged unit from the case, and then repack and sell the rest of it (Karolefski, 2007).
Nikolaou, Evangelinos and Allan (2011) said that firm performance is identified by economic sustainability and gave various sustainability indicators such as sales of reuse, resalable and recyclable, cost of returned materials, and subsidies associated to reverse logistics.
Srivastava and Srivastava (2006) gave points for the decisions about the logistics facilities i.e. warehouse and transportation depend on certain factors such as estimated returns, costs, competitors' behavior and operations techniques. Madaan and Wadhwa (2007) used the Product lifecycle analysis to plan reverse logistics operations.
The reverse logistics process varies based on the type of product. For some items some type of replacement or repair is undertaken while at times, products which face complicated technical failures, an extensive reverse logistics process is undertaken for example, when millions of laptop batteries overheated and had to be replaced, logistics costs were high due to the need to return defective batteries for reclamation, as well as the need to rapidly replace batteries to minimize consumer impact (Marks, 2006).
DiBenedetto (2007b) advised that companies must establish a reverse logistics plan before the recall is made public. Details on the recall, instructions on how to return a recalled product, and company response to the recall are very much important (Field, 2006).
Reverse Logistics in Food Supply Chain:
According to European Commission, there are more than 17 million operators and 32 million individuals involve across the food chain (European Communities, 2008). The food and drink sector contributes to 20%-30% of all environmental impacts in EU (Bakas, 2010).
The perishable nature of food products, stock forecasting, continuous food supply, quality management, returns management and waste management to name a few. To move the food items quickly through the supply chain not only the forward flow but also the backward flow system should be well developed.
According to CIAA (2011) the EU food industry is facing strict controls which impact its competitiveness. These regulations drive the companies to embrace Reverse Logistics to become more sustainable (Nikolaou, Evangelinos and Allan, 2011). These rules and regulations make the companies responsible for their products which cause the companies to adopt reverse logistics activities. Companies are also making ties with food manufacturers to gather defective or returned packaging and change it into new products. The management of data streams in one of the key successful drivers in forward logistics as well as in reverse logistics operations (Georgiadis, Vlachos, and Iakovou, 2005). A 3R framework of readiness, responsiveness and recovery is illustrated by Tang (2008) who explained the production/logistics, product development, and communication that companies should be having in order to conduct a successful recall.
The performance of Reverse logistics is influenced by many factors in the Food supply chain. These factors incorporate food specific features, cost, competitive advantage, regulation and legislation, and information management. The physical attributes of food items decide how the reverse logistics will work. Food features affect logistics performance including: Shelf life time, production throughput time, temperature control transportation, and production seasonality (Vlachos, 2003; Aramyan et al. 2006; Hsiao et al., 2010). Poor handling during logistics operations may result in degradation of food quality and in turn stimulate “return avoidance” which is a critical factor in reverse logistics process (Stock and Mulki, 2009). Nestle has enabled itself to reduce waste to 3.1% and increasing reuse or recovery to 4.2% (Nestle, 2011).
Coelho, Castro and Gobbo (2011) said that environmental effect of a reverse logistics process can be calculated using measures such as energy use, CO2 emissions, water pollution, and urban traffic congestion. According to Kumar and Putnam (2008) there is a requirement for special attention to reverse logistics when the products reach the end of their life cycle because a product with poor quality has value to extract and the reverse logistics add cost than create value (Bernon, Rossi and Cullen, 2010).
The food industry has a significant impact on the environment. Fox (1997) pointed out problems with manure disposal, soil and water damage. Environment factors addressed in literature are water pollution, packaging, food miles (distance travelled from the farm to consumer leading to issues such as fuel consumption and global warming) and damage consumption (Boehlje 1993; Wade, 2001). So food industries have to provide environmental friendly products to the consumers. Many studies have addressed specific environmental conditions responsible logistics such as waste disposal, reverse logistics and recycling (Carter and Ellram, 1998; Young, 2000; Rogers and Tibben-Lembke, 2011).
The US food industry is highly visible. It represents more than 12% of gross domestic product (Stock, 2004). Grocery stores and supermarkets amounts to $590 billion towards the annual sales (Standard & Poor's, 2005c), food processing and distribution account to about $1 trillion in revenue annually (Stock, 2004). Restaurants contribute about $450 billion in sales and provide employment to 12.2 million workers (National Restaurant Association, 2005; Standard and Poor's, 2005b)..
