How to Setup Your 3PL Operations to Provide Reverse Logistics Service
By now, your clients have requested that you handle and process their returns or you already understand that Reverse Logistics is an excellent opportunity to enhance the value added logistics services your 3PL Third Party Warehouse offers. So now it is time to think about how what is involved in processing returns and how you need to set up your warehouse operations. To prepare your operations to provide Reverse Logistics services you need to understand some of the key points related to the processing activities, the reporting and data exchange requirements, the software systems and the physical warehouse layout requirements for handling product returns. With the right planning and tools, you may find Returns processing much easier than you initially imagined and that the skills and talent required will integrate well with your current operations and skill sets.
Understanding Your Reverse Logistics Customer’s Needs and Goals
To begin, it is important to get a high level understanding of your 3PL client’s Reverse Logistics needs and goals along with the opportunity it can present your 3PL business and why you are well suited to provide the Reverse Logistics services.
Your clients need your expertise to help them accomplish two goals:
1. Look after their Customers/Retailers: This means, when processing the returns, they need you to:
a. receive quickly
b. receive accurately, validate the returned item and condition
c. report on receiving so they can issue credits or provide exchange goods
2. Help Recover Value: Long gone are the days where you would resell a truckload of dusty inventory for pennies. Often the return goods that need processing are in good condition (e.g. “open box” retail returned items) with a very high resale value opportunity, especially if you add some minor processing, such as:
a. Triage - develop rules and methods to sort for highest value-recovery processing
b. Light processing such as visual inspection, minor testing, cleaning, repackaging, kitting or harvesting for parts (“un-kitting”).
c. Grading and consolidating “like” goods for next stage processing, shipping for further processing (repair or RTV Return to Vendor) or for final sale
d. Shipping the “finished goods” that have been converted to the highest possible recovery value for its condition. These “finished goods” may be in the form of refurbished goods, “As Is” goods, or scrap depending on the outcome of the triage and processing.
e. Reduced Transportation and processing costs – if you already process your client’s forward logistics, there may be an opportunity to save significant transportation costs by also handling their returns, in addition to knowledge and other savings since you already know and understand your client’s products and forward logistics needs.
With these client needs and goals in mind, you also need to keep in mind what you want: value added service that will generate higher revenue and profit per square foot of your precious space than your basic Warehouse and Logistics services. As an additional note, you may also find that returns processing seasonality is an opposite cycle to retail logistics, since it often lags by 1-3 months. This may provide an opportunity to be busy processing returns when your warehouse is less busy processing forward logistics orders.
Next month, for part 2 of this article, we will expand on the processing, triage, dispositioning, reporting, data exchange, software technology and warehouse setup and layout to operate a Reverse Logistics and returns processing operation at a 3PL Third Party warehouse.
Paul Rupnow - Director, Reverse Logistics Systems, Andlor Logistics Systems Inc.
Editor - Reverse Logistics Professional Report Business Insights and Strategies for Managing Product Returns