U.S. companies shipping their goods to international markets tend to ignore reverse logistics, often at their own peril. This element can gobble up as much as 10% of a company’s supply chain costs by some estimates.
Jerry Levy, OIA’s Director of Marketing and Communications, stresses that reverse logistics is not a necessary evil: “For logistics firms it is another profit center, for logistics firms and their clients it is another opportunity to stand out.”
“Before offering reverse logistics to their end customers, shippers should establish very clearly what constitutes an acceptable return, and what are the conditions and timelines to the market. Also, they should receive a detailed quote from their logistics provider of choice, making sure it covers all possible instances. They should make sure that their pricing to market covers the costs of the reverse process in full.”
– Anabella Mas of DHL, Americas
In many cases reverse logistics is part of the overall logistics package. “We offer reverse logistics in every business,” Jerry Levy said. “Some companies put it in their RFP. We put it in because we know they are going to need it.” Returns are usually part of the broader deal, but some clients might engage different logistics providers for inbound and outbound flows. According to a white paper produced by supplychain247, few companies integrate reverse logistics fully into their enterprise software solutions and many shippers manage returns through disjointed and fragmented systems.
Product recalls are often bolts out of the blue for logistics providers. An online poll conducted last year by Deloitte found that a mere 8 percent of auto manufacturers were using advanced predictive analytics to help prevent, prepare for and manage recalls, and 23 percent had no operational product safety and recall anticipatory analytic capabilities. Reverse logistics can be determined by a company’s strategy to market. Some industries—notably electronics, apparel, pharmaceuticals and consumer goods—are frequent users.
“Our reverse logistics programs are almost entirely for clients from the apparel, retail and outdoor sectors,” remarks Jerry Levy. “Cost has traditionally been the overriding factor in the choice and creation of reverse programs. However, this has been changing, as the customer experience and ease of handling returns have become more important factors for many companies,” Jerry says. “Speed has gotten big. In the past the metric was only cost,” he adds.
Levy finds that some sectors are most concerned about speed of returns, while others emphasize reliability. Companies that sell high-end goods usually rate quality of service the highest. “Getting it right is their main concern,” he says, adding that in the fashion and technology sectors, there is a stronger sense of urgency of moving returns quickly, as products become obsolete sooner.
The longer a returned item sits in a warehouse or on a truck, the less value its producer or vendor can recuperate, according to Ryan Kelly, senior vice president at Genco. He advises shippers to embrace a data-driven approach, which should start with standardizing processes and establishing baseline key performance indicators for these.
“The metrics to control both outbound flows and reverse logistics are very similar in composition,” Mas comments, “but the reverse goods flow is much slower since the points of origin and conditions of the merchandise vary significantly, adding complexities to the process. “As with any other logistics process, standard operating procedures are required to ensure reverse logistics operations are performed in a professional and consistent way. Specific SOP details will depend on what type of service the customer wants performed,” she adds.
Levy says that SOPs and processes can differ between commodities. When it comes to measuring performance, he finds that the biggest factor is the timely transmission of status messages to the client’s enterprise resource planning system. “It is critical how quickly we can get the information to them so they can tell their customers how long it will take to get the new product to them,” Levy said.
Logistics providers identify the customs clearance process as the most complex aspect of returns when it comes to international business. However, returns seldom go back all the way to the point of origin, Levy notes. “The last thing you want is to trigger transportation cost all the way back, plus the documentation you have with international moves. And it would take a lot of time,” he says.
More likely the goods will go to a regional distribution center where they are assessed if they can be re-packaged, repaired or disposed. “The first decision is: Can we repackage, reconfigure? Is there any damage?” Levy says.
This is when a logistics firm’s capabilities beyond just warehousing and distribution will come into play. Many providers handle re-packaging, re-kitting, and cleaning, besides the initial assessments of the retuned product. Some even go as far as performing repairs.
Levy says OIA keeps “part banks” for clients in some of its facilities—a small supply of parts to replace faulty ones or carry out basic repairs. Disposal of products that cannot be used anymore is also a feature on many reverse logistics contracts. This can open doors to closer alignment between logistics providers and clients on environmental issues.
This article was originally published in Global Trade Magazine as “There and Back Again” and has been edited and republished here with the consent of the original content owner.