Reverse Logistics: Evaluating H&M's International Operations Report

This report provides a comprehensive literature review on reverse logistics, specifically in the context of Hennes & Mauritz AB (H & M) within the global logistics market. It examines the driving forces behind reverse logistics, including internal and external factors such as operational, competitive, economic, and legal drivers. The report delves into the strategic utilization of these forces and the implications of various barriers, such as management, economic, and market-related obstacles. Recovery options within the reverse logistics system are discussed, along with the critical features of a recoverable manufacturing system, and the differences between forward and reverse logistics are highlighted. A case study on H&M is included, analyzing its logistics network and identifying performance metrics. The report concludes with recommendations for improving reverse logistics practices within the company.

Reverse logistics
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Running Head: Reverse logistics
Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................3
Literature review on Reverse logistics............................................................................................4
Definitions of Reverse logistics...................................................................................................4
Methodology................................................................................................................................5
Driving forces of reverse logistics...........................................................................................5
Internal drivers.........................................................................................................................5
External drivers........................................................................................................................7
Strategic utilization of driving forces..........................................................................................8
Strategic implication of barriers..................................................................................................8
Recovery options of the reverse logistics system......................................................................10
Critical features of the recoverable manufacturing system.......................................................10
Hindrances and Drivers of Reverse Logistics...........................................................................12
Case study......................................................................................................................................13
Interpretation of the useful logistics network type in the organizational context of H & M.....13
Identification of performance matrices for reverse logistics system of JIS Logistics...............13
Differences between the Forward and Reverse logistics...........................................................15
Recommendations..........................................................................................................................16
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
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Running Head: Reverse logistics
Executive summary
The primary purpose of this report is to present a well-articulated literature review on Hennes &
Mauritz AB (H & M) in the global logistics market. Factors of reverse logistics, recovery options
in terms of credit or value and features of recoverable production unit are critically mentioned in
the strategic report. Through this study, suitable and sufficient logistics network can be
identified, and the scope of improving the effectiveness of reverse management for H & M can
be understood. The critical factors of reverse logistics are further defined in this report. These
factors of reverse logistics are useful for evaluating the performance and productivity rate of H &
M in terms of better customer satisfaction capital growth, profitability, cost-effectiveness,
innovativeness and competitive advantage.
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Running Head: Reverse logistics
Introduction
The definition of sustainable supply chain management has changed with the revolutionized
globalization, technological advancement and effective communication. This assignment on
reverse logistics aims to evaluate the impact of various success factors of reverse logistics and
different recovery and distribution operations in the context of H & M in the global market
scenario. H & M holds a legacy of 72 years in the global logistics and supply-chain market of
clothing apparel and accessories. Being a fashion level company, H & M offers services for the
client companies through procurement, transportation and distribution. Global logistics solutions
include superior distribution services and warehousing as essential parts of supply
chain management programs across the globe. The company is dedicated to delivering
transportation and value-added service to small, medium to large enterprises with customized
solutions for their significant stakeholders like shareholders, suppliers, manufactures and finally
customers (H & M, 2019).
This assessment in the context of H & M would help interpret the best reverse logistics solutions
and identify the significant hindrances that are lowering the performance scale of the company.
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Literature review on Reverse logistics
Definitions of Reverse logistics
Supply chain management is vital for proper channelization of goods and services. Supply chain
management involves activities like planning, implementing and supervising over the fair
balance between the inputs of raw materials and outcomes in terms of services and manufactured
goods (Agrawal, Singh and Murtaza, 2015). The Council of Supply Chain Management
Professionals has demonstrated that reverse logistics focuses on the cost-effective and timely
circulation, consumption and disposal of raw materials, finished goods, information and services
from the manufacturers to the end users (Mathiyazhagan et al. 2013). The reverse logistics
system is comprised of activities like moving of resources or products to the end users to
collecting the used products for refurbishing and returning of damaged or used products to the
warehouses (Mangan, Lalwani and Lalwani, 2016).
Through this process, the customer gets values for their belief over the goods and services that
are offered by companies. Essential activities like returning of products because of quality issues,
collecting damaged goods from the customers, recycling issues, disposition of hazardous
products, recovery of assets etc. are part of this reverse management framework.
