Reverse Logistics

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

In this chapter the researcher determined what are the factors of reverse logistic in Prima Quality Food Industries Sdn Bhd. Researcher will describe the relationship between dependent with independent variables and the theoretical framework of the study.

2.2 Reverse Logistic Approach

2.2.1 Definition to Reverse Logistic

Reverse logistics is the management of returned products. Rogers and Tibben-Lembke, (1998) defines reverse logistics 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

From Table 2.1 it is clear that reverse logistics is perceived to be substantially different from forward logistics. The differences are apparent in seemingly related operations such as quality, disposition, routing, pricing, inventory management, and product life cycle management. Similarly, other differences emerge in features such as origin and destination of products, quality of products, and cost of operations and visibility of products. Therefore reverse logistics is not the same as forward logistics. Adapted from: Tibben-Lembke,R.S., & Rogers, D.S. (2002). “Differences between forward and reverse logistics in a retail environment,” Supply Chain Management: An International

(Dekker and Van der Laan, 2002) cite the average rate of returns in general off line business to be 10 per cent. (Rogers and Tibben-Lembke, 1998) report that the return rate for all types of products in United State market is around 6 per cent. However, the rate of sales via catalogues, the Internet, telemarketing and television is growing and returned goods in this market represent up to 35 per cent of total sales (Trebilcock 2002).

Successful sales strategies are able to convert potential customers into actual customers through attractive marketing programs. However, it is difficult to predict customer’s reaction once the ordered product is received, particularly when it does not accord with the customer’s perception gained from the screen, catalogue, or description. This is especially evident in Internet sales, with the estimated average return rate being 30 to 50 per cent (Mason 2002; Nairn 2003; Sharma, Wickramasinghe & Singh 2005; Vigoroso 2001).

With the projected growth in the rate of product returns discussed above returns management is no doubt an essential