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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 are 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 also 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.

In today’s markets, the total cost of logistics is increasingly defined in terms of carbon impact. As “going green” becomes a standard business practice, consumers are asking for measurements around climate change impacts, energy consumption and emissions.

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 at the same time, unlocking the hidden value of reverse logistics, one of the supply chain’s last untapped revenue streams.

Steve Sensing is Vice President and General Manager for Ryder’s Hi-Tech/Electronics vertical, which serves Consumer/Commercial Electronic, Hi-Tech/Semiconductor, Telecommunication, Medical, & Appliance clients in the commercial and consumer arenas. Ryder is a FORTUNE 500 provider of logistics and transportation solutions.

Evolving consumer behaviors have dramatically impacted the way retailers deliver products. From clothing, to cars, to computers, consumers have gotten used to getting the custom product they want, when they want it. Case and point: While Dell’s business model was one of the first to create a true build-to-order and direct-to-consumer supply chain, consumers today have the ability to buy just about any electronic device customized with the specifications they want, right down to storage space, color and ring tones!

As consumer preferences have become more personalized and complex, retailers are asking their suppliers and logistics providers to step up to the plate. This means more customized orders, tighter delivery windows, and an increased focus on retail vendor compliance. Couple these factors with an economic recovery on the horizon – suppliers to retail will have to be prepared to deliver more products, with complex configurations, faster and more often. As order-to-shelf cycles tighten, suppliers are looking for their logistics providers to help them keep inventories low, and fulfill orders at the last minute to better match consumer purchasing trends.

In order for suppliers and retailers to remain competitive in this changing environment, manufacturers can no longer allow products to be fully configured in Asia (or anywhere deep in the supply chain). This strategy creates the potential for lost sales and unwanted, aged inventory within the supply chain. A growing new strategy in the hi-tech/electronics industry is to postpone the customer specific configuration of the product as late in the supply chain as possible, increasingly at the third-party logistics provider’s dock.

This trend is resulting in a new wave of Value Added Services that retail vendors and their logistics providers must be capable of providing. Let’s use a hi-tech/electronics manufacturer as an example. The lines are often blurred between outbound finished good shipments from a hi-tech/electronics manufacturer and inbound orders for a retailer. This makes the work to ensure that the product is configured accurately – exactly the way the end consumer expects it – even more challenging. Many retailers have unique product configuration and shelf displays to differentiate them from their competitors. Consumers have very specific ideas of how a product should look and be packaged before they will make a purchase decision.

As a result, logistics providers need to develop Value Added Services that address these trends, enabling warehouse operators to package finished goods inventory to match a specific retail order, helping to eliminate or avoid costly vendor compliance charges, and increase retail customer satisfaction. Some of these services include:

Kitting: Building advance “kits” to merge with Finished Goods improves speed to shelf. By pre-building kits of components (for example, HDMI cables or specialized remotes) for a flat screen television via a “drop in the box” process, retailers can deliver TVs to consumers with the latest technology and customized peripherals.
Bundling: Involves the creation of unique combinations of components and peripherals to meet end customer demands at the shelf. For one electronics supplier, unique retail orders are delayed until the last minute prior to shipping, to allow the hottest printer and monitor combination to be bundled with the hottest laptop or PC.
Customization and Packaging: Encompasses the building of production runs of retailer specific configurations to meet changing demands of the end consumer, especially for special promotions of slow moving products to eliminate aging inventory. The customization and packaging process allows hi-tech and electronic suppliers to adapt to a very dynamic customer demand flow and improve bottom line performance by eliminating soon-to-be obsolete inventory.

To accurately fulfill more complex, customized orders, the best logistics providers are integrating lean principles such as continuous improvement, standardization, and quality into their operations that service retailers and retail suppliers. Further, the use of new technologies, such as voice-to-pick, are helping to improve inventory accuracy, order fill rates, shipment accuracy, and vendor compliance for retail.

As retailers become more demanding, we’ll see more top manufacturers maturing from discrete service outsourcing (Transportation Management, Distribution Management, and Dedicated Contract Carriage) to highly integrated solutions that provide end-to-end Value Added Services and technology solutions that create seamless handoffs and enhance customer satisfaction.

Guest Commentary: Reverse Logistics: The Untapped Revenue Stream

Guest Commentary: Value-Added Services Bring Flexibility to the Supply Chain

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