I think I am not the only one who has some interesting anecdotes about Reverse Logistics – a very hot topic these days.
Here are a few of my favorites:
- I saw a woman we know at Sam’s Club a couple of years ago. She had purchased a new Compaq/HP computer, but had a minor (and easily solvable) technical problem with the networking card. Not real savvy about computers, she couldn’t get her problem addressed through technical support, for whatever reason. So she was bringing this perfectly fine computer back to Sam’s, which happily accepted the return, setting off a reverse logistics chain for Sam’s, Compaq, and probably others.
- I led a warehouse automation project for totes-Isotoner a number of years back. Like many consumer goods manufacturers, it was very difficult – let’s say impossible – to well control returns from retailers, especially after the Christmas season. Returns would show up in every imaginable way, and frequently include products that weren’t from totes-Isotoner. About March of each year they had a sale where DC workers could buy all the televisions, hair dryers and other weird stuff that they received back – and for which they had incurred costs to process and store.
- I was modestly connected to an effort Home Depot had a few years ago looking for software to help them improve returns processing. I don’t remember the exact figure, but I am pretty sure at the time Home Depot had on average tens of millions of dollars in returned goods in the back room of their stores, most of which sat for much longer than it should have. What to do with the merchandise wasn’t always clear, and there was no real tracking/event management that forced store personnel to do something to keep the flow going. I don’t know what Home Depot ultimately did, but I have heard this type of story from a number of other retailers and manufacturers in the past few years. (Note: see partially related story on Home Depot’s plans for supply chain/logistics transformation nearby in News Bites.)
We haven’t spent a lot of time on reverse logistics at SCDigest, and we will rectify that starting with this piece. Right now, it is finally getting better attention from many corporations. Three factors are driving that:
- Growing recognition of the total costs: Reverse logistics expenses, in total, can be a larger absolute number, and larger as a percent of sales, than many companies realize.
- Regulations: There are a growing number of regulatory requirements both in the U.S. and across the globe. Most of these are focused at the electronics industry, but today that means a lot more than computers and monitors. A growing array of products have chips and electronics in them, and are or may be covered by these “end-of-life” and recycling requirements. Expect lots more. The EU is also getting very tough on chemicals.
- “Green Supply Chain” efforts: We identified the Green Supply Chain movement as our number one supply chain trend of 2006 (see Top 10 Supply Chain Trends). Better management of reverse logistics will be at the core of many of those efforts.
Part of what triggered this week’s column was a Videocast we did this week on “Building an ROI for Reverse Logistics.” It contained some good insight from Clear Orbit on building a business case for reverse logistics improvements, as well an overview from expert Jade Lee of SSI on the global regulatory environment. The broadcast is now available on-demand.
The issue is complex. It’s wrapped up in the issue of Returns policies, which many manufacturers and retailers have been getting tougher on (See Philips Electronics Finds The Best Way To Tackle Reverse Logistics Is To Focus On Root Cause, Enforce Policies, from the SCDigest archives.) Best Buy is trying to identify “serial returners” and prevent them from buying goods in the first place.
So in this column I am not doing much more than to raise the issue, and suggest that after years of many logistics people realizing the costs and challenges, but unable to get much support for improvement, that the combination of factors I cited above (and maybe some more I missed) are moving reverse logistics costs, opportunities, requirements, processes and technology support up a bit on the priority list – finally.
Do you agree reverse logistics is starting to get more attention? Why – or why not? What do you think the key issues are? Do you have any interesting or amusing reverse logistics anecdotes? Let us know your thoughts at the link below.