Once a niche in supply chain management, reverse logistics is emerging as a supply chain corporate strategy supporting everything from environmental sustainability to bottom line profitability.
Several forces are combining to drive interest in reverse logistics including: the pressure for profitability, volatility in the fuel markets, community interest in sustainability, changing customer needs, and rising levels of regulation.
Other factors also come into play. LTL trailer load utilization can be any¬where from 30 to 80% and at times, even lower when certain transportation moves lead to deadhead¬ing are factored into the equation.
Reverse logistics offers a way to help alleviate poor utilization and deadheading issues. Ideally, reverse logistics programs will keep trailers full while also providing continuous moves. Some carriers have milk runs involving simple raw materials (RM) and finish goods (FG) exchanges.
Many times this can also include returning specialized pallets and racks, recyclables, cages, and totes.
Mike Dewey is a Cincinatti-based home brewer who decided to get serious after his favorite local brewpub closed about five years ago. Today Dewy’s Mt. Carmel brewery is still a small brewing company but it does much higher volume.
Dewey sends growlers out on pallets and has to take return on the pallets. A typical load of 16 pallets at $20 each represent $320 in needed cash flow. He uses about 40 pallets per month.
More small brewers in the market makes for a more competitive business situation. A dollar saved is as important as a dollar earned. Shipping and logistics costs are important areas in which every small businessman needs to control costs.
He said he’s looked at a variety of shipping options and settled on OneMorePallet, a Cincinatti-based discount freight shipping site that helps small businesses reduce shipping costs by filling unused truck space.
OMP’s Pallocator™ system instantly matches pallet shipment needs to excess available space at great rates with national, name-brand carriers. If delivery timing can be flexible, savings can be big – up to 50% off already discounted retail prices.
OneMorePallet enables small businesses to save money and time on freight shipping, regardless of their volume, and helps carriers fill their truckloads and operate more efficiently, resulting in improved profitability.
“We used one of the top tier brokerages but OMP was able to save us 25% off the discounted shipping rates,” Dewey said.
Also among the items that may be returned include MRO tools and equipment which support manufacturing and are also often found in the automotive, boating, aerospace and defense industries.
Several options may be explored to reduce the potential for deadheading, including finding ways to man¬age both the inbound and outbound of a shipping node or identifying collaborative and synergistic oppor¬tunities in the proximity of an existing customer. There are, however, numerous variables at play in the development of these opportunities – scheduling, flexibility, synergy, cargo limitations and competition.
One of the best avenues to pursue in the development or expansion of a reverse logistics program is to plot the data from your company, your customers and their respective value chains. With this complete, you have the potential to look at geography-based, industry-based, synergy-based pursuits to locate opportunities.
Another example of an emerging focus of reverse logistics is the shipment of returns, defective parts or discontinued merchandise. Customer satisfaction is a key element in corporate strategic planning. The ability to efficiently take returns on defective or damaged products cuts the cost of sustaining this emphasis on customer satisfaction. Due to the unstructured nature of the returns process, companies need to have flexibility in their return shipping solutions.
The rapid introduction of new generations of electronic products provide a fertile ground for encouraging consumers to join in the benefits of reverse logistics. Combined with regulations that prohibit or limit the disposal of electronic products in landfills, there is a powerful incentive to fine tune the return process.
I-wireless is a Cincinnati-based retailer that sells cell phones and service. On a semi regular basis i-wireless needs to ship disabled cell phones back to the manufacturer or a location from which the used product can be evaluated for salvage or repurposing, said Kris Berry, senior warehouse manager.
The typical shipment by i-wireless of this old equipment occurs semi-regularly and requires about one pallet or less. Finding the best shipping rates on such small loads required a great deal of time searching load boards and other sources, said Berry.
OneMorePallet™ lowers small business freight costs by filling unused truck space. OneMorePallet™ can save shippers money while also linking carriers to reverse logistics opportunities. Not only does OneMorePallet™ support reverse logistics programs - it also supports overall sustainability and green supply chain initiatives.
‘We were challenged to find low cost shipping until OMP came along. My group spent too many hours chasing carriers to find the best price for LTL shipments,” Berry said.
Another important advantage of elevating reverse logistics into the strategic planning process is the issue of environmental sustainability. Compliance with environmental regulations is the most often cited reason for undertaking sustainability improvements. Leading edge thought on reverse logistics has now evolved to an understanding that compliance can lead to lower costs and increased productivity.
Reverse logistics can include recycling of packaging and leftover resources found in used containers. As population increases and resources become more scarce, the value of recycling and repurposing resources becomes more apparent. Efficiency in the supply chain eliminates waste and supports green initiatives that can provide differentiation and competitive advantages in crowded markets.
Implementing a strategic reverse logistics program can offer both reduced costs and increased customer value. It is necessary that the value to be obtained through reverse logistics is understood and evaluated in the broadest perspective by senior management as a part of the strategic plan.
Implementing a reverse logistics strategy and operational plan needs to start with the realization that there are significant corporate, environmental, and business development opportunities within your value chain. Once you have identified those opportunities and your supply chain group has a good plan, seek an executive sponsor within your organization.
By plotting your shipping and logistical nodes, gain an understanding of your transportation moves and their frequency, you can start looking at synergies and opportunities within your “value chain” which includes your own organization, your partners, your suppliers, and also your neighbors.
The key is to realize there are multiple opportunities with reverse logistics especially in returns management (including recalls), obsolescence and damage claims, refurbishing / upgrading of products, MRO of equipment, container movements (racks, crates, totes, etc.), and sustainability / recycling initiatives including the proper and optimal disposal of waste. Many of these opportunities can be found through synergies and location.
Once a reverse logistics initiative commences, you and your organization will need to be flexible in making adjustments to your organization (change management), your supply chain (capacity constraints), and measurement (metrics and financial benefits). Determining what success looks like is based on your own internal views, benchmarks, and participants of your reverse logistics value chain. Likewise, there might be additional financial and community impact / “green supply chain” opportunities available in secondary markets of products, recyclables and reusable components, and waste. Equally impressive is that these reverse logistics benefits can be shared financially (either through additional revenues, savings, or credits/rebates) or through public relations and brand awareness initiatives associated through sustainability. The time is optimal more than ever to develop a reverse logistics program for your company and community.
Bill Johns, MBA, MPA is known as the Supply Chain Guy™ and has 25 years in supply chain management covering all aspects of sales, technology, operations including reverse logistics, and executive management. The Supply Chain Guy™ holds an MBA in supply chain management from The University of Tennessee and is Founder and CEO of Bluewater Consulting®, a boutique international professional services firm.