Food waste is a significant problem in the United States. The Environmental Protection Agency (EPA) calculated that 34 million tons of food was thrown away in 2010, representing close to 14% of the municipal solid waste generated in the United States. The food returns accounts for the competitive strength of a company because of the high perish ability and complexity. The food industry is very much inefficient. For example, Gustavsson and Otterdijk (2011) calculated the global food losses and waste to account for 1.3 billion tons of food per year corresponding to 95-115 kg/year per capita in Europe and North America and between 6 and 11 kg/year in Sub-Saharan Africa and South/Southeast Asia. Food waste is caused by many factors such as excess buying, premature harvesting, inadequate labeling and storage instructions, poor storage facilities and transportation, production errors, trial runs, packaging defects, and wrong weights and sizes (Fotopoulos, Vlachos, and Maglaras, 2010; Gustavsson and Otterdijk, 2011). Household wastes are about 14-26% of food sales in USA and almost 27% in UK whereas the percentage of food products returns was 1.2% to 1.8% of total sales in 2010 (Nestle, 2011; Terreri, 2010).
It was discovered that data coding in food labels accounts for another problem because customers are not able to fully understand well the food dates and storage information. Confusion on data labels, combined with modern consumer lifestyles generate about three million tons of food and drink wasted by consumers before ever being cooked or served ( Karolefski, 2007).
Van der Vorst, Tromp and Van der Zee (2009) said that food quality management affects the supply chain performance which is influenced by logistics functions such as packaging, loading techniques and handling, temperature-controlled transportation and warehouses. De Koster, De Brito and Van de Vendel (2002) said that a central distribution center to receive the returns is a common practice in food sector. A centralized supply chain design provides suppliers and retailers with a better visibility and control of return products, thus reducing wastes (Terreri, 2010). Food returns from customers to retailers create higher recovery rates for retailers than the rest supply chain members (Stock and Mulki, 2009).
In general, food products have short product life cycles, which make lead times a critical parameter of reverse logistics operations (Vaidyanathan and Yadong, 2007).
Packaging refers to the technology and material for enclosing or protecting products for distribution, storage, sale, and use (Soroka, 2002).The different share of packing material includes paper which is used most extensively with a percentage of 34%, followed by rigid plastic which accounts for 27%, metal accounts for 15%, glass has a percentage of 11%, flexible packaging is 10% and others account for 3%. Food is a major item which requires packaging. According to an estimate food industry makes up for 50% of the global consumer packaging industry in 2009. If the beverage industry is also included it the percentage would go up to 69%. In an organization there are two types of barriers to waste reduction namely, external and internal. External barriers include infrastructure, competition, consumer behavior and technology. The internal barriers are lack of expertise, technology, lack of top management commitment and financial restrictions. (Stop Waste Partnership & Reusable Packaging Association, 2008).
Packaging also needs to be easily disposable after use, because most packaging is one Way and it is one of the most significant factors in the total environmental impact of goods (Andersson and Ohlsson 1999; Lewis 2005; De Monte et al.2005). The increased use of packaging contributed to the burden of waste disposal, resulting in the imminent exhaustion of landfill sites near urban populations (Reynolds 1993, 1; Twede and Goddart 1998, 9-12; Gidarakos et al.2005). The use of common type of reusable packaging that complies with an agreed standard and could be exchanged within companies is a good way to reduce costs. (Kroon and Vrijens, 1995; DfT, 2005)
Every year in the United States, the paper, aluminum, glass, plastics and other recyclable material is thrown away. If this material is recycled it could generate $11.4 billion. Less than 14 percent of plastic packaging, which is the fastest-growing form of packaging, gets recycled. In addition to being a real waste of materials, single-use food and beverage packaging is a prime source of the estimated 269,000 tons of plastic pollution currently floating around in the world's oceans, harming turtles, whales, seabirds and other marine life, as possibly human health as well?
Starbucks started the preferred Supplier program which rewards suppliers for both environmentally and social responsible practice (Schrage, 2004). Starbucks along with paper recyclers are finding ways to recycle greasy and food stained wrappers and boxes. McDonald's considers environmental factors into their sourcing practices which include elements like water and energy conservation, air pollution, waste and recycling, habitat preservation and use of chemical (McDonald's, 2004).
A food recall is a voluntary action by a manufacturer or distributor to protect the public from products that may cause health problems or possible death. Product recalls are an observable manifestation of quality failures which result in product harm events (i.e., unsafe products reach consumers) (Siomkos & Kurzbard, 1994). Recalls are the result of external quality failures (i.e., quality failures that exist outside the boundaries of the firms that are primarily responsible for the quality of finished goods) (Juran, 1969; 1972; 1992).
