ACCOUNTING FOR REVERSE FLOWS

Traditional logistics systems are aimed at minimising total (logistics) costs. At the same time, these systems focus on forward material and information flows in the supply chain. Concerns for the environment, and warranty-related product returns have led to both end-of-life and commercial product take-backs, introducing the question of reverse material flows in these systems. These are backward moving inventories that have to be (re-)processed and show several coupling points to the forward materials flows in the logistics system. We argue that modern accounting systems are challenged with the phases of remanufacturing and refurbishment in the reverse supply chain. Many reverse logistics and reprocessing activities are integrated in other corporate processes, and their costs are difficult to separate from other cost objects, thus hindering correct costing of reverse flows. By an analogy to safety management accounting, this paper proposes an activity-based method to account for the costs of reverse material flows. Accounting for these costs will help to take a more holistic view on total logistics costs.