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Important Considerations for Reverse Food Logistics

This article discusses the important consideration when integrating reverse logistics in the food industry. These considerations indicate the connection between reverse logistics and food wastage. Additionally, it highlights the beneficiary aspects a company can gain through implementing efficient reverse logistics. Firstly, it helps to minimize the impact of food wastage by creating new values for the rejected food products. Secondly, it provides partnership opportunities and allows the company to gain competitive advantages in the market. Lastly, the company can obtain genuine information that was utilized to improve the company’s current business strategy on products and services to increase customer satisfaction and retention rate.

Global Awareness for Food Wastage

On average, 2.54 billion tons of food are wasted in a year, which is equivalent to 40 percent of the total food produced within a year. These potentially contribute to 10 percent of the greenhouse gases produced which trapped heat on the earth’s surface, resulting in climate changes. Food wastage comes from either food being disposed of within the supply chain process or consciously disposed of during consumption. Food wastage implies both resources and financial loss for the company and consumers. This has rapidly become an important consideration for a company that seeks to maximize profitability and move towards a more sustainable and eco-friendly business process. Companies such as Nestle and McDonald’s are currently attempting to incorporate reverse logistics to reduce, if not mitigate food wastage. The key concept of reverse logistics is to process discarded food waste into reusable resources to minimize wastage. Ultimately, it improves a company’s reputation as an eco-friendly company and is more likely to attract environmentally conscious consumers.

Importance of Competitive Advantage

With digitalization, consumers can now purchase their daily necessities from multiple platforms. E-commerce, which involves online shopping through devices such as smartphones and tablets is the most trending platform. However, online businesses today would only be able to market their products and services through images, live-streaming, and videos without the ability to provide customers with a sensory experience. Survey has shown that online businesses face up to an 89 percent return rate where nearly 50 percent comes from high-value foods products. Often, products sold from online purchases have failed to meet the consumer expectation in terms of the food appearance and taste, etc. Thus, online businesses must establish a hassle-free return policy for their consumers. In this way, a business can build greater trust in consumers and assurance for their purchase which aids in promoting a fruitful long-term business relationship with the company. Thereby, companies that can provide return services for consumers will gain a competitive advantage over their competitors and will aid businesses to increase market shares.

Importance of Product Value

The value of a product diminishes once the product has been rejected either by the company or the consumer due to various reasons. For instance, damage in food packaging due to shipping fault or other reasons, expiry of food products, or massive food recall by a company or by the relevant government sector. These will create a substantial financial and resources impact on the company if they have no means of reusing the rejected products. Successful companies such as Amazon are looking into integrating reverse logistics to create new values for the rejected food products through different means. Amazon’s warehouse work as a distribution and reprocessing center where rejected food waste is examined on whether they are qualified for reselling purposes. This allows companies to retrieve a minimum value from the rejected foods rather than letting them go completely to waste. Thus, a company with reverse logistics should continuously seek improvement in its reverse process to further maximize its gain from this process. As shown in statistics, the company is able to minimize its cost for reverse operation from 10 percent to 1 percent of its total supply chain cost with efficient reverse logistics.

The Partnership Opportunity

Reverse logistics can only be implemented successfully when a company has the knowledge, skills, capacity, and capability to convert food waste into reusable and profitable products. In order to achieve successful reverse logistics, companies will have to source partnership opportunities to re-manufacture rejected food products into valuable products. For instance, “Waste2func” is a US campaign that involved a partnership between 12 parties from universities, SMEs, and large enterprises such as Evonik. These parties gather food waste through reverse logistics and turn them into bioplastic with aids in research, innovation, and technology.


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The bioplastic can be manufactured into usable products such as biodegradable plastic packaging and even medical implant. This campaign helps companies to reduce food waste in long term and creates an opportunity for companies to generate yield. Without partnership opportunities, companies will face difficulties in obtaining new values or purposes from the rejected products due to financial and resources constraint. Therefore, the partnership has become an important factor in maintaining sustainable reverse logistics.

