Reverse logistics can create big value for small business startups
By Dr. Oliver Hedgepeth, Program Director for Reverse Logistics Management at American Public University
My first entry into the reverse logistics world was advising small business startups that ranged from developing refrigeration containers for Alaska seafood to recycling parts for an automotive and truck repair company in Virginia. For those readers thinking of starting a business, you should seriously think beyond the basic supply chain business model and consider the extra revenue stream that is possible from what you might think of as the waste products of your business.
Consider the case of TEDSBOX, nine years ago in Alaska. I consulted with the owner of this small company that was creating a new container for airlines to move fresh Alaskan wild-caught salmon.
Usually, fresh salmon is placed in a wet-lock box, which is a plastic and wax covered cardboard box. TEDSBOX was an unusual design based on an LD-3 container (a large pallet used to load freight onto an aircraft). It had a revolutionary battery system and refrigeration unit that was half the weight of the models in use by the airline industry at that time.
The developer of this TEDSBOX was only concerned with moving fresh salmon from the coast to inland airports and retail stores. However, I asked him to consider the return of the containers to Alaska – did they have to come back empty?
We looked at other items that need refrigeration such as pharmaceuticals. Some items need to be shipped in containers with precise temperature controls, and his TEDSBOX fit that description. In the world of supply chain management or logistics or transportation, we call that a back haul. For TEDSBOX, it meant another whole revenue stream.
In another example, A&T Auto and Truck Repair in Chester, Virginia just wanted to repair cars and change oil. The two people who started the company had a vision of helping others by offering repair service. So they started a small shop.
I encountered A&T just two years ago. They had a large building and lots of parking spaces. However, the parking spaces became full of cars that people either refused to pick up or had abandoned; A&T had a huge problem.
This was an easy reverse logistics fix. By looking at the cars as a source of parts, this “waste” became a source of revenue. A little investigation found that they could sell the used batteries for $8 each. They could recycle a used motor for $50 to $100. A transmission system could be sold for $100. Even the oil they were taking out of cars as they changed oil could fetch 75 cents per quart. If they cut up other parts of steel and aluminum, they could earn around $9 per pound.
Today, they maintain a running inventory of about 40 cars headed for recycling of parts. What started as a dream to repair cars and trucks turned into that and much more. Today, A&T has nine employees, one of whom is dedicated to reverse logistics. Her work to generate revenue from items formerly viewed as scrap and hazardous waste products pays her salary.
Reverse logistics is everywhere. It goes by many names, including recycling sustainment and returns. There are others, but the big news is that it is big business.
Both of my examples show how sustainment works and how there are ways to keep the environment and landfills empty of hazardous materials while creating value and revenue for businesses.
Look around your company. What can you see that may be outside the box of normal operations that can create value for the company, create a new job for someone, and keep the environment clean?
Dr. Oliver Hedgepeth is the Program Director for the Reverse Logistics Management. Previously, he was a tenured Associate Professor of Logistics at the University of Alaska Anchorage. His Ph.D. is in Engineering Management from Old Dominion University. His book, RFID Metrics, examines how we define problems such as reverse logistics.