One man's trash...

Asia- With a notable lack of bottle recycling, plastic and paper recycling and computer parts disposal procedures, it is clear reverse logistics in Asia has not reached the same stage as it has in Europe and the US.

There are, however, considerable benefits to be gained by investing in the supply chain handling the backflow of products.

According to Frost and Sullivan Asia Pacific director of transportation and logistics practice R Gopal, corporations with a good reverse logistics system in place are able to recapture profits through asset recovery, a segment of growth that is often overlooked.

Through reverse logistics, companies are also able to gain feedback on OEM quality and design, Gopal says.

However, because of the inherently fragmented Asian landscape, the reverse logistics function is commonly outsourced. "Reverse logistics is among some of the top key functions currently outsourced," Gopal says.

According to him, this is due to Asia's diversified landscape, where one system which works well in Singapore for example, will have very different implications on a company's customers in Thailand. In situations such as these, an organisation is unable to engineer the same reverse chain across the different markets.

In spite of this, the value in reverse logistics should not be overlooked - with better insights into what customers are sending back, companies can re-engineer their supply chain in the hope of minimising the need for reverse logistics.

This can in turn translate into significant savings in the logistics. According to studies by Frost & Sullivan, companies spend about 14.4% of their total costs on logistics, of which reverse logistics accounts for 4-14%.

Apart from getting better insight into their products, large corporations across the world are investing more into constructing a smoother reverse logistics system as part of a wider customer commitment strategy.

"Reverse logistics is one of the tools companies can use to increase service quality," Gopal says. "It is a commitment to after sales service to their customers."

This aspect of the reverse chain has gotten more spotlight than ever, spurred by the flurry of product recalls in 2007 that saw large corporations digging deep into their supply chains and hauling all their products back to source.

In fact, Gopal believes the reverse flow of the supply chain should not take less precedence than the forward flow of getting products to customers. "Reverse logistics is not too far from the basic functions of outbound and inbound logistics in terms of importance," he says. "It can and should be considered critical and on par with information management and forward logistics."

Key industries that have good reverse logistics systems in place in Asia include the electrical and electronics, petrochemical and polymer, engineering support and the machinery and equipment industries, a Frost and Sullivan report reveals.

Service parts distribution points are commonly used in the reverse supply chains powering the electrical and electronic industries in Asia. Singapore, once touted as the service parts distribution hub of choice is finding competition in neighbouring countries, Gopal says.

Singapore now has strong competition from neighbouring Malaysia, Gopal says. Penang, in particular is a strong competitor as it houses Dell's operations.

Thailand too, is beefing up its reverse logistics infrastructure in terms of service parts distribution hubs, backed by efforts from the Thai government to develop the sector, Gopal says.