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Methodology
In this literature review on reverse logistics, the motivating drivers and major hindrances are
discussed with relevant examples.
Driving forces of reverse logistics
Supply chain management is essential for managing the movement of goods and products to the
consumer. As stated by Suryanto, Haseeb and Hartani, (2018) supply chain management needs to
achieve sustainability in terms of better communication, easy returns and secure transaction of
money. In the closed loop supply chain method creation, delivery and recycling of disposed of
products can be better understood with sustainable supply chain management (Govindan,
Soleimani, and Kannan, 2015). Driving forces of reverse logistics can be bifurcated into internal
and external drivers.
Internal drivers
Based on motivational approaches of the reverse logistics practices, the internal drivers can be
identified. For instance, profit-making strategies like the cost-effectiveness, capital growth and
profitability are regarded as the motivational sources that can elevate the operational
effectiveness of reverse logistics (Hofer, Knemeyer and Murphy, 2015).
Operational drivers
 Operational driving forces include the factors that are essential for an organizational
environment.
 If the organizations collect all those disposed of but recyclable products and refurbish
those into the workflow, manufacturing organizations and warehouses can gain additional
monetary, operational profit and reduce the extravagant expenditure.
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Running Head: Reverse logistics
 Inventory cost, as well as product transportation costs, would get reduced with the
implication of operational drivers into the supply chain management system and
beneficiary for gaining an edge over the competitors in the global market scenario.
 Effective conservation of resources and minimization of opportunity expenses of obsolete
and dangerous products (Nel and Badenhorst, 2012).
Competitive drivers
 Conduction of recovery operations is useful for reducing the carrying costs and expenses
of the reverse logistics system.
 Customer satisfaction is of profound importance in terms of attaining the sustainable
market capitalization and achieving the business objectives.
 Recycled inputs are beneficial for companies for introspecting and achieving their
company objectives and balance the environmentally sustainable brand image.
 Operational performance and organizational brand image have an essential role in
attaining economic growth. It has been observed that customers prefer companies that
have a good market reputation and brand image.
 When the customers would get similar services in terms of affordable supply chain
solutions that are provided by the competitive sources, they would opt for the better one
(Wong and Tang, 2018).
Economic drivers
 Forward flow of products and goods are included in organizations under the open-loop
logistics network that are effective for drawing monetary profit in the workplace.
 Closed loop logistics network is essential for considering the risk opportunities and
revenue growth opportunities.
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 Moreover recapturing would help the organization to attain the value of returned and
damaged products.
 Reverse logistics practices have been popular in terms of market capitalization and
market expansion across the global logistics market (Govindan, and Soleimani, 2017).
External drivers
External drivers of reverse logistics include the elements of the external business environment
like effective communication and a strong relationship among the stakeholders. Typically, the
logistics companies must deal effectively with the manufacturers, suppliers and finally customers
(Hwang, Hong, and Lee, 2017). Driven by triple bottom line factors, external factors mainly
consider customers value perception.
Legal drivers
 Legal factors are extremely for the companies to maintain the perfect balance between
the outsourcing and distribution of products in the inbound market or directly to the
consumers.
 Aids the nations to implicate laws on customer safety and manufacturers responsibility to
ensure efficient handling of hazardous products, recycle of disposable items and
aggregation of bio-degradable, recyclable but used products.
 Proper disposal of end-of-life products is vital for achieving the operational growth of the
organization as well as sustaining the environmental brand image.
 Strict regulation is essential for active business in domestic as well as international
market. Packaging waste, disposal items and non-recyclable waste must be dealt with
caution as these can later pollute the environment (Giri, Chakraborty, and Maiti, 2017).
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Strategic utilization of driving forces
Procurement involves recycling of damaged and waste products even end- of-use (EoL)
products. On another hand Customer satisfaction can be considered as responsive and effective
logistics program help the customer to get loyal to the company. Hustle-free reverse logistics
ventures are beneficiary for an individual organization as well as for the overall stakeholders.
