By Steve Sensing, Vice President, Operations, Supply Chain Solutions | Global Logistics Media
Retailers receive the most returns during the months of January and February, when returns equal about eight to twelve percent of overall sales, and the cost to return those units is two to three times that of the forward logistics activities that brought them to market.
With a significant increase in returned goods from online sales, which now make up 20 to 30 percent of all returned merchandise for retailers, it’s becoming more and more crucial that retailers rely on reverse logistics.
Reverse logistics is the process of managing goods from the point of consumption to the point of origin. It aims to maximize asset recovery and supply chain efficiency, reduce costs, and improve the customer experience. Such core functions involving reverse logistics include waste management, liquidation, service parts logistics, and repair and refurbishment. It is the most fast, cost-effective, and sustainable means for disposing, recycling, or reselling the products that are reentering their supply chains.
It wasn’t until recently, however, that retailers began designing products with end-of-life processes in mind. In the past, the product lifecycle ended when the consumer walked out the door with a purchase. Returns management was a cost center, with little to no visibility into what products/parts were in the pipeline or what should be done with them. Today, companies are rethinking the processes associated with returning and disposing of goods and viewing their reverse logistics as a competitive advantage, rather than just a cost center. Businesses are looking for better control of their supply chains and with reverse logistics, this means increasing the speed and efficiency of recovering, inspecting, testing, and dispositioning returned products. As product life gets shorter and shorter, particularly in the consumer electronics industry, the speed of the reverse supply chain is paramount. That may be why a growing number of companies are turning to experienced outsourced third-party logistics providers to help them meet their goals.
Ryder, for example, has worked with some consumer electronics and high-tech companies to develop innovative solutions that address these needs. For some customers, Ryder is co-locating forward and reverse logistics under one roof. By co-locating the distribution management of finished goods with returns processes such as technical repair, refurbishment, and repackaging in the same facility, companies can achieve greater speed to shelf, visibility, and cost-savings.
The focus isn’t just on the business, though. Reverse logistics, which helps reduce harmful emissions and energy usage, is intrinsically aligned with environmental sustainability. E-waste is now the fastest growing municipal waste stream in the United States. Every year, American consumers dispose of an estimated 400 million electronic units. Of the 2.4 million tons of e-waste generated in 2010, only 27 percent was recycled. The remaining 73 percent went to landfills and incinerators. Today, 83 percent of e-waste laws hold manufacturers accountable for collection, transportation, and recycling of products. Sustainable reverse logistics activities like repair, refurbishment, repackaging, recycling, and harvesting can help mitigate impacts, while increasing profitability and asset utilization.
Some companies have zero-landfill goals and strive to work with a logistics partner that can provide proper recycling and disposal of returned products. A co-location strategy like the one previously mentioned, further supports carbon footprint reduction and corporate sustainability goals through fewer transportation miles, lower vehicle fuel consumption, and lower building carbon output. A more agile supply chain also decreases product obsolescence and reduces total inventory levels. An effective reverse logistics strategy is actually the ultimate recycling process.
Reverse logistics can truly serve of great value to retailers, from helping them manage their bottom lines, to improving competitiveness and operating more sustainably.