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 and sustainable supply chain practices are increasingly required.
The primary driver of reverse logistics is the staggering cost of returns. In 2009, retail returns in the United States amounted to $185 billion, equal to about 8 percent of the estimated $2.3 trillion in retail products sold by members of the National Retail Federation.
Recognizing that reverse logistics can drive real impact to the bottom line, this is an area of high priority for companies looking to find 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 through sustainable supply chain management.
In a recent survey of over 160 companies in the computer, consumer electronics, telecom, aerospace and manufacturing industries, those that used best-in-class reverse logistics processes report an:
- Average customer satisfaction rate of 93% (vs. 86% industry average)
- 4.4. Average days parts return times (vs. 14.5 days industry average)
- 21% decrease in cost per return materials authorization over a 12-month period (vs. 6% industry average)
For many companies, the reverse supply chain 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, 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.
By rethinking their approaches to customer returns, companies are reducing costly customer interactions and administrative burdens, strengthening brand loyalty and enhancing their sustainability drives and environmental scorecards.
The ultimate goal of reverse logistics is to maximize asset recovery rates and supply chain efficiency to ensure the lowest possible costs.
The reverse logistics process begins with ensuring that returns are authorized and warranty information is accurate. Product data is gathered to determine the proper disposition of the product, which could include:
- On-line Auction
- Repackaging and Return to Stock
How is your company uncovering the hidden value of returned assets?
To learn more about how you can turn your reverse logistics into a revenue stream, download our white paper “Reverse Logistics – the Untapped Revenue Stream.”
Watch out for the next post in our reverse logistics series, which will speak towards the sustainability benefits of a robust reverse logistics program.
Authored by Steve Sensing
J. Steven (Steve) Sensing is President of Global Supply Chain Solutions (SCS) at Ryder System, Inc., a FORTUNE 500® commercial fleet management and supply chain solutions company. In this role, Mr. Sensing is responsible for management, operations, sales, and the financial performance of Ryder’s SCS business segment.