Furthermore, Corporate Social Responsibility (CSR) activities are essential for establishing the
environment-friendly, responsible and positive brand image of the organization in front of the
competitors as well as the customers.
Strategic implication of barriers
Barriers or hindrances are responsible for lowering the operational effectiveness of an
organization. Obstacles like operational carriers for instance management barriers, economic
barriers, organizational barriers, market-related barriers, and technological as well as legal
restrictions. As stated by Murphy and Knemeyer, (2018) lack of communication between the
management and employees, lack of knowledge regarding reverse management, uncertainty
avoidance, lack of progressive vision and non-integrated reverse logistics can lower the
sustainable economic growth of the company. On another hand, Lower valued products
recovered from expensive end-of-life products, high operational expenses, lack of interest among
shareholders to invest in reverse logistics, lack of reverse logistics transactional system are
beneficiary for better understanding of best strategic practices (Jordan and Bak, 2016).
The organizational framework is dependent upon proper foundation and identification of the
critical elements like availability of resources, technical training, expert guidance, supervision,
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performance measurement scale etc. Additionally, several issues like the uncertainty of
customer preference, change of global fashion trend can hamper the organizational success of the
fashion industry (Flick, 2018). Moreover, customer perception, lack of support from other
stakeholders and uncertainty of quality and quantity of products are essential characteristics of
market-related barriers (Liu et al. 2017). In the era of digitalization, the organizations need to
implicate technical facilities so that consumers to manufacturers can all become aware of the
schedule of products delivery to shipping. Additionally, lack of transparency, safety and
complexity in transactional services, lack of knowledge on reverse logistics over technological
infrastructure and lack of refurbishment techniques are some valid examples of technical
obligations.
Multi-national retail companies deal in several countries and promote their goods-services over
the online or offline platform. The fashion brand companies need to import resources from
another place and sell the outcome into other countries. A multi-national organization that is
dependent upon the logistics network need to implicate legal framework in its business and abide
by the rules and regulations of the importing nations (Maloni et al. 2016). Otherwise, the global
supply-chain network would be broken. Inconsistent waste management techniques, lack of
green practices, lack of concentration over the ecological environment and loose regulatory
framework are considered critical issues that can affect the legal framework.
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Recovery options of the reverse logistics system
Figure 1: Reverse logistics framework
Source: (Mangan, Lalwani and Lalwani, 2016)
A structural scaffolding of reverse logistics framework is dependent on the balanced notion of
forward and reverse logistics. Primary functions like recycle, remanufacture and recycle revolve
around the source, manufacturer to sales-marketing personnel. If products quality standards are
not matching and having manufacturing issues, the products are identified before the whole set
of products are segregated into the market. After identifying the end products, those are collected
and safely disposed of.
Critical features of the recoverable manufacturing system
Reverse logistics under the closed loop supply chain is severely influenced by the economic,
environmental, legal, social and political factors of the business environment. Reverse logistics
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framework has been beneficial for analyzing the undermining issues of an organization
(Cannella, Bruccoler and Framinan, 2016).
In closed loop supply chain management balanced forward and reverse logistics are essential for
ensuring the ecological, sustainable and socio-economic recovery system (Heydari, Govindan
and Jafari, 2017). The key elements that are part of the recoverable manufacturing system are
green operations, manufacturing process, disposal management process and product recycling
process (Hsu, Tan and Mohamad Zailani, 2016).
Figure 2: Closed-loop reverse logistics system framework
Source: (Giri, Chakraborty, and Maiti, 2017)
In the case of the open-loop reverse logistics system framework, the suppliers, producers,
distributors, collectors and customers work in an open market space. These entities are not
bounded by any external or internal forces but work collaboratively.
