Given the fierce competition from rapid technological advances and globalization, companies have sought to enhance logistics and supply chain efficiency in recent years. Banihashemi et al. (2019) inform that the increasing concern about adopting green strategies as a sustainable environmental solution and green legislation, in addition to the volume and vast manufactured products by companies, has made reverse logistics attract significant attention in supply chain management and logistics business. Having this in mind, the awareness and implementation of reverse logistics as a sustainability solution can give companies a competitive advantage since competitiveness also implies success in establishing a robust competitive advantage through performance. Enhancing reverse logistics activities like returned product recovery or product elimination at the end of inventory is approach organizations use to retain and improve a market share and competitive advantage. According to Giri et al. (2018), reverse logistics offers a competitive advantage since it helps optimize the recovery of assets, maximizes the efficiency of the supply chain, minimizes costs and enhances customer experience. Therefore, this paper will conceptualize reverse logistics and provide in-depth information on how it helps gain competitiveness in the supply chain.
Definitions of Reverse Logistics
Reverse logistics is a vital component in the supply chain’s ecosystem and actively helps improve overall efficiency. According to Fernandes et al. (2018), reverse logistics refers to the flow of materials, products or products from the end customer via any supply chain stages. Also, reverse logistics include the return of leased equipment or inventories that are not sold and, in addition, the recycling and disposal of unused materials. Thus, reverse logistics mainly focuses on a series of activities in reusing, product updating, material recovery and waste management.
Reverse Logistics in Supply Chain
The increased global economic integration that organizes various businesses worldwide requires smooth coordination for successful functioning. Supply chain management is a complicated commercial system of information, resources, people, and organization that creates a dynamic supply and demand structure between various economic agents such as consumers, manufacturers and suppliers. According to Statista data, in 2019, the global supply chain management market was at $15.85 billion, but the size has doubled over the last decade. By 2027, the market is projected to reach $37.4 billion, which implies that growth will increase exponentially by 11.2%. An efficient logistics element, particularly reverse logistics, is quintessential in the supply chain ecosystem. The supply chain oversees the flow of services and goods from the manufacturing point to the consumers. Mostly, the end user in the market is few, which prompts companies in retail to seek a competitive advantage to stand out among their competitors. According to Andrade et al. (2020), constant end users’ behaviours change the new competitor entrant into the market, which is a primary threat to organizations. This obliges companies to learn about the market environment and embrace approaches that establish a competitive edge and improve overall business performance. Thus, supply chain management requires reverse logistics to increase competition and market share. The end user within the current market has a vast array of commodities from various service providers. Hence, firms cannot exhaust all the goods at a go, which implies that reverse logistics, if implemented, can assist the firms in monitoring and supervising the flow of goods from commodity flow from the manufacturers to end users and in monitoring the excessive products not owned by consumers. According to Banihashemi et al. (2019), a competitive advantage can be attained by using reverse logistics since the unsold commodities can be managed for potential reuse. This implies that organizations implementing reverse logistics can have less burden in overcoming costs and reducing surplus wastage in production.
Furthermore, monitoring and planning the flow of supply chain processes obliges the company to absorb professional staff who can maintain a competitive advantage in the organization. With the insights and implementation of reverse logistics processes, an organization can absorb numerous end users because managing the flow of commodities from manufacturers to consumers is professional. The supply chain ecosystem requires specialized skills in the direction of surplus supply and the application of reverse logistics. This can create a competitive advantage in the market, affecting the overall organization’s supply management efficiency. According to research, the global reverse logistics market is expected to reach $603.9 billion by 2025. Many consumers prioritize an easy and convenient reverse logistics procedure. Suppose it fails to meet their requirements and ease. In that case, nearly 85% of consumers seek other alternative organizations, and if the organization meets the consumer’s needs, it acquires 95% of repetitive purchases from a specific retailer. Therefore, processes in reverse logistics like repackaging, refurbishment, and repair can minimize a company’s economic, social and environmental impact. Similarly, it can increase asset utilization and profitability in a company, affecting the bottom line of supply chain management.
Reverse Logistics as a Competitive Advantage in Supply Chain
When companies implement reverse logistics correctly, they can reap maximum benefits that positively affect the entire supply chain network and the organization’s bottom line. Modern supply chain companies utilize reverse logistics as a competitive advantage. The market demands green legislation, and green strategy for ecological management also makes reverse logistics more significant in manufacturing quality products, improving brand and pricing in sales. Apart from social and environmental benefits, the utilization of reverse logistics leads to a competitive differential in supply chain companies (Banihashemi et al., 2019). According to Giri et al. (2018), reverse logistics offers a cost-saving competitive differential over competitors, making it the most prominent strategy tool in firms. Reverse logistics can help a supplier obtain items from buyers or return the unsold stock to the manufacturer to be remanufactured, reused or refurbished, limiting the overall expenditure costs. Also, reverse logistics help minimize administrative and transportation costs, thus helping in improving comprehensive management and organizational objectives. In addition, reverse logistics implementation is a strategy of product differentiation since the processes of friendly product disposal help improve ecology. The overall effectiveness of administrative costs allows firms to provide services and products at affordable prices to competitors, which calls for a competitive edge in organizational resource utilization in an effective way. Therefore, the reverse logistics for end users’ products is significant in the supply chain ecosystem. Using recycled or remanufactured products helps minimize operation costs and wastage in the production process.
Moreover, reverse logistics can offer other competitive gains to enhance healthy competition in the supply chain. Fernandes et al. (2018) inform that compliance with environmental demands improves competitive advantage. The increased issue and sustainability insight drive the manufacturing and consumption of innovative products that meet sustainability demands; thus, reverse logistics has increased aims to impact the ecology through waste management through the useful product life. Banihashemi et al. (2019) report that reverse logistics enhance competitive advantage through cost reduction. Economic benefits are associated with returnable products that enhance reverse logistics processes development and improvement, thus creating more competitive prices than other competitors. Giri et al. (2018) inform us that reverse logistics can help improve customer experience. Supply chain firms with reverse logistics that are appropriately implemented help establish differentiation in context with various allies since they are well-equipped to serve consumers.
Recently, reverse logistics has gained interest in creating a competitive edge in the supply chain ecosystem. Enhancing the recycling, reusing, returning and remanufacturing of products helps supply chain management save on leadership costs and develop a product differential which affects the competitive prices of products, thus, promoting a competitive advantage over competitors. In addition to the economic impact of reverse logistics processes, it offers an ecological impact as products manufactured and consumed are ecologically friendly. Firms that implement reverse logistics correctly can have several benefits in maximizing a competitive advantage. Reverse logistics can help reduce leadership costs, operational costs, competitive pricing and increased manufacturing of new volumes of friendly products. This implies that reverse logistics helps increase supply chain efficiency and promote a competitive advantage that optimizes the organization’s bottom line.
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Fernandez Sheila et al. (2018). Systematic literature review on the ways of measuring the reverse logistics performance. SciELO – Brazil. https://www.scielo.br/j/gp/a/kRfWt87PRRc4sbZXQFjQzHd/?lang=en&format=pdf
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