How to Gain Reverse Logistics Efficiency

Forward thinking companies increasingly need to consider reverse. With so much attention, time, and capital spent on exploring ways to move the enterprise in new directions, what’s left behind is often overlooked and under-controlled.

Reverse logistics covers a wide array of services—from inspection, repair, and remanufacturing to consumer returns and aftermarket recycling. It can reduce waste and ancillary costs, drive sustainable best practices, or generate new revenue streams. It may include using inbound routing guides and core carrier partners to manage returns or outsourcing product lifecycle management to a 3PL.

Reverse logistics becomes even more important when the bottom line drops, budgets cinch, and sales grow sluggish—when economy and customer service become paramount. Manufacturers are challenged to maintain high cost structures without risking lost sales due to poor customer service. Retailers, too, must focus on outward-looking forecasts to match marketing and sales efforts with demand. Overstock and returns are often unavoidable and they account for considerable expense.

Some companies may rewire their internal infrastructure and work with logistics partners to manage the returns process; others completely outsource reverse logistics to reduce fixed costs.

Reverse Engineering

Here are three examples of how companies can rethink reverse logistics to gain greater supply chain efficiency and economy.

CHALLENGE #1:

Following a series of acquisitions, a retailer is managing reverse logistics regionally. Recognizing that a fragmented approach is creating redundancies, inefficiencies, and cost bleeds, it decides to adopt a centralized returns strategy.

SOLUTION: The company uses a demand-supply planning model to substantially reduce inventory by postponing unneeded repairs and focusing repair activity on meeting projected requirements for specific units. Additionally, integrating returns processing and repair operations reduces the return/repair cycle. Leveraging these efficiencies, the company increases control and centralizes returns processing; enables visibility to all inventory throughout the return/repair cycle; and purges unnecessary investment in buildings and systems to manage reverse logistics.

CHALLENGE #2:

An e-commerce company expands by selling into brick-and-mortar retail outlets. As its logistics requirements grow, it struggles to efficiently manage warehouse space and labor. Managing fulfillment and returns poses an additional challenge.

SOLUTION: The company sells its warehouse and materials handling equipment, and outsources inbound and outbound distribution to a third-party logistics provider. It reduces its warehouse footprint and labor need by 50 percent, automating processes while improving space utilization. The company then reinvests the capital it recovers from selling the warehouse into growing its business.

CHALLENGE #3:

A manufacturer dealing with sensitive, high-value medical parts is hampered by a lack of field inventory visibility. Inexact and non-automated processes for returning parts into its pipeline also create inventory management challenges. Delivering critical service parts to, and managing returns from, more than 1,000 field service technicians is rife with inefficiency.

SOLUTION: The company opts to work with a logistics service provider to manage a national network that includes 20 parts depots and a central distribution hub. Together with its 3PL, the manufacturer identifies key elements of the returns process that need improvement. As a result of these business process changes, the company increases visibility to parts-on-hand for field service technicians, dramatically reduces inventory costs, and centralizes all returns to a single location for better control.