Can reverse logistics help your business and the planet?
Though the holiday gift giving season is well over, there is a different kind of hustle and bustle taking place in the retail world right now -- handling returned merchandise.
January and February are the busiest months of the year for holiday returns, with returns equaling about 10 percent of overall sales. And as more and more consumers make purchases online, product return rates post-holiday have significantly increased. 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 and sustainable means for disposing, recycling or reselling the products that are reentering their supply chains. That’s 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, it’s all about speed. When a product is returned, it is basically a lost sale. So retailers have to maximize the value of that returned asset, and they have to do it 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.
To do this effectively can be complex, costly and labor intensive. 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 product's condition -- should it be repaired, refurbished, scrapped, recycled or 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.
But with greater competitive and economic pressures, companies are now viewing their reverse logistics operations as a competitive advantage, rather than just a cost center. Businesses are looking for better control of their supply chains with reverse logistics. This means increasing the speed and efficiency of recovering, inspecting, testing and disposing of returned products.
And the speed of the reverse supply chain is becoming increasingly important as product life cycles get shorter and shorter, particularly in the consumer electronics industry. That may be why a growing number of companies are turning to experienced outsourced third-party logistics providers to help them meet their goals.
Ryder Supply Chain Solutions, a transportation, logistics and supply chain management provider, has worked with some consumer electronics and high-tech companies to develop innovative solutions that address these needs. [Editor's note: the author of this article is an employee at Ryder.] As an example, for some customers, we are co-locating forward and reverse logistics operations under one roof. 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.
Effective handling of returned goods isn’t just good for the business. It is also good for the planet. Reverse logistics is intrinsically aligned with environmental sustainability. When companies maximize tons per mile, consolidate shipments, reduce returns and optimize the product disposition and asset recovery processes, they are simultaneously reducing harmful emissions and energy usage, while increasing profitability and asset utilization.
The handling and disposition of products, components and packaging is a growing concern for many companies. In the European Union, the WEEE (Waste Electrical & Electronic Equipment) and RoHS (Restriction of Hazardous Substances) restrict the use of hazardous substances in electrical and electronic equipment and provides for their collection, recycling and reuse. Similar laws are under development in the United States and other countries. Instead of carting products to landfills, companies are recovering the value of the assets through a variety of other paths, such as returning to stock, donations, secondary market sales and recycling.
Some companies have zero-landfill goals and strive to work with a logistics partner that can provide proper recycling and disposal of returned products. 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.
By unlocking the hidden value of reverse logistics, companies can manage their bottom lines, improve competitiveness and operate more sustainably. It’s truly the gift that keeps on giving.