Companies are starting to realize that returns do have a cost impact to the bottom line.
IS YOUR COMPANY missing financial and environmental opportunities by not better managing its returns process?
According to two experts from Inmar CLS Inc., Rodney Bias, vice president of regulatory and Rich Fanning, executive vice president of operations, many food and beverage companies are not reaping the benefits of a true returns program.
Food Logistics recently talked to Bias and Fanning about industry trends in reverse logistics. Based in Winston-Salem, NC, CLS is a leading provider of reverse logistics and supply chain management solutions.
A recent study from the Supply Chain Consortium found that companies do not measure their returns process with the same scrutiny they use for outbound distribution. Why don’t companies recognize the need for this type of analysis?
Fundamentally, food supply chain participants are more focused on forward logistics—getting the right product to the right place at the right time.
After all, the performance of their forward supply chain is how they are measured in the marketplace. By comparison, returns are a very small percentage of overall sales and, therefore, often become the forgotten piece of the supply chain.
Sometimes it’s a case of “out of sight, out of mind.” Sometimes because returns are not a core competency, the handling of them is cumbersome and difficult. And, finally, in today’s world with changing returns policies, many manufacturers never actually “see” their returns nor any data regarding total returns quantities. As a result, it is impossible to analyze or know the trend of their returns.
However, many companies are starting to realize that returns do have a cost impact to the bottom line. And that, in fact, effective handling of returns plays a role in inventory optimization, environmental sustainability, and profit improvements.
Likewise, it seems that some organizations don’t make the connection between returns processing and the environmental benefits of having such programs in place.
How does better managing returns help support a company’s “green” initiatives?
The premise around environmental sustainability would suggest that proper management, disposal and handling of returned goods would be a key component within any supplier or distributors’ environmental scorecard. If the returned goods aren’t properly managed, they could reflect negatively and disproportionately on the scorecard.
Many companies have viewed returns as “trash” where they are simply “thrown away.” In the past, that view may have been somewhat acceptable, but that mindset is no longer acceptable in the current environment in which so much focus and attention is on “zero waste” and sustainability programs. Those organizations that have made the connection between returns processing and environmental benefits have found that there is treasure in that so called “trash.”
A true returns program evaluates each individual return for the opportunity and then determines the proper disposition. There are so many options available to keep the returned product from going to landfill, including:
• Donation—this type of program can provide positive marketing for a company within the local community. It’s important to remember that sustainability is about doing what is right for people and the planet and this activity supports both of those aspects and can yield a savings at the same time;
• Return to stock;
• Secondary market sales.
A returns program can even go deeper than just managing the final disposition to minimize landfill. Analyzing the returns data to understand package condition assists companies in understanding what is causing the return, giving them valuable insight into how they can ultimately prevent returns—a definite sustainability approach. As more companies reduce packaging in order to be more environmentally friendly, it’s important to also analyze how the new packaging withstands damage as it moves through the supply chain and if, in fact, it actually leads to more returns—and more waste.