In the US, in the first quarter of the year 2012 alone, there were 142 food recalls, initiated by more than 130 companies (with 9 of these companies having multiple Recalls) (FDA, 2012). According to the Consumer product Safety Commission (2012) the estimated societal impacts of product harm whether it is from faulty consumer products, food borne illnesses or defective automobile components are substantial (e.g., total costs of unsafe consumer products, including healthcare costs and property damage are estimated at $900 billion annually).Food borne pathogenic illnesses impose an estimated
$77.7 billion dollars of healthcare costs (Scharff, 2012). Food borne illness affects 1 in 6 residents of the US and is estimated to create total societal costs of, including health care costs and productivity losses in excess of $1.4 trillion annually (Roberts, 2007). Indirect costs of recalls include market share, shareholder value and reputational impacts to the firm. Direct recall costs include solid and easily measured impacts such as reverse logistics, warranty, replacement, and repair costs along with product liability (Jarrell & Peltzman, 1985; Rupp, 2003).
Moreover the literature on operational and supply chain aspects of food recalls is really scarce in spite of the effects it has on firms as well as public health. Many companies are not measuring the effectiveness or efficiencies of their returns operations with the same level of attention they employ for their forward logistics (Reverse Logistics: Returns, Refunds and Recalls, 2009).
The supply chain recall detection competence means the combined operational monitoring, integration and coordination systems across supply chain stakeholders. The time to recall is the one of the most important aspect of recall effectiveness because perishable products have a finite shelf life. So the recall must be done quickly to reduce the customer's exposure. SCRDC is a reflection of supply chain design, monitoring systems, communications, feedback mechanisms, and integration strategies that exist among supply chain entities that provide them the absorptive capacity to recognize quality problems in the first place; in addition to collectively resolving them faster (Cohen & Levinthal, 1990; Tu, Vonderembse, Ragu- Nathan, & Sharkey, 2006). While the recent empirical evidence seems to indicate that publically traded firms, in particular, may have significant incentives to delay recalls in order to minimize impacts to shareholder value (Chen et al., 2009), the marketing, communications and crisis management literature suggests the opposite; namely, that firms that respond earlier and take responsibility for product failures, if appropriate, can limit reputational and market share effects (Dawar & Pillutla, 2000; Laufer & Coombs, 2006; Pearson & Clair, 1998; Smith, Thomas, and Quelch, 1998). For perishable items such as food and pharmaceuticals (which are also not completely testable (Roth et al., 2008ab), the window of opportunity for mitigating consumer risk is further limited to the shelf life of the defective product. The sooner the public announcement is made, the more potential consumer exposure is reduced, therefore limiting firm liability; furthermore, lost sales may be minimized by early and responsive communication (Dawar & Pillutla, 2000; Siomkos & Kurzbard, 1994). On the other side, if recalling is delayed fewer products would have to be returned through the reverse logistics process because the product would expire. Moreover there is a possibility that the items to be recalled have not produced the attributed illness. It is less clear how recall timing will affect brand equity and shareholder value in this sector (Chen et al., 2009; Chu et al., 2005; Teratanavat et al, 2005; Thirumalai & Sinha, 2011; Thomsen & McKenzie, 2001).
Discussion and Analysis:
The literature mentioned above clearly indicates the importance of reverse logistics. Typically in food industries where the returns are quite frequent due to the perishable nature of products. Since many of the food items have a short life span before they expire so there is always a possibility that products if not sold can be returned. Another reason which could occur for a food product to return is the presence of an adulterant which could be harmful to the consumers. For this purpose a sound Reverse Logistics system has to be developed. The companies need to pay attention towards this aspect of the supply chain. They should be considering it of equal importance as forward logistics. The development of a reverse logistics system is not beneficial only in monetary terms but also it has great benefits for the environment. When talking from a business oriented perspective, the company can use reverse logistics to have the salvage value from the returned products. The company can easily locate the exact position from where the problem has aroused. In this way company can reduce the number of returns by working on its weak points. As mentioned in the literature a firms performance can be enhanced economically. This economic betterment is achieved by several factors like sales of reuse, recycled products and selling to secondary markets. A sound reverse logistics system can help the company to retain its public image by efficiently and quickly removing any product which deems to be harmful for the consumer. In food companies there is an extensive usage of packaging material. All food items are packaged in plastic bags, cardboard boxes, and different type off foils. These packaging material if not disposed of properly can have detrimental effects on the environment. For example plastic bags can destroy marine life. There have been many incidents in which these shopping bags got caught in the mouths of aquatic organisms resulting in their death. If these shopping bags are burnt in open air, which is the most typical way of getting rid of these, produce carcinogens, which could cause cancer in humans. Though there are companies like waste management which handle these sorts of issues. But it is primarily the duty of food companies to have the packaging disposed off or recycled (if possible). These food packaging materials need to be taken care of by the specialists. With the increased concern about global warming and ozone depletion all over the world, the call of the hour is that the food companies should make a major contribution towards these concerns by reducing the packaging waste, properly disposing off the rotten food items. This can be only done when there is a proper mechanism for such activities i.e. reverses Logistics.
