Clearly, the opportunities hidden in the reverse logistics process are worth investigating from a cost savings perspective as well as from a process improvement perspective. What might appear to be low percentage increases that can be added to the bottom line through customized reverse logistics programs are beginning to look more enticing. For instance, Ferrell explains that identifying a packaging flaw can increase that percentage increase by a factor of 100. “Or you can increase that by a factor of 1,000 if you can identify a flaw that extends beyond that one product into multiple products,” he says.
OPTIMIZING THE RETURNS CHAIN
Companies measuring data collected from their reverse logistics programs can gain a deeper understanding of what is causing returns and how to minimize them by taking the appropriate course of action. They can also reap significant savings by optimizing the returns supply chain, similar to efficiencies achieved by their forward supply chains. Here are a few examples.
Identifying returns problems: Renkitt Benckiser—the manufacturer of French’s products—has Inmar manage its returns process. The company uses the data provided by Inmar to identify recurring problems.
“We monitor the quantity of items returning back through the reverse logistics program to see if any specific item is producing more problems than other items,” says Joe Genda, director of credit for the Parsippany, NJ-based company.
The data allows Genda and his team to know where to begin to discover what is causing these returns. “The data provided allows us to zero in on the problem items and fix the cause of the problem. Knowing you have a problem is one thing—but knowing where to start to fix the problem is definitely a big benefit to having a reverse logistics program.”
Genda reports that Renkitt Benckiser’s returns average is lower than the industry average, and he attributes this achievement to having Inmar manage the program.
Closed-loop system: In 2000, Kellogg Co. implemented its Closed-Loop Returns Management System with the help of Inmar. This closed-loop supply chain combines traditional forward supply-chain activities with returns management. The Battle Creek, MI-based company wanted to reduce the amount of unsaleables and knew that such a program would also reduce costs while improving process efficiencies and overall satisfaction at the customer and consumer levels.
Kellogg’s not only collected data—it designed the closed-loop to be an actionable model embraced by all functional areas so the data presents information that is measured. It then closes the loop with accountability from the various functional areas involved, including customer service, distribution centers, logistics, marketing, packaging, remarketing and returns management, research, retail sales, quality and packaging suppliers.
The company’s unsaleables team was able to influence management by effectively explaining the issues involved from a financial perspective, highlighting all decision options in dollars as a return on investment. Thus, by speaking this common language and involving senior management and finance in the decision-making process, they were able to influence the decision-makers and secure the necessary funds for the program. —A.T.