Inventory of returns in EOL in RSC

P.Chandiran

Type of inventory in Reverse SC

Cores Remanufactured parts New parts OEM parts

Inventory issues

The inventory in the reverse supply chain is depends on collection rate of used products

demand rate of these used products for remanufacturing

the number of intermediate facilities between these two ends of supply and demand.

Also to give another dimension to this issue, the inventory will go up if the supply point and demand points are separated by geographical distance as well as by time.

It is very important to know whether we have enough capacity to process all the materials collected.

Inventory in Reverse SC

Used products inventory exists at different nodes in reverse supply chain.

It spend some time with collection center as well as with customer before returned to concerned next stage in the supply chain.

The time it spends in these places have lot of impact on speed of reverse logistics system and remanufacturing efficiency

Inventory for Products with High TVR

For innovative products (High TVR), it is not always easy to predict the volume of returns and its availability so that one can plan remanufacturing with less uncertainty.

Forecasting returns is a major challenge in this type of industries. It is always better to have a flexible faster supply chain to collect innovative product returns so that maximum value can recovered.

It is advisable to hold minimum inventory at each node and return products then and there to the next stage for innovative products.

Inventory management for functional product

In battery industry, the situation is different. Old Batteries do not loose value over a time period and also it is not a fashion or technology based product. The return intermediaries can have large inventories in reverse supply chain still it will not affect the SC very much

The waste paper collection system is totally unorganized one and Paper mills which recycle waste papers normally maintain large inventory so that production planning and operation are smooth. It is a commodity product and it can be categorized as functional product.

Inventory issues (Cont.)

The time value of returned products is not deteriorating as much as some innovative products like mobile phones and the holding of inventory does not cost much.

The reverse supply chain for paper recycling industry is highly fragmented and at each stage there is huge amount of inventory maintained. The active demand period for recycled or remanufactured products is always exists and hence less uncertainty.

It is advisable to have efficient reverse network with enough inventory for these kinds of products.

Q-policy

Q

Formula

Cost involved are Carrying cost and shipping cost

EOQ=SQROOT of 2DS/H D-annual volume of returns S-Shipment cost per trip H-Holding cost per unit

Q-model

Mostly followed at channel levels Channel partners should decide the

level of stock of old products to ship it to next stage of the SC

Mostly carrying cost is less and transportation cost will be more.

Can be used for non-bulky products

P-Model

P

Q

P-Model

Returns get accumulated till the period.

Period is fixed Period can be a month or a week Again two costs of S and H There is no safety stock issues at

channel level.

P-model

Used for bulky and high value products

Can be integrated with forward logistics

Again this model is used at channel level

At remanufacturing or recycling level, inventory policy is determined by demand and supply rate.

Incorporating Supply Uncertainty at Remanufacturing point

Take the case of Paper recycling The supply of waste paper is

uncertain The quantity and quality varies

widely Paper mill should depend on many

suppliers Risk pooling should be used to

reduce uncertainty Paper mill normally have fixed

capacity and fixed production schedule.

Inventory at Remanufacturing point

Demand per period assumed to be fixed

But the arrival of load of supplies is random

Quantity and tome gap both are uncertain

So, paper mills carry almost one month demand as inventory

If supply is certain and pre-determined one carry less inventory.

Need to have network of contacts for sourcing.

Model

Time

Inventory

Other issues

Because uncertainty exist in terms of supply and demand destination, the amount of inventory at remanufacturing point is always high

Multi-supplier to single plant model