All companies want to increase their bottom line. Often there are not many options to achieve this as it is not always feasible to reduce material and labor costs or increase sales, especially in a sluggish economy. The best way to increase profitability is to take a cost center and turn it into profit source.
Reverse logistics is a cost center that companies can move into the profit column. According to Gailen Vick, president and CEO of Reverse Logistics Association (RLA), “Reverse logistics represents anywhere from 3 percent to 35 percent of a company’s bottom line.” *
This increase in profitability can result from a number of improvements to your reverse supply chain – be it the ability to return repaired and refurbished merchandise back to the marketplace, selling in the secondary markets, or simply harvesting for parts and recycling the rest of the components – these are sustainable environmental solutions that go hand-in-hand with fiscal solutions.
One of the best times to think about a product in the reverse supply chain is actually in the design phase. Are the components made of recyclable materials? Are there hazardous materials involved? Often the best reverse logistics solutions can come from the concept and design aspects of a product – if you know what can be done with a product at the end of its lifecycle, you can make better decisions at the beginning.
When looking at returned product, whether it comes to you or to a third party that handles your reverse logistics, you can often get extended life from the product and keep it viable in the marketplace. Products can often be refurbished or repaired if they have minor damage and can then be re-packaged and sold in secondary markets. If a product is beyond repair, many parts can be harvested for future refurbishments. And finally, at the complete end of the product lifecycle, recycling of remaining parts can sometimes alleviate disposal cost adding to the bottom line.
Another area for reverse logistics savings is in transportation. Using centralized locations to handle product and determine its disposition can cut time and costs from the reverse supply chain. The goal is to always get the product back into the market or disposed of as quickly as possible. It should always be moving. By eliminating steps and centralizing processing, fuel and transportation costs can be decreased as well as carbon footprint.
With companies taking a new view of reverse logistics by extending the life of products and reducing costs within through transportation, new opportunities are becoming available to improve a company’s bottom line.