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Figure 3: Open-loop reverse logistics system framework
Source: (Giri, Chakraborty, and Maiti, 2017)
Hindrances and Drivers of Reverse Logistics
Key attributes Hindrances Drivers
Cost-effectiveness Quite expensive Include lower charges
Major
stakeholders
Lack of knowledge and
awareness on customer
satisfaction
Focuses on customers
Image-wise Lack of technological
advancement and
appropriateness
Corporate image is promoted
Market structure Complex market structure Well-structured market structure elevates
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wise lowers the growth the growth
Case study
Interpretation of the useful logistics network type in the organizational context of H & M
H & M has mentioned that the discovery of business demands, active reciprocation, strategic
planning and actual execution of plans are part of their organizational system framework
(Agrawal, Singh and Murtaza, 2015). This multi-national fashion retail company is presently
headquartered in Sweden. The demographical position, rules and regulation, local government
and availability of resources have helped H & M to provide comprehensive retail services to the
consumers in the domestic as well in the international market. The customer-centric company
has mentioned that flexible, cost-effective business solutions and transparent logistics practices
have helped them to offer value-added services to their customers (Sweeney, 2013). Being a
third-party logistics company, H & M is based on the three predominant fields-1) streamline
manufacturing and outsourcing of products 2) active and secure handling of inbound shipping 3)
distribution of the products.
Identification of performance matrices for reverse logistics system of JIS Logistics
H & M has become globally renowned as one of the fashion and clothing based Retail Company
in the world of retail and supply chain management network. The company deals in freight
shipping, product outsourcing, market distribution and warehousing of the products. H & M
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Running Head: Reverse logistics
provides retail services across the globe with more than 4500 retail outlets and has become a
billion-dollar company with high preference score among the global natives
The performance ratings of H & M can be evaluated based on responsiveness, customer
satisfaction index, cost-effectiveness and standard product quality.
Performance metrics Goods recovery alternatives
Required time product refurbishment Reuse
% product that can be renovated and modified to another
product
% product volume/ weight recovered
% of recyclable materials available that are part of ‘end of
product life’ product group
Remanufacture
% product in terms of volume, mass, weight disposed at the
dump yard
Recycle
The ratio of potential recyclable products and containers
by-products that are already recycled
Return ratio of materials
% purity level that is recovered from the damaged
condition
The fraction of returned products
Other than these factors handling cost, ownership cost, percentage of cost refurbished and finally
the percentage of energy that has been utilized while handling returns.
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Differences between the Forward and Reverse logistics
Attributes Forward logistics Reverse logistics
Structure wise Standard product framework Refurbished framework
Cost sensible Easier accounting system Complex accounting system and
visualization of cost-effectiveness is
critical
Disposal system
smart
Clear disposition alternatives Conditional and situational based
disposition system
Inventory wise Consistent inventory system Inconsistent inventory system
Important
stakeholders
Mainly important to the
manufacturers
End-of-line personnel are important
Thought
process
Deterministic The stochastic thought process that is
based on a probability distribution
pattern
Visibility wise Maintains real-time product
tracking process
Lack of transparency and clarity in terms
of the real-time product tracking process
Financial
implication
sensible
Clear and transparent commercial
implementation
Unclear commercial implementation
Based on Cost and profit optimization Environment-friendly principles and
regulations
Forecasting
type
Straightforward and easy
forecasting of goods
Complex and difficult product
forecasting
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Marketing
techniques
Traditional marketing techniques Complex marketing techniques
Transportation
technique
Goods and products are
transported to many locations
from one location
Returned, damaged products are
collected from many places and are
submitted to one place
Speed factor Sped is essential and essential
for gaining a competitive edge
Considered not at all important
Recommendations
The Sweden-based clothing apparel retail conglomerate has achieved extreme popularity among
the youth as well as the teenagers' because of its innovative sales-marketing strategies and
transportation framework. The company majorly deals in metropolitan cities worldwide. Instead
of that the market research team of Hennes & Mauritz AB (H & M) can look for warehouses,
central logistics hubs and freight services for offering forward and reverse logistics services in
the closed loop business framework.
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Conclusion
In conclusion, in the context of H & M, the way reverse logistics can impact the overall logistics
network has been discussed. Detailed interpretation of closed loop logistics networks and open
loop logistics networks are essential for understanding forward and reverse logistics framework
worldwide. This Sweden-based logistics organization has become one of the leading companies
in the clothing and accessories sector in terms of market capitalization, customer satisfaction,
quality standard, logistics and innovation. Through this assessment on reverse logistics, the
possible and suitable frameworks for the organization are interpreted and discussed in detail.
