Unsaleable goods are no longer perceived as the supply chain’s unwanted headache. These days the reverse supply chain is gaining the strength and stature of the forward supply chain, thanks to ever-advancing technologies. Today’s dedicated reverse logisticians have the data they need to study and understand how, why, and where along the food supply chain problems ensue that cause damaged and expired food products in the first place. This knowledge helps optimize efficiencies throughout the supply chain to help eliminate unsaleable incidents, resulting in significant sustainability achievements while also uncovering hidden opportunities for new revenue streams.
The sheer numbers of returns in the country are astounding. The National Retail Federation reports that in 2009, 8 percent of sales—or $186 billion worth of merchandise—eventually winds up as returned product for one reason or another. “That is equal to two-thirds of the entire world’s GDP,” reminds Robert Iaria, reverse logistics manager for C.H. Robinson Worldwide Inc. in Eden Prairie, MN. “So folks are realizing that they must pay acute attention to reverse logistics and their unsaleables operations to minimize the associated costs while getting the most value out of these products.”
Inherent in the reverse logistics process are many moving parts, each with its associated cost such as transportation and fuel consumption, inventory planning and management, disposition management, and administrative processes.
Discovering Retrievable Value
A robust reverse logistics program must make intelligent use of data from the reverse logistics flow to facilitate better decision-making on the forward supply chain, notes Gene Bodenheimer, senior vice president of reverse logistics for Pittsburgh-based Genco ATC. “More informed decisions can certainly minimize the amount of product that flows back as a result of poor decision-making on the frontend—or as a result of excess inventory being put into the pipeline.” The more informed the decision-making, the better optimized will be the disposition sequence and the greater the chances are for achieving sustainability goals and for salvaging monetary value that might have been overlooked otherwise.
As companies pay more attention to reverse logistics, they rely on advanced technology that is far better than it ever has been, notes Rich Fanning, executive vice president of operations for Inmar Inc. in Winston-Salem, NC. “They are getting more actionable data that allows them to make the necessary decisions to change something quickly in their process so they can reduce the potential for unsaleables. Our customers can analyze the data they receive based on information they pull from their stores or from us. They can then make smarter decisions about the type and amounts of inventory they will carry.”
Companies need to think more about the inherent value of food and beverage products and how a product nearing the end of its shelf life can maintain some or all of its original value by being transformed into another food product, advises Gailen Vick, president and CEO of Reverse Logistics Association in Lehi, UT. “For instance, a bruised apple might not sell at the retail level. But you can take that apple and make applesauce or you can transform it into a salad. You can take that salad made from a 50-cent apple and donate it at a value of 75 cents. So that unsaleable apple doesn’t have to go through a waste stream that winds up at a hog farm, for example.”
Iaria reports C.H. Robinson does a lot of reverse logistics programs in the food and beverage industry, where technology is appreciated particularly because of the value of the products. “When you think of this industry, it is almost like you can hear the clock ticking on those expiration dates of certain products. So it is extremely critical that you quickly assess where you can get the most value from a product, while minimizing the cost of disposition. What we at Robinson are trying to do is to make that assessment at the instant someone has refused freight or has requested a return, because waiting just minimizes the value of the product. By evaluating these options, you are acting sustainably.”