The Council of Logistics Management defines logistics as “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.” Reverse Logistics, on the other hand, is the process that includes all the above-mentioned activities, only performed in reverse order. More precisely, reverse logistics refers to the procedure of moving goods from their typical final destination back to their origins. This operation is meant to recapture value from products or to properly dispose of them.
The objectives of reverse logistics include, among others:
improve the quality of products and services by returning defective products and equipment
reduce costs related to packaging and auxiliary materials
be actively involved in protecting the environment
Thus, reverse logistics provides a wide range of opportunities for improvement, ranging from customer service and returns processing, to supplier management and unexpected revenue sources.
The implementation of reverse logistics activities stimulate several key areas that influence performance and which, in the end, have a positive impact on revenue.
Reverse logistics activities are typically processes an organization performs to collect products which are either used, unwanted, damaged or outdated. Packaging and shipping materials returned from the end-user or reseller are also included in this process. Once a product was returned, the organization has many disposal options from which it can choose.
The figure below shows how the recovery value is increased by implementing such activities:
Figure 1. Recovery Value Improvements
Following the completion of a reverse logistics process, the products returned may be sold again but only after being reconditioned, repaired or re-manufactured. However, such products can never be sold as new ones.
When the product cannot be brought back into working order under any circumstances, either because of its poor condition, legal or environmental repercussions, the organization will try to dispose of it with the smallest amount of cost implications.
The organization will retain any materials that still hold value and which can be reclaimed. Other materials that the organization can recycle are removed from the product before finally sending what remains of it to an authorized center, to be properly disposed of.
Usually, packaging materials returned to an organization can be reused. For example, shipping containers or pallets can be reused many times before their disposal. Damaged containers or pallets can often be refurbished and then utilized for the remainder of their life-cycle. The work required to recycle such a product for future uses can be made in-house or with the help of an outside company specialized in repairing shipping containers or pallets.
At the end of the product’s life-cycle, when no more repairs can be made, the reusable materials left of the transportation packaging are salvaged while the rest are sent to an authorized disposal center. In some cases, however, another purpose is given to those materials.
European laws oblige companies to take back the transportation packaging used for their products. Therefore, to reduce their costs, European organizations try to reuse these materials as much as possible.
Strategic variables are not only business elements with a long-term bottom line impact. Organizations should manage their strategic variables for the sustainability of the company. Solutions such as reverse logistics are more than just tactical or operational answers to a problem.
Most professionals interested in performance management must have heard by now about a new hip approach – Objectives and Key Results (OKRs). So, what is it all about? Why is everyone so mesmerized by this new system?
Some may argue that the OKR format became popular because companies with strong brands, such as Google or LinkedIn, credit their success to OKRs. Some might say that it is just another, more flexible, way of working with KPIs.
Others claim that OKRs are simply operational measures, while KPIs reflect the achievement of the strategy. However, supporters of the system state that OKRs represent a tool to create a link between the vision and the reality of an organization.
So, as we can see, there are many ways of interpreting them, but what is the truth behind OKRs and how did they become so popular? Do they really bring superior benefits to organizations compared to other performance management systems or are they used simply because KPIs are starting to be too “mainstream” and the field needed something new?
Timeline of OKR Popularity
Figure 1. OKR Timeline | Source: Author’s Compilation Based on Step by Step Guide to OKRs
OKR Components
Objectives and Key Results is a goal-setting methodology deriving from Management by Objectives, which tries to simplify the concept of performance management. The main goal of this approach is to be easy to use, flexible and answers 3 main questions:
Where do I want to go?
How will I know I’m getting there?
What will I do when I arrive?
Figure 2. OKR Questions | Source: Author’s Compilation Based on Step by Step Guide to OKRs
OKRs are there to better serve fast-changing, agile businesses and environments, given that this system requires regular updates and feedback, as well as employs a smaller time span for changing objectives or key results.
The main changes an OKR-focused system brings are the following:
The achievement of our actions or of what we want to do is supposed to be stretched (60-70% achievable) and set quarterly. In other words, the OKR methodology encourages employees and organizations to set inspirational, challenging, higher-risk objectives, not just operational ones.
The purpose is to strive to do more, which is why a lower achievement than 100% is considered good. The number of objectives is limited to a maximum 5 to ensure employees are focusing on the most important work for one quarter at a time.
Everyone should be involved in the OKR-setting process and employees should be responsible for creating their own OKRs. This automatically creates more empowerment and accountability for the value their job brings. The process of empowering employees to think outside the box, and allowing them to take risks, will result in higher employee engagement.
By not just focusing on day-to-day activities and taking part in a more creative process, your workforce will be able to generate increased levels of innovation as well.
The Value creation theory says Key Results should focus on the impact of activities, not measure the result of the tasks. Setting Key Results that trigger going the extra mile for each employee will create even more value for the entire organization, which will allow it to go even further than planned.
Objectives and Key Results should focus on alignment, not cascading. When setting their own OKRs, employees should take into consideration they own responsibilities, the strategic direction, the already-established OKRs or the management’s aspirations in the organizational context. It is recommended that an employee’s OKRs are actionable by that person, so it’s harder to assign OKRs or create a set of general OKRs for a position.
Given that OKRs are set quarterly and designed to stimulate constant communication, this tool offers more flexibility that the others. It allows fast changes through weekly or biweekly progress checks and makes sure that the focal point is reconsidered each quarter.
However, after all is said and done, we have to remember that the main change OKRs bring is cultural.
Instead of only giving employees objectives and KPIs, employees should understand the strategy, in order to be able to align their OKRs to the strategy or the management’s.
Instead of being given the measures of their performance, employees are involved in setting the focus of their quarterly work.
Instead of measuring the performance of the employees based only on what they have to do, employees are measured based on the value they bring and are offered the flexibility to work on innovative ideas, which might in return bring a lot of benefits to the organizations.
Instead of linking performance with rewards and making sure employees do what they need to do because of incentives, organizations try to engage employees, to make them part of the vision.
As we can see, when implementing Objectives and Key Results, the process feels a lot more back-and-forth than other management methods.
On the one hand, managers play a key role since they need to challenge their employees to consider the value they bring to the organization, as well as offer them support and stimulate regular communication on their OKRs’ status.
On the other, employees represent an equivalent key player, since they need to set their OKRs and be honest with themselves in the process, trying to set challenging OKRs and be willing to go the extra mile.
Visit our website to read more articles covering OKRs and other similar performance management concepts.
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Editor’s Note: This article is part of an ongoing series that will feature practical tips and tricks we’ve learned while implementing the OKR system within various organizations.This article has been updated as of September 17, 2024
