A System Dynamic Model to Assess Cost and Profitability in Reverse Logistics in Apparel Industry

Abstract

AbstractReverse Logistics has become an inevitable process of any company's business model. It is concerned with such issues as used goods, defective and returned goods from customer end to the manufacturers. The returned goods can be reprocessed/recycled and can create value. However, the entire process of reverse flow of returned goods also incurs cost attributed to facility, inventory, transportation and others. These cost implications have hindered the popularity of Reverse Logistics among the original product manufacturers. Different industry verticals are having varying issues of challenging nature in reverse logistics.India is the second largest producer of textiles and garments in the world. It has an enormous raw material and manufacturing base. The domestic textile industry accounts for 14% of total industrial production. As of today, it is the second largest employment provider in the country. There are challenges related to Reverse Logistics in the apparel sector. There are many issues related to returned goods in apparels. It is quite a common phenomenon for businesses in the apparel industry to shy away from undertaking this function because of the huge costs that accompany the processes. This paper looks at return issues related to reverse logistics in the apparel industry in India. The authors are proposing a system dynamics model to assess the long‐term cost implications and profitability of Reverse Logistics in the apparel sector in India.