With the ever-quickening pace and increasing volume of commerce around the world, it's no surprise that effective logistics practices have never been more critical to a business's survival and success. Nowadays, it's not only a product's quality, features, or price that captures and retains customers, but the velocity and flexibility with which that customer obtains the product. But what about when that product takes one step back in the supply chain after arriving at the customer? This is called reverse logistics, an all-encompassing term that captures the movement of goods from the point of final consumption back through the supply chain for the purpose of disposal or value recapture.
There is little doubt that manufacturers and distributors have developed many methods to increase customer value as products flow through the supply chain. Made-to-order manufacturing is now standard practice in many different industries. Automobiles, laptops, clothing, and even specialty foods are just a few of the goods that can be completely customized in the ordering process and delivered to that standard. The tracking of shipments is now easier than ever too. Bar codes are scanned and RFID tags are read by handlers and updated in real-time systems that the customer can monitor. Innovation has truly enhanced the way that customers, whether B2B or B2C, purchase goods.
But now, reverse logistics has started to garner substantial attention as well – and rightly so. Effective reverse logistics practices can have a significantly positive impact to the bottom line. Depending on industry and channel, the maturity of reverse logistics processes within an organization typically varies. High-volume, end-customer-facing industries like retail tend to be more advanced in their adoption of bar coding and computerized return tracking, while manufacturers tend to lag further behind. Customer service is highly impacted by the ability and ease of returning damaged, excess, unwanted, or incorrect goods for purposes of recycling, refurbishing, and repurposing. Reverse logistics is a key component of Service Lifecycle Management (SLM) and customer retention. Ideally, manufacturers and distributors want to make these processes as painless as possible for the customer.
Reverse Logistics in Action
Let’s take, for example, the importance of reverse logistics to an industrial chemical manufacturer that produces volatile products in large volume. In the distribution process, the barrels or boxes are transported to the customer through a safe, effective, and efficient process. But what if those products are rejected upon delivery? Maybe the packaging has been damaged or the lot date has expired. Now, those goods must be safely returned to the manufacturer or distributor. And, once back at the warehouse or distribution center, those goods will not just be restocked on the shelf but in a specific returns area. In this scenario, it’s critically important that the placement of those goods is in the correct location. When dealing with products like volatile chemicals, safety regulations about the proximity of certain products cannot be ignored. The importance of managing returns in a safe and effective manner makes robust reverse logistics a necessity.
Another example of reverse logistics processes in practice, outside of the typical retail returns process, is leased equipment. In the communications and media industry, customers are now leasing equipment from providers for various purposes and durations. Once contracts end or customers move, that equipment must be returned to the provider. With hundreds of thousands of customers, the effective returns management of this equipment is a necessity. Equipment that is damaged, missing components, or even stolen can only be tracked as well as the systems and processes in place allow.
A Mindful Approach
Whether a business is a high-volume retailer or a custom manufacturer, it may be time to consider reverse logistics processes as a valuable way to increase efficiency, improve customer satisfaction, and manage profitability. Niche vendors and large integrators are developing and offering commercial software applications to help in this regard. As more companies choose to adopt technologies to improve these processes, the pressure on competitors to keep up is increasingly important – especially in commodity industries, where competitive advantage among manufacturers and distributors is often earned in the smallest of details.
But the undertaking of redesigning processes or selecting software packages must not be taken lightly. A critical first step is to conduct an objective assessment of current processes to pinpoint which are working well and where there might be opportunities to maximize efficiency. It is often useful to have a third-party resource perform this evaluation, particularly one who can offer unbiased, objective recommendations for improvement. With this clearer visibility into reverse supply chain performance strengths and weaknesses, management can make an informed decision regarding ways to improve processes and/or implement appropriate new technology. By ensuring clear alignment between important operational requirements unique to particular products and their supporting processes, manufacturers can feel confident in their ability to manage their supply chain in a timely and cost-effective manner that drives high customer satisfaction.
Justin Peppel is a Senior Consultant with Navigate, a management consulting firm that provides Business Process Optimization expertise to companies in multiple industries, including manufacturing. Justin helps organizations enable enterprise technology and strengthen supply chain processes to improve overall financial and operational performance. Contact Justin at firstname.lastname@example.org.