Co-locating Reverse and Forward Logistics Unlocks Value of Returns
Q: Why is reverse logistics an important function in today's consumer electronics supply chain?
A: Companies are trying to extend product lifecycles, as well as maximize asset recovery value. If they spend money to make a product, they want to recapture as much of the original cost as possible.
Consider that 65 to 70 percent of consumer electronics returns have no problems—a consequence of buyer's remorse or lack of understanding about the product. Manufacturers and retailers that turn viable assets, and make them available quickly for resale, can defer investment in new inventory, which carries both cost and sustainability considerations.
Q: How is strategy evolving to streamline reverse logistics processes?
A: Co-locating reverse and forward logistics functions together instead of using a centralized returns model is one way to reduce transportation miles, touches, and facility overhead while increasing turn times.
Typically, a customer with a defective item ships product back to the distribution center, then the third-party logistics (3PL) provider delivers it back to the contract manufacturer. Or returns may go to a centralized center where units are processed to finished goods, liquidation, or sorting facilities. This approach brings multiple hand-offs and associated costs.
Co-locating reverse and forward logistics in one facility allows shippers and 3PLs to determine whether a unit is good or bad, make minor repairs, sub-contract for more technical board work, return the item to the manufacturer, or repackage working units with accessories, then put them directly back into the proper resale channel—all in one stop. Immediate receipt verification also allocates credit back to the customer more quickly.
As part of the refurbishing process, companies can also record and report components that are routinely defective. Manufacturers can then ask their engineers to troubleshoot whether problems are a result of supplier or consumer error; or perhaps even identify new ways to design certain devices to extend their lifecycle.
Q: How does technology play a part in expediting returns?
A: Up to 12 percent of consumer electronics sales are returned. Processing high-velocity items quickly is the key to realizing and recouping whatever value remains in an asset.
From a technology perspective, having a tier-one reverse logistics system allows companies to receive advance shipping notices, then compare that information against products to validate and verify reporting and analytics. This also helps identify disposition strategies associated with certain assets.
For example, if an inexpensive part is defective or cosmetically blemished, it's likely not worth repairing. The system builds in business rules at the item level, so it knows whether the value of a unit justifies refurbishment. If not, the process stops, and the product goes to the scrap heap to capture any leftover commodity value.