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References
Agrawal, S., Singh, R.K. and Murtaza, Q. (2015) A literature review and perspectives in reverse
logistics. Resources, Conservation and Recycling, 97, pp.76-92.
Cannella, S., Bruccoleri, M. and Framinan, J.M. (2016) Closed-loop supply chains: What reverse
logistics factors influence performance?. International Journal of Production Economics, 175,
pp.35-49.
Flick, A. (2018) Intermodal transport in emerging supply chains: The United States and
European Union perspective.
Giri, B.C., Chakraborty, A. and Maiti, T. (2017) Pricing and return product collection decisions
in a closed-loop supply chain with dual-channel in both forward and reverse logistics. Journal of
manufacturing systems, 42, pp.104-123.
Govindan, K. and Soleimani, H. (2017) A review of reverse logistics and closed-loop supply
chains: A Journal of Cleaner Production focus. Journal of Cleaner Production, 142, pp.371-384.
Govindan, K., Soleimani, H. and Kannan, D. (2015) Reverse logistics and closed-loop supply
chain: A comprehensive review to explore the future. European Journal of Operational
Research, 240(3), pp.603-626.
Heydari, J., Govindan, K. and Jafari, A. (2017) Reverse and closed loop supply chain
coordination by considering government role. Transportation Research Part D: Transport and
Environment, 52, pp.379-398.
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H & M. (2019). H & M offers fashion and quality at the best price/ [online] Available at
https://m.hm.com.entrance.ahtml?orguri=%2F [Accessed 9 May. 2019]
Hofer, A.R., Knemeyer, A.M. and Murphy, P.R. (2015) Achieving and exceeding logistics
outsourcing expectations in Brazil: a replication study. Transportation Journal, 54(3), pp.339-
367
Hsu, C.C., Tan, K.C. and Mohamad Zailani, S.H. (2016) Strategic orientations, sustainable
supply chain initiatives, and reverse logistics: Empirical evidence from an emerging
market. International Journal of Operations & Production Management, 36(1), pp.86-110.
Hwang, D.W., Hong, P.C. and Lee, D.Y. (2017) Critical factors that affect logistics performance:
a comparison of China, Japan and Korea. International Journal of Shipping and Transport
Logistics, 9(1), pp.107-129.
Jordan, C. and Bak, O. (2016) The growing scale and scope of the supply chain: a reflection on
supply chain graduate skills. Supply Chain Management: An International Journal, 21(5),
pp.610-626.
Liu, L., Wang, Z., Xu, L., Hong, X. and Govindan, K. (2017) Collection effort and reverse
channel choices in a closed-loop supply chain. Journal of cleaner production, 144, pp.492-500.
Maloni, M.J., Scherrer, C.R., Campbell, S.M. and Boyd, E. (2016) Attracting students to the
field of logistics, part 1. Transportation Journal, 55(4), pp.420-442.
Mangan, J., Lalwani, C. and Lalwani, C.L. (2016) Global logistics and supply chain
management. John Wiley & Sons.
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Mathiyazhagan, K., Govindan, K., NoorulHaq, A. and Geng, Y. (2013) An ISM approach for the
barrier analysis in implementing green supply chain management. Journal of Cleaner
Production, 47, pp.283-297.
Murphy, P.R. and Knemeyer, A.M. (2018) Contemporary logistics.
Nel, J.D. and Badenhorst, A. (2012) Identifying potential solutions for specific reverse logistics
problems. Journal of Transport and Supply Chain Management, 6(1), pp.73-90.
Suryanto, T., Haseeb, M. and Hartani, N.H. (2018) The correlates of developing green supply
chain management practices: Firms level analysis in Malaysia. International Journal of Supply
Chain Management, 7(5), p.316.
Sweeney, E. (2013) The people dimension in logistics and supply chain management–its role and
importance.
Wong, W.P. and Tang, C.F. (2018) The significant determinants of logistic performance in a
global perspective: evidence from panel data analysis. International Journal of Logistics
Research and Applications, 21(4), pp.431-443
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