Importance of Genuine Business Information

Today, companies can easily gather feedback on their products through surveys, interviews, or even blogs reviews. However, these methods may be costly, time-consuming, or might even inaccurately reflect customers’ needs and expectations for products. Therefore, reverse logistics are integrated into various large companies such as Amazon and Shopee as an important part of their operation process. The key reason is that these companies realized that reverse logistics provides an efficient and effective data collection strategy. This strategy allows companies to obtain genuine feedback from their customers. For instance, the Shopee return policy requires customers to indicate the actual cause for return with proof of evidence in order to raise for product returns and to get a refund or exchange. This is to ensure that only products with valid reasons are able to seek product returns. With this information, companies can better understand their products and customer requirements. This will then provide advanced insights for the company in making better business decisions in improving and developing new or existing products, and eventually, lowering the rates of returns when the products are able to satisfy consumers’ needs.

Importance of Customer Satisfaction

The customer satisfaction level is a keys driver in determining a company’s financial performance as a high satisfaction level would imply higher customer retention rates. With the rapid growth in digitization, return policy has become an important factor that consumers would evaluate especially for online purchasing where there is a lack of sensory experience. A recent study has shown that up to 60 percent of consumers would review the return policy of the platform before checking out from their cart when shopping online. This indicates that the ability to provide clear and transparent return processes and policies is highly crucial in today’s market. This shows that having an effective return policy will provide the customer with greater assurance and trust towards their purchase. Thereby, it highlights the need for efficient reverse logistics that aid in providing the customer with streamlined return processes. Ultimately, a company that is able to retain highly satisfied customers will more likely to achieve a positive branding image.

Importance of Customer Satisfaction
Image is taken from SIPMM: https://sipmm.edu.sg/events/sdpp/

Conclusion

In conclusion, it is important that a company should take into consideration of the 6 important aspects mentioned. In the long-term, only will the company realize the severity of the lack of reverse logistics. For instance, the large amount of food waste that potentially affects the environment and the financial loss incurred due to excessive disposal of rejected goods. Additionally, the lack of reverse logistics would also indicate that the company is no longer entitled to the opportunity to build genuine partnerships and obtain quality information. Without this information, it would be a challenge for the company to accurately identify key areas for products improvement. Ultimately, it will affect customer satisfaction, brand image, and lower retention rates when the product does not satisfy the needs of its customer.


References

Jeanna Courter. (2017). “E-Commerce Returns: Why Return Policies are Key to Customer Satisfaction”. Retrieved from http://www.pbd.com/blog/ecommerce-returns-key-to-satisfaction, accessed 19/03/2022.

Judy Yang Lan, DLSM. (2021). “Key Factors to Overcome Challenges in Reverse Logistics”. Retrieved from SIPMM: https://publication.sipmm.edu.sg/key-factors-overcome-challenges-reverse-logistics, accessed 27/03/2022.

Nestlé. (2022). “Reducing food waste and loss”. Retrieved from https://www.nestle.com/sustainability/waste-reduction/food-loss-waste, accessed 16/03/2022.

Sunny Chaudhary, DPSM.(2019). “Key Considerations for Reverse Logistics of Agricultural Products”.Retrieved from SIPMM: https://publication.sipmm.edu.sg/key-considerations-reverse-logistics-agricultural-products, accessed 27/03/2022.

Todd Wilson. (2018). “Touching Experiences: Bringing Tactile Sensation Into Online Shopping”. Retrieved from: https://www.adelphi.edu/news/touching-experiences-bringing-tactile-sensation-into-online-shopping/, accessed 17/03/2022.

Winnie Teh Cheng Hoon, DLSM. (2022). “Evaluating Lean Performance for Reverse Logistics”. Retrieved from SIPMM: https://publication.sipmm.edu.sg/evaluating-lean-performance-reverse-logistics/, accessed 27/03/2022.

World Wildlife Fund,(2014).” We’re losing 40% of the food we produce. Here’s how to stop food waste”. Retrieved from: https://www.worldwildlife.org/stories/we-re-losing-40-of-the-food-we-produce-here-s-how-to-stop-food-waste, accessed 15/03/2022.

Edmond Fong Mun Seong
Edmond Fong Mun Seong
Edmond Fong Mun Seong has substantive years of experience in warehousing and logistics operations, and specifically in the skincare and FMCG industry. He holds an Executive Certificate in Supply Chain Management and he is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Edmond completed the Diploma in Logistics and Supply Management (DLSM) in March 2022 at SIPMM Institute.
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