Reverse Logistics Moves Forward

Companies are beginning to measure the effectiveness and efficiencies of their returns operations with the same level of attention they employ for forward logistics.


O’Brien notes “it used to be simply the returns business and returns authorization. The difference now is that the emergence of 3PL providers has initiated the development of systems and processes to make reverse logistics a more robust practice—not just a process housed within supply chain operations.”

C.H. Robinson interfaces with customer service, finance, inventory and QA groups, as cross-functional investment is paramount to driving process improvements, explains O’Brien.

Reverse logistics as a function is gaining interest, says Tom Marcellino, executive vice president of business development for Inmar Inc. in Winston-Salem, NC. “We are even beginning to see individuals with titles like senior director or vice president of reverse logistics as companies assign resources to this area. They recognize that when you apply discipline, management and resources to an issue as significant as unsaleables, the benefits are worth the investment.”

Having an assigned individual or small team charged with managing the process helps providers like Inmar. “A primary point of contact can help us design the right program and acutely measure the performance of that program for our clients,” Marcellino says. “Generally speaking, when companies charge one individual with several responsibilities—including reverse logistics—that individual’s level of interest and attention will not be as focused on reverse logistics as it should be.”

Providers of reverse logistics programs work diligently to minimize the amount of product they dispose in landfills; however, there are still companies using that route. One of the challenges facing the industry is trying to break the mindset of land-filling as the primary method of disposition, notes Ferrell.

“Sending these products to landfills involves a known cost and many companies have gotten the process down so well that it doesn’t feel like it is costing money. Once they break from that mindset, which can be risky and scary, they will discover the opportunities. But this requires leaders who can see the bigger picture.”

Actionable Data Creates Value

Data is absolutely critical because you can’t change what you can’t measure, says Walsh at FMI. “The level of data sophistication varies by company, but data is a critical requirement to provide the metrics related to whether you are making improvements or not. Data needs to be integrated with the other pillars of a reverse logistics management program, namely policies and business handling practices.”

What are people missing about reverse logistics? “One big issue is reason codes are not being captured to identify why the product is being returned—or if they are being captured, they are not really being used,” says Ferrell. “If companies were to apply additional granularity to the process, they would realize there are huge opportunities—other than land-filling—that could be less expensive than trying to get control of those products that have been distributed throughout the country.”

The rich data can be delivered in any number of ways so companies can make the appropriate decisions to take action. For instance, data can provide specific information relative to why one vendor’s merchandise has a higher return rate than others in the same category. “The data also helps retailers and manufacturers understand store compliance regarding product shelf rotation,” says Marcellino. It also helps manage the returns authorization process and ultimately helps manage the proper store crediting procedures retailers have in place.

“A centralized system offers retailers and manufacturers visibility so they can understand why product is being damaged, where it is occurring, what the rate of return is and where to focus their efforts to improve the process,” he adds.

Inmar delivers the data through two Web-based portal applications—one designed for food manufacturers and one tailored for food retailers and distributors.

“Generally, retailers are interested in understanding returns by store and by supplier,” explains Marcellino. “So they need to track at the UPC and store levels. They can see if there is a supervision problem within certain stores and they can see if certain stores are having higher rates of returns than others. They can then discover why this is so.”

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