Reverse Logistics: The Untapped Revenue Stream

Reverse logistics has become an area of high priority for companies looking to reduce costs, add efficiencies and improve the customer experience. As a result, manufacturers are uncovering the hidden value of returned assets and streamlining return, repair and product reallocation processes.

Once a supply chain afterthought, reverse logistics has evolved into a highly complex endeavor. This is especially true in the hi-tech/electronics sector, where product lifecycles have dramatically shortened, global service networks create more supply chain complexity, products are highly customized to consumer preferences and sustainable practices are increasingly required.

For many companies, the whole reverse logistics/returns management process has been a kind of black hole; a cost center that offers little visibility into which products were in the pipeline, whether they should be repaired, repackaged, restocked, recycled or disposed of in some other way, or whether they belong in the reverse channel at all. However, effectively managing the reverse supply chain has increasingly become more important to the operational and financial performance of companies.

More than ever, companies are using robust, efficient reverse logistics networks to:

  • increase velocity
  • reduce costs (transportation, administrative, aftermarket support)
  • gain service market share
  • improve customer service and retention
  • meet sustainability goals

Reverse Logistics and Sustainability

Reverse logistics is intrinsically aligned with sustainability. Instead of carting products to landfills, companies are recovering the value of the assets through a variety of other paths, such as returning to stock, donations, secondary market sales and recycling.

When companies maximize tons per mile, consolidate shipments, reduce returns and optimize product disposition/asset recovery processes, they are simultaneously reducing harmful emissions and energy usage, while increasing profitability and asset utilization.

More than ever, companies and their suppliers are required to provide environmental scorecards, quantitative environmental performance data and descriptions of sustainable initiatives. The synergy is obvious; end-to-end reverse logistics/product lifecycle management solutions translate into energy savings, provide economic value and strengthen customer relationships.

Advantages of Outsourcing Reverse Logistics

Companies that outsource some or all of their logistics services are looking for better control of their supply chains to drive quality, reduce costs, increase visibility and improve inventory management. For reverse logistics, this means increasing the speed and efficiency of recovering, inspecting, testing and dispositioning returned products.

A growing number of companies are turning to 3PLs to meet those goals. Reverse logistics is well-suited for outsourcing. Unlike forward logistics, it is characterized by uncertainty of supply; no one can easily predict which products are coming back, when they’re coming back or in what condition they’ll arrive in. Adding to the complexity is the customized nature of reverse logistics supply chains, which operate under company-specific rules that can vary for thousands of different SKUs.

Effective reverse logistics management requires a broad range of operational, technical and strategic capabilities including:

  • scale and flexibility to meet changing business needs
  • industry and geographic expertise
  • visibility into the full product life cycle
  • refurbishment/distribution center management
  • web-based technologies and data integration

If you’re considering outsourcing your reverse logistics operation, here are a few questions you’ll want to answer about the providers you’re considering:

  • Do they have measurable performance standards?
  • Do they have the ability to shift fixed costs to a transaction-based environment?
  • Can they integrate forward and reverse logistics with overall supply chain strategies?
  • Do they have leverageable infrastructure and transportation resources and move products into secondary markets, e-waste streams or back into the forward supply chain?

As companies consider these and other questions, they should keep in mind the cost reductions, supply chain efficiencies and improved asset recovery rates that a robust reverse logistics network can provide. In the face of ongoing competitive and economic pressures, companies should carefully weigh the benefits of working with trusted supply chain partners to navigate the complex world of reverse logistics/Product Lifecycle Management. By doing so they can establish themselves as leaders in sustainable supply chain management, while unlocking the hidden value of reverse logistics, one of the supply chain’s last untapped revenue streams.

Find out more:

Read this white paper: Reverse Logistics—From Black Hole to Untapped Revenue Stream, and read how Philips Consumer Lifestyle is doing it.

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