More and more, innovative companies are looking to unlock the power of their supply chains as a competitive advantage. However, while most companies are actively working to optimize the forward supply chain, for too many, the returns management process remains a black hole Ė a cost center offering little visibility into what products are in the pipeline and whether they should be repaired, repackaged, restocked, recycled, disposed of, or be in the reverse channel at all. As a result, returns cost companies billions of dollars every year.
This is especially true in the hi-tech/electronics sector, where product lifecycles have dramatically shortened, global service networks create more supply chain complexity, products are highly customized to consumer preferences, and sustainable practices are increasingly required.
As online shopping continues to grow as the method of choice for consumers, product return rates are significantly increasing. In fact, returned goods from online sales now make up 20 to 30 percent of all returned merchandise for retailers. All of this activity means that retailers need to find a fast, cost-effective means for disposing, recycling, or reselling the products that are reentering their supply chains. Thatís where reverse logistics comes in.
Reverse logistics is the process of managing goods from the point of consumption to the point of origin. And these days, itís all about speed. When a product is returned, it is basically loss of sale. So retailers have to maximize the value of that returned asset, and they have to do it really fast, in order to not take a hit to their bottom lines. For example, more than 70 percent of the products returned in the consumer electronics and high-tech industry have nothing wrong with them. The quicker those products can be repackaged, put back into inventory and made available for sale, the quicker those companies can recover their value.
Effective reverse logistics management requires a broad range of operational, technical and strategic capabilities. Businesses must be prepared with scale and flexibility to meet changing business needs as well as industry and geographic expertise. Web-based technologies and data integration has also grown into a requirement for a cost-effective reverse logistics operation. These factors are why a growing number of companies are turning to experienced outsourced third-party logistics providers to help them meet their goals.
The returns process generally includes logistics and transportation, depot repair, sales and marketing of refurbished products, finance (validating warranty repairs), customer service, and channel management. There is also a great deal of physical handling of the returned goods to determine the products disposition (should it be repaired, refurbished, scrapped, recycled, repackaged) and employees need specialized training depending on the types of goods they are dealing with (consumer electronics, appliances, apparel). Technology solutions also have to be customized to track the products through every step and manage credit reconciliations and compliance related issues.
Businesses must recognize the keys to optimizing their reverse logistics operations. One notable solution is to use integrated technology to create visibility across the supply chain. Increasing velocity by co-locating forward, reverse, and repair functions to trim transportation, infrastructure and overhead costs and increase disposition and speed to shelf is another strategic tactic. By co-locating the distribution management of finished goods with returns processes such as technical repair, refurbishment, and repackaging in the same facility, companies can achieve greater speed to shelf, visibility, and cost-savings.
In addition, accurately determining the appropriate disposition of assets and recovering the most value assist with making your reverse logistics operation a competitive advantage. Depending on the condition of the asset, options could include resale, return to vendor, refurbish/repair, recycle or donation.
Some companies have zero-landfill goals and e-waste management policies in place and they strive to work with a logistics partner that can provide proper recycling and disposal of returned products. Any e-waste collected or accumulated through a companyís disposal chain will be tracked and documented, through final disposition, to ensure that it is properly recycled and companies audit their recycling partners to confirm policies and standards are being met. Therefore, a co-location strategy like the one described earlier, further supports carbon footprint reduction and corporate sustainability goals through fewer transportation miles, lower vehicle fuel consumption, and lower building carbon output. A more agile supply chain also decreases product obsolescence and reduces total inventory levels. An effective reverse logistics strategy is actually the ultimate recycling process.
One area thatís seeing a surge in recycling and reclamation efforts is in high-tech devices like mobile phones or circuit boards, where companies recover valuable metals like gold, silver, titanium, palladium or copper. By salvaging, reclaiming and re-using components, companies can reduce costs and minimize waste.
By unlocking the hidden value of reverse logistics, companies can manage their bottom lines, improve competitiveness and operate more sustainably.
Norm Brouillette is the Vice President and GM for the Ryder Supply Chain Solutions Technology and Healthcare Operations. Reporting to Steve Sensing, VP of Ryder Supply Chain Solutions, Norm is responsible for providing the strategic vision, operational execution, and commercial leadership for Technology and Healthcare Supply Chain Solutions. Norm began his Ryder career as a Logistics Manager in 1998 after retiring from the U.S. Air Force. Since then, he has progressed through various logistics management positions of increased responsibility and has led teams responsible for some of Ryderís largest and most integrated customers.