Digital technology in reverse logistics

Published by Ngoc Tran on 23 March 202223 March 2022

Reverse logistics has become a more popular topic since several companies have learnt from their competitors and researched that it did bring benefits if being performed properly. Those organizations have enjoyed success from reverse logistics, not solely from their visions, but also from utilizing digital technology. Let’s discover how companies have applied technologies into improving their reverse logistics.

#1: Radio Frequency Identification (RFID)

The traceability of a product in reverse logistics is possible with the use of RFID. An RFID system consists of an antenna and a transceiver, which can read the radio frequency and transfer the information to a processing device, and a transponder (or tag). When triggered by radio waves from a nearby RFID reader device, the tag transmits digital data (e.g. inventory number) as a feedback signal to the reader. An RFID tag is attached to each product, which sends different signals. Have a look at the Figure 1 above (Payaro, n.d.) to know how RFID works in reverse logistics.

The information system requires a unique central database collecting product code and the technical characteristics of the products. This database is updated when the product is sold via a Web-portal or a GSM (Global system for mobile communication) system. During the life cycle, if the product needs assistance, the technicians update information in the tag. At the end of the lifecycle, the product is brought to the collection and sorting center where the tag will be read. Then, the center knows the modules in the product that can be remanufactured or refurbished, the demand for remanufacturing of the firm, the hazardous components and eventually the instruction for disassembly. This information will be sent to the manufacturer who will update its database with the information contained in the tag. Finally, the collection and sorting center decides if the product will be remanufactured, refurbished, disposed or incinerated.

#2: Blockchain 

Figure 2. The Blockchain process (D’Amico, 2021)

Blockchain technology (BCT) is a digital distributed ledger (Figure 2) which enables decentralization, real-time peer-to-peer (P2P) operations within a P2P network, transparency, etc.. In reverse logistics data held in the blockchain can confirm that returned products are genuine against original transactions, identify the retailer who sold them and the quantity, and then continue to track them after they have been refurbished, remanufactured, or sent for disposal. Furthermore, blockchain can assist the collection of items through crowd-shipping (a form of crowd-sharing resources) where forward logistics providers would like to return with cargo in a reverse logistics situation, especially for materials that can be remanufactured. Besides, BTC, together with smart contracts can help ease transactions by holding actors in the reverse logistics channels accountable and adhere to their responsibilities in each phase. They also help develop an appropriate Gatekeeping, which filters the returned products by storing critical information associated with the product identification (e.g. series number), manufacturer, bill of material, hazardous components, purchase data, etc. This is the process through which a company knows which stage the returned goods belong to and can decide whether it is suitable to be processed in reverse logistics.

Another application of BCT is tokenization, which is considered as a digital twin that depicts products and materials in the form of a token that can trace the materials in a supply chain. RecycleToCoin is an initiative to encourage people to recycle waste in the UK. When recycling their plastic and aluminium cans, participants are rewarded with virtual tokens valued as gift cards or given to Plastic Bank which helps developing countries recycle ocean plastics.

#3: Cloud computing and Artificial Intelligence (AI)

These two technologies can be combined and applied in the context of Predictive analytics incorporated in reverse logistics operations. Computers can monitor and processes historical data to find patterns and trends, which will be used to predict what is likely to happen and thus companies can come up with solutions to alter the outcome. Sustayn, an IT company, has developed smart recycling and waste management systems that incorporate machine learning to analyze and to distinguish various types of products; such systems lead to an improvement in collecting and sorting. When combined with predictive analytics, these smart systems enable companies using third-party logistics (transport carriers) to predict when a load is ready and notify the carrier ahead of time. As a result, it guarantees that the load will be ready for the carrier to pick it up. This ultimately streamlines the reverse logistics while reducing costs, errors and human efforts. Companies using predictive analytics into their reverse logistics operations have gained an improvement in service levels whereas saving freight costs between 5% and 10% by reducing last-minute load requests (Jadallah, 2020).

It is great to see some positive developments and attention in enhancing reverse logistics process. Digital technologies can be applied in several industries and areas, together with the creativity and capabilities of human. Now, reflection and brainstorming time: Do you know other digital technologies or methods that have sucessfully implemented in reverse logistics? Share in comment to our community!

Thank you for reading and see you in the next blog!

Recommended reading:

Analysis of Challenges and Potentials of Reverse Logistics (D’ Amico, 2021)

Information management in reverse logistics (Jovic et al., 2020)

Digitalizing the Closing-of-the-Loop for Supply Chains: A Transportation and Blockchain Perspective (Bekrar et al., 2021)

http://www.payaro.com/documents/Reverse%20logistics%20and%20RFID_payaro_2.PDF

Jadallah, S. (2020) https://www.ascm.org/ascm-insights/use-artificial-intelligence-to-improve-reverse-logistics/

Series “Reverse logistics”