Today's retail landscape presents some daunting challenges brought on by rapidly evolving consumer demand, technology enabled shoppers, compressed product life-cycles and obsolescence challenges, omni-channel expectations and increased competition. With these factors come a growing new set of challenges for your reverse supply chain. Those challenges can only be addressed with a strong reverse-logistics strategy. This blog is the second in a series of six that I'm writing to explore a simple formula for success in creating value from the reverse supply chain.
The strategy for tapping this additional value starts with fully understanding your reverse flow, the resources it requires, the costs generated (from an enterprise perspective) and the opportunities. That means data collection to support identification and root-cause analysis of problems. With that analysis in hand, you can begin tapping into significant sources of value across your enterprise. We'll explore them briefly in four areas: operations, merchandising, regulatory and sustainability, and collaboration with trading partners.
Reverse logistics is more than just forward logistics in reverse. Understanding what's possible in having a solid reverse strategy can have a significant positive impact on forward process. Data gathered from returns processes is rife with information that can greatly benefit forward processes:
- Returns data can improve inventory and replenishment planning leading to improved on-shelf availability and reduced unsaleables
- Product and packaging issues can be identified and mitigated to reduce unsaleables and improve consumer satisfaction
- Benchmarking and analysis can ensure maximum value is recovered from unsold products
Information from returns processes is worth its weight in gold for merchandising. Consumer returns don't just tell us the "what or why" about the return. The returns process is a prime opportunity to learn what worked and what didn't: stocking volume and timing for promotional or seasonal product; product assortment; sales rates and timing for replenishment; online vs in-store sales of a particular product; planning inventory for the next promotion to avoid overstocks or prematurely empty shelves. The list goes on.
It's important to realize that the reverse process first has to be recognized as impactful to every aspect of your business, with each impact area identified; then you can strategically design a process that captures data and opportunities for improvement.
Regulatory and Sustainability
The regulatory landscape gets more challenging all the time, and companies have faced multimillion-dollar fines for improper disposal of product deemed hazardous or for other regulatory compliance issues. A solid reverse logistics strategy identifies the risks and allows you to avoid those costly fines. Many products or product components that can't be resold but are still useable can often be donated for non-profit use. Product evaluation programs in reverse supply chain can often identify easily removable materials or parts that can either be reintroduced to the production process for new product, put to other uses or can be recycled. Inmar works with one of our clients to repackage and donate blood glucose meters to special-needs children's camps nationwide. It's a win-win, and these products don't wind up in a landfill.
Trading Partners — scratching each other's backs
Nothing I've said here has to happen in a vacuum. To the contrary, a reverse logistics strategy executed with trading partners in mind can have even greater impact. Viewing your supply chain in terms that include your trading partners can amplify the benefits of your strategy as you enable greater reach into areas that cost you money, but you don't directly control.
Supply chain doesn't begin and end at your door. It involves any number of outside entities, but your supply chain is just that — yours — regardless whose hands are on the product at a given time. There are distinct strategic advantages to viewing your reverse strategy as a full continuum, inclusive of your trading partners. In some cases, their involvement may be a critical factor in your success with getting the most out of any reverse strategy. Quite often, collaboration with trading partners is an opportunity to develop policies and practices that benefit you both. Shared investment can reap great rewards in data gathering and process efficiencies that translate to cost savings and improved profitability.
In the long run, we have to look beyond reverse logistics as just a product-returns process where you ship back what didn't sell. When you take a close look, it's easy to see what a strategic role it can play and the difference it can make in overall profitability.
What are your challenges to finding value in reverse logistics? Let me know in the comments section below.