A reverse logistics system is required no matter what. It is required both for food recalls and for the return of packaging material. A reverse logistics system not only defines how the products will move from the consumer back to the manufacturer, it also help to figure out what has to be done with the returned products. At the same time as the products moves in the backward channel, it also highlights the flaws due to which the recall has occurred. As the food companies produce items which are directly affecting the consumers, a little problem in the product can have devastating results. So it is the need of the hour that companies focus on the mechanism through which they can remove any defected product from the market before any major catastrophe happens. The same mechanism could be easily used for dealing with packaging waste.
Since Pakistan's food sector is growing rapidly, there is a need for the companies to have the Reverse Logistics process implemented. They should understand its importance and the benefits it could reap. The local food companies must acknowledge that without a proper backward channel their survival in the market is impossible. They must put extra effort in this regard and should consider Reverse Logistics as important as any other part of the business.
Any organization which understands the importance of Reverse Logistics can still face difficulties in implementing and managing the process. The challenges faced by the organization depend on the level of maturity about Reverse Logistics. Five Stages have been mentioned. The innocence stage in which the company has no idea about reverse logistics and are not involved in it. The second is the understanding stage, in which company has the idea about RL but cannot implement it efficiently. Third is the Competence stage in which Company can efficiently manage RL activities efficiently. The Fourth is the development stage, in which companies expand their RL capabilities and try to become specialists. The fifth is the Excellence, in which the company is a world class leader in RL. (Cope, 2007: 18)
This section aims at providing a simple but an effective framework which could be a source of guidance for the companies who want to implement reverse logistics. This frame work focuses on the second stage i.e. Understanding. The reason is that the food companies are aware of the reverse logistics phenomenon but are not performing RL activities efficiently. The conceptual framework is as follows:
• First of all assess the understanding level of the Organization about RL.
• After that explain the Reverse Logistics concept and its related terms.
• Emphasize the importance, the benefits and drivers of RL
• Different types of returns, their reasons should be explained.
• The organization should know the parties involved in RL process e.g. 3PL, Jobbers etc
• Explain the RL activities that correspond to the type of returns in the organization.
• Develop KPIs to keep a track of performance.
Companies should understand the need of RL. They need to consider the benefits that RL activities can bring to their business. To make them aware, Campaigns, seminars and trainings should be conducted. There should be research done on developing specialized Reverse activities for handling of food material. In this regard special regulations must be made, which would make it essential for all food companies to develop a sound RL mechanism. Companies should be consulting people from academia and should hire reverse logistics experts. These experts would let the company know what RL activities should be used for a particular item. They would tell the company not only how to transport the product back but also provide options when the products have returned. There should be work done to know the actual cost of Reverse Logistics. Reverse logistics, when not organized, usually costs 10 times more than regular logistics. Companies can use 3PLs to handle their reverse logistics. As these 3PL s are very much expert in dealing with reverse logistics and recycling options, employing these could make the company to focus more on their core competency. These 3PLs can deal both in case of a product recall as well as return of a packaging material. E.g. Genco, a 3PL company, manages the reverse logistics for Unilever. The RL mechanism should be sound as well as flexible. It should be able to trace the products efficiently. For this purpose RFID could be used. Newgistics, a company that specializes in reverse logistics, recommends giving Smart Labels to customers, who then stick the label on their good before mailing it back to the warehouse. This makes it easy for customers to return defective products, and enables the company to easily trace their recalled goods (Field, 2006). The customer should be motivated to return the packaging material by giving some incentives. Like there are certain companies which give a discount coupon on every wrapper of a certain item returned. There should be a proper Recall protocol designed, both for recalled food products as well as packaging material and waste. Accurate and timely flow of information should be done throughout the supply chain. Because returns are hard to predict collaborative forecasting should be encouraged. KPIs should be developed so that company could know the efficiency of the Reverse System. Some KPIs are Disposition Cycle time, Amount of product reclaimed, Percentage of Material Recycled etc.
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