No Deposit, No Return: Reverse Logistics and Returnable Packaging

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No Deposit, No ReturnReverse Logistics and
Returnable Packaging

• Dr. Dale S. Rogers
• University of Nevada, Reno
• 28 February 2001

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Reverse Logistics Executive Council

• Mission
• The Reverse Logistics Executive Council is a
  not-for-profit professional organization whose
  purpose is to
• develop best practice industry standards that
  take costs out of the system for consumers,
  retailers and manufacturers
• provide on-going benchmarking
• return causal information in order to improve the
  entire Reverse Logistics process.
• www.rlec.org

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Logistics is

• 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
  origin to the point of consumption for the
  purpose of conforming to customer requirements.
• Source The Council of Logistics Management

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Reverse Logistics is

• 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 or proper disposal.
• Source Rogers Tibben-Lembke

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Reverse vs. Green Logistics

• Reverse logistics refers to all efforts to move
  products or packaging from the point of
  consumption toward the point of production, in
  order to recapture or create value, or for proper
  disposal.
• Green logistics, or ecological logistics, refers
  to understanding and minimizing the ecological
  impact of logistics.

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Reverse vs. Green Logistics
Green Logistics
Reverse Logistics
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Key Reverse Logistics Management Elements

• Gatekeeping
• Compacting Disposition Cycle Time
• Reverse Logistics Information Systems
• Centralized Return Centers
• Zero Returns
• Remanufacture and Refurbishment
• Asset Recovery
• Negotiation
• Financial Management
• Outsourcing
• Packaging

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Adding Value

• Reverse logistics should be a set of business
  processes that adds value to the firm.
• Most firms do not view reverse logistics as a
  value adding process.

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Return PoliciesFrom the Consumers Point of View

• Purpose
• Determine return habits and examine attitudes
  surrounding return policies and processes for
  both brick and mortar and e-commerce retailers.

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Focus Groups
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Internet Results

• Most college students and affluent women had
  purchased over the web
• Surprising number of college students have credit
  cards. Students likely to take return policy
  into consideration when buying over the Internet
• Experienced Internet shoppers consider return
  policies
• Fear of giving out credit card over Internet

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Is it easier or more difficult than returning a
product to a traditional store?

• Generally, the belief was that it is easier to
  return Internet items
• Prefer on-line store that has brick-and-mortar
  location to return to
• They come pick it up
• Packaging critical issue

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Landfills

• Waste disposal has not changed dramatically since
  the fifth century B.C
• Trash was generally discarded without much
  thought given to its effect on people and the
  environment.
• A survey done in 1880 showed that only 43 percent
  of major American cities had some minimal type of
  garbage collection. By the 1930s, this number
  had risen to 100 percent.

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Landfills

• Until the 1950s, waste disposal still consisted
  primarily of burying waste in a large pit.
• By 1959, the sanitary landfill was the primary
  waste disposal system used in American
  communities.

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Landfill Availability

• For a number of years, there has been a
  perception of an impending shortage of landfill
  space
• In 1988, it was believed that nearly half of the
  metropolitan cities on the East Coast would have
  no further landfill capacity by 1990.i
• Although this claim has not been borne out, there
  has been a steady decline in the number of
  landfills. i O.P Kharbanda and E. A.
  Stallworthy, Waste Management Towards a
  Sustainable Society, (New York Auburn House,
  1990).

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Landfill Decline

• In 1986 7,683 municipal solid waste landfills
  (MSWLFs) were listed.
• In 1992, the number of landfills had declined to
  5,345.
• In 1995, the number of municipal solid waste
  landfills had declined to 3,581.

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Landfill Space

• Many smaller landfills are not able to afford the
  cost of being compliant with new regulations.i
  
• According to the EPA's Municipal Solid Waste
  Factbook,
• 29 states have 10 years or more of landfill
  capacity remaining, 1
• 5 states have between five and 10 years of
  landfill capacity remaining, and
• six states have less than five years of landfill
  capacity remaining.ii

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Cost of Landfill Usage

• Rapidly rising prices for landfill usage
• The national average tipping fee in the United
  States increased from 8 to 31.50 from 1985 to
  1996, an increase of 294 percent. This is an
  annual growth rate of 9.4 percent.

