This blog is the first in a series of six I'm writing to explore a simple formula for success in creating value from the reverse supply chain. The six factors we'll dig into in the coming months include improving core reverse logistics yield, strategies for tapping other value, leveraging data for decision making, investing in required capabilities that return value, collaboration with trading partners and reporting results and ROI. Today we start with improving core reverse logistics yield.
I see it all the time — companies say their reverse logistics program is buttoned up as tight as they can get it and there's not much more they can do. All too often, that's the truth — but that truth is based in a traditional cost-efficiency approach. Although they may have truly gotten all the efficiencies water-tight, that's a narrow perspective that doesn't allow for yield beyond cost reduction, to an approach that can improve profitability.
Most often, reverse logistics is addressed as an inversion of forward supply, treating returns as a necessary evil and seeking to simply make the process as efficient and cost-friendly as possible. However, when viewed through a broader, more holistic lens that incorporates possibilities for synching with returns policy, product disposition management, liquidation, repackaging, repairs and recycling, there's much more to be gained.
Value starts at the source: Returns
It all starts with the source of reverse — getting the product back in the first place. This is where great impacts can be made. How does your returns policy impact cost? Is your policy one that makes your customers happy but costs you deeply to implement? You may have an idea of how much your returns process costs you overall; but do you have a plan to minimize cost or loss on returns and retain some level of value?
The traditional model of returning to the vendor doesn't always make sense when you may be adding unnecessary cost and missing opportunities to get some money out of returned product. Too often, the costs of transportation, handling and reduced value may cost more than handling disposition through reverse logistics distribution centers. Some of the world's largest retailers take advantage of Inmar's network of facilities, often with secondary-market sales opportunities in mind.
From there, several other factors identify value opportunities in the reverse flow of returns:
Review determines value and disposition
Returned product assessment is essential to recovering value. Thorough product review at reverse distribution centers affords you the occasion to evaluate the right value opportunity in whether a product can be returned to stock, repackaged, repaired or refurbished, recycled, harvested for parts, donated... all opportunities that retain more value and sustainability than landfill disposition.
Instituting processes to inspect, diagnose and classify your returns equals money. This is where you can make key decisions that are the difference between revenue and landfill. The right assessment process can greatly reduce waste, leading to opportunities to restore product for return to retail or secondary market opportunities. Even product deemed unsaleable can be exploited for parts in new-product manufacturing, refurbishment and repair.
The review stage is a great place to find the money. This is where good assessment can determine how much product goes directly to the landfill, vs capitalizing on opportunities to be resold, recycled or donated.
Restore for cost-efficient second chances
This is all about the cost comparison between trashing a product vs refurbish, repair, prepackaging or re-labeling. When you have product that still has a chance to be sold, the prospect goes far beyond the age-old trash/don't trash decision. Repackaged and relabeled product may still have a chance at retail, or a very good chance of recovering some value in secondary markets.
Recycling goes beyond sustainability
Recycling opportunities go beyond the sustainability goal of materials that can be broken down and reconstituted for other items. Evaluation for parts that can be cost-effectively removed and used in repair and refurbishment has a direct impact on production cost. Every part pulled is one that doesn't have to be manufactured for repair, and useable parts can return to the production line.
That said, with today's sustainability movement gaining momentum, any effort to keep product out of landfills is a plus.
Resell — don't miss another opportunity
Secondary markets represent a strong, viable means of retaining value on returned product. Seasonal returns, overstocks, shelf pulls, any saleable stock that won't go back to retail all have a large market of buyers waiting. This market is where most of the deep-discount sellers of brand-name items get their stock. It's an enthusiastic, competitive business, and good return truckloads don't sit for long when you take advantage of this second opportunity to reduce the cash cycle time on returns and significantly improve overall net recovery.
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