Disruptive digital forces that include the internet of things (IoT), robotic process automation (RPA), cloud computing and analytics have affected e-commerce businesses at large. While the e-commerce industry is actively engaged in trimming the channels to make the goods available to the consumers at earliest, hasty purchases by consumers may lead to the selection of a wrong product. Such products are often returned to the producers. Therefore, modern day e-commerce companies along with the ‘buy anywhere’ mantra are equally concerned about ‘return anywhere’ concept, as poor service with respect to the return of goods may lead to the loss of customers. This arrangement of flow of goods back from customers to the company is termed as’ reverse logistics’. Advocates of strong ‘reverse logistics’ state that five R’s cover all aspects of reverse logistics. These 5 R’s comprises are -
lReturns and Exchanges: Here the customers start returning the products due to reasons like damaged/defective products or the product failing to meet expectations. Estimates state that in developed countries, 47% of high-tech shoppers have returned or exchanged an item purchased online.
lRecalls: When a sold product encounters a defector potential hazard, it calls for a system and processes in place to receive, replace, reclaim or resell that product.
lRepairs: Companies generally prefer to repair and return the product rather than replace it, owing to inventory costs. In case the faults in the returned products are too severe, then the manufacturers refurbish or remanufacture the products to a condition that is more like new. Reusing materials from returned products is becoming a common practice today.
lRecycling and Disposal: When products reach the end of their life cycle, they are required to be scrapped. Here the manufacturers look for safe, environment-friendly and cost-effective ways for disposing such waste.
lRepackaging: In case when the returned products are tested and cleared, then these products are simply repackaged and returned to the inventory as soon as possible. However, in case of minor flaws, the products are repaired, reconditioned and repackaged for resell.
Statistically, e-commerce revenue in India is expected to reach $120 billion by 2020 and reverse logistics may hinge somewhere around $50 billion which indicates that nearly 40% of the goods procured will be returned. The products so returned are recycled, reused for materials, refurbished or repaired and remanufactured. For example, a mobile phone when returned to the company in reverse supply chain gets dismantled and its parts which can either be reused or re-utilised, are again sent back to the consumer. Thus, reverse logistics proves instrumental in saving the environment.
Why reverse logistics is important in India
Keeping in view the environmental concerns and need for sustainable development, several legal regulations has been passed in countries like Germany (retrieving packaging and electronic devices regulations), Netherlands (with its stringent automobiles laws) and Brazil (Brazilian National Solid Waste Policy). As far as India is concerned, we have enacted E-Waste (Management and Handling) Rules, 2011 which became effective from May 2012 which further got revised to the E-Waste (Management) Rules, 2016 and came into effect from October, 2016. These rules brought the manufacturers, dealers, refurbishers and Producer Responsibility Organisations (PRO) under its ambit. Though the regulations are being made - they are in their infancy - whereas the challenge posed by increasing e-waste is becoming monstrous.
As per the United Nations University Report published in The Global E-waste Monitor in 2017, India generates about two million tonnes of e-waste very year and ranks fifth among e-waste producing countries behind the US, China, Japan and Germany. This e-waste finally finds its way back to the unorganised Indian market for recycling and disposal where small and informal businesses (commonly working with child labour) separates the second-hand products and e-waste, often at the cost of the labourer’s health. Thus, it becomes imperative that reverse logistics should be practiced in electronic units.
Challenges in reverse logistics for India
Firstly, the reckless selling of products by companies in order to gain a sizeable market share leaves no space for reverse logistics. However, it is now turning out to be a necessary evil which probably will become a hallmark of company’s social responsibility in future. Secondly, there are no cut and paste solutions that can work in context of reverse logistics. Solutions have to be reflective and innovation-driven. Thirdly, because of geographical constraints, far flung and rural areas may not be properly catered by e-commerce companies. With more than 65% of the Indian population residing in rural areas, sending the product backward in the supply chain may turn out to be a big problem. Last but not the least, mediator companies which connect the producers and consumers are generally operating in a small scale with not enough capacity to control information and logistics. Additionally, they don’t have power to influence the whole supply chain in order to reach the coordination level and that promotes inefficiency with respect to reverse logistics.
However, these challenges can be sorted. Dedicated third party engagement can greatly aid the situation. It will free the producers and suppliers and allow them to concentrate on other critical tasks. With the help of advanced technology, information related to the items returned and their fate should be shared with both the e-retailers as well as producers. A sound reverse logistics model can offer a viable solution to the e-waste problem in India.