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Garbage Generation

• Every year Americans use 75 billion disposable
  paper cups
• The Fresh Kills Landfill on Staten Island, New
  York, is run by the New York City Department of
  Sanitation. According to estimates, in the very
  near future, the total volume of the landfill
  will exceed that of the Great Wall of China

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Garbage Generation

• The average American generates 4.34 pounds of
  garbage per day.i
• According to a 1987 study, the then-current U.S.
  annual waste generation was 228 million tons,
  which is an amount sufficient to cover an area
  654 miles square 10 feet deep
• i EPA Fact Book, 1997.

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Garbage Generation

• The EPA projects that from 1995 to 2000, the
  annual rate of garbage generation per person in
  the U.S. will increase from 4.34 to 4.42 pounds
  per person per day a modest increase of two
  percent.
• Because of increased recycling efforts, however,
  the amount heading for landfills is expected to
  decrease over this period, from 2.47 pounds per
  person per day to 2.38 pounds, a reduction of 3.6
  percent

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European Reusable Packaging

• The Duales System Deutschland (DSD)
• Green Dot

Figure 5.1 German Green Dot Symbol
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German Packaging Ordinance of 1991

• Manufacturers and distributors must accept
  transport packaging, such as pallets, cartons,
  etc., and reuse or recycle them.
•  Retailers must accept back secondary packaging,
  for example, outer packaging, like the box that a
  tube of toothpaste comes in. Distributors must
  accept back secondary packaging and reuse or
  recycle it.
•  For primary packaging, such as a toothpaste
  tube, the same rules apply as for secondary
  packaging, unless the industry establishes a
  collection and recycling system that meets strict
  governmental quotas for the recovery of each
  type.
• Deposit/refund system is required for beverage,
  detergent, and paint containers

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Transport Packaging

• In Germany, transport packaging represents 30
  percent of all packaging
• All transport packaging must be coded for
  recycling
• 1991 to 1996, the annual usage of expanded
  polystyrene (EPS) transport packaging fell 36
  percent, from 31 thousand metric tons to 23
  metric tons

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Transport Packaging

• Of the 1.6 billion pallets in the United States,
  each year, pallet recyclers will process more
  than 170 million pallets for recycling,
  representing 2.6 billion board feet, of which 2.3
  billion board feet will be reused to make new
  pallets.
• National Wooden Pallet Container Association,
  Recycling Solutions for Pallet Disposal,
  (Arlington, VA National Wooden Pallet
  Container Association, 1996).

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Transport Packaging

• Although wood is the most common material for
  pallet construction, plastic pallets currently
  represent about 3 percent of the market, but are
  estimated to be growing by as much as 30-40
  percent per year.
• Each year, 15 billion worth of corrugated
  fiberboard is sold in the U.S. alone, generating
  more than 24 million tons of waste.
• Raymond Communications, Transportation Packaging
  and the Environment, (College Park, MD Raymond
  Communications, 1997).
• iii Minnesota Mining and Manufacturing Corp.,
  3M Gives Business an Eco-Advantage, (St. Paul,
  MN Minnesota Mining and Manufacturing Corp.,
  1997).

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Costs of Utilizing Reusable Containers

• Forward Transportation Costs
• Reverse Transportation Costs
• Container Inventory Management
• Inspection
• Cleaning
• Repair
• Storage
• Sorting
• Adapting for Future Use

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Container Pools

• CHEP model
• Much infrastructure required

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Returnable Packaging Considerations

• Purchase and disposal costs
• Provide better protection for the products being
  shipped
• Flexibility
• Ergonomic
• Environmentally correct

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Reusables

• Heavier than the corrugated materials they
  replace
• Strong enough to be double-stacked
• Cube utilization may not be as good with
  reusables
• Disposable materials may offer a wider variety of
  sizes
• More dunnage material will be needed
• Getting the containers back to the company

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Managing Containers

• Unpredictable cost
• Customer incentive or motivation
• Bar coding to track individual containers. Other
  companies are developing specialized software

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Success Factors

• Transportation Distances
• Frequent Deliveries
• Number of Parties Involved
• Number of Sizes Needed
• Partner Buy-In