Financial Services Case Study

Predator or Prey?

Best practices to get the most out of your Reverse Logistics program and avoid falling prey to current trends.

By Jim Schumacher

Introduction:

Times change, industries change (think Blockbuster Video), consumers at the end of supply chains are demanding more.  Driving much of this change is the effect e-commerce is having on the retail supply chain.  If factors like these are making you feel cornered when it comes to managing the cost and complexity of reverse logistics, then you are not alone.   Unfortunately, the axiom “survival of the fittest” also applies to reverse logistics.  As a person responsible for managing this for your company you are faced with choices like “adapt or perish”, “fight or flight” or becoming “predator or prey”.

 

No different than with other aspects of your business such as marketing and or operations, adaptation or evolution should also be present in your approach to reverse logistics.  With the fast pace of technology and impact of e-commerce almost everywhere today, companies must adapt if not embrace the changing forces present in reverse logistics to remain relevant and competitive.  Choosing to look the other way or ignoring these forces can become a costly mistake. Where prior to the impact of e-commerce on reverse logistics you could be dealing with a 1%-2% cost of goods sold, the multiplier effect we see today from e-commerce can easily double or triple this cost.

Fortunately, DRS is here to help you continue as king of the jungle in your industry. We have put together an assortment of best practices and actual business cases for you to reference.

Recommended best practices from the experts:

Here are some of our favorite best practices to illustrate the impact that a sound reverse logistics program can have in helping you make more profitable decisions in running your reverse supply chain:

  • When was the last time you updated your returns policy? Retailers have certainly been active updating their returns policies to reflect such changes as e-commerce and haz-mat. Policy best practices include:

    • Ensure policy is current and updated regularly
    • Accepted by your trading partners
    • Audited for accuracy
    • Comprehensive to cover all your product types and most likely scenarios
  • Are you in control of your product’s disposition? The ultimate disposition of your product should be your decision. 20 years ago, manufacturers were concerned with keeping their items out of 2 dozen flea markets.  Today, because of the proliferation of 3rd party resellers on sites like Amazon and eBay your product could be for resale out of thousands of garages and basements at any given time.  Best practices related to product disposition include:
    • Predetermine your items disposition beforehand by explicit direction in your policy, a prearranged return authorization or some other means
    • Avoid ambiguous dispositions like “destroy in field” or “donate”
  • Are you recovering as much residual value as possible? This is directly related to the best practice of controlling the disposition of your product. If there is residual value to be recovered most likely somebody is recovering that value.  Why not ensure through the control of your returned items that somebody is you and your company who benefits from any value recovery through liquidation, repurposing or recycling?  Best practices related to value recovery include:
    • Commit to a multifaceted disposition process that can positively impact your company’s bottom line
    • Don’t go at it alone – work with a trusted 3PL who can customize a program to meet all your needs and provide the expertise and experience you may be lacking
    • Understand that reverse logistics is a constant need to address and that you and your customers will both benefit from a disciplined, well-structured approach
  • Are you paying retailers claims with no questions asked? A longstanding paradox of reverse logistics has been that returns can be extremely transactional and these transactions can be highly inaccurate. Best practices related to claims processing include:
    • Validate quantities returned to quantities claimed
    • Audit claims to ensure correct item pricing and fees are included
    • Pay only on items returned and not just claimed
    • Get repaid for wrong items and fees claimed
  • Are you analyzing what is coming back, from where, and why? Analytics is your tool for adapting to survive in reverse logistics. What gets measured improves. If you are not learning from and adapting to this information you most likely don’t know your true cost of returns.  Often this blind spot can be a competitive disadvantage to your peer companies who have this information and understanding.  Best practices related to analyzing returns data include:
    • Limit the return of in-date, undamaged product that you are paying for
    • Identify and prevent the return of diverted product
    • Understand the root causes for the return (promotional, packaging, other) and preventing reoccurrence
    • Implement a continuous improvement mindset and philosophy and reinforce with cross functional teams
    • Collaborate both inside and outside of your organization with the information and knowledge gleaned from your program to reduce the incidence of returns
    • Use your improved understanding of the true costs related to your returns and the potential benefits directly tied to program improvements to secure senior management support for additional reverse logistics related projects

See our best practices in action:

Interested in learning more from specific examples?

If you are interested in looking to improve your returns management process, financial reconciliation, remarketing results, dealing with a recall or looking to assess your supply chain for areas of opportunities, take your pick from the links below.  DRS has been there assisting companies like yours for 25+ years and can customize a solution to meet your exact needs to help you save money and remove costs from your reverse supply chain.

Adaptation can keep your company’s supply chain from falling prey to these fast-moving developments in reverse logistics.   Now is not the time to be reducing and or even eliminating your focus on reverse logistics.  This is the best time to do just the opposite.  It’s not time to run, it’s time to attack this head on.  Don’t be prey, be the predator in this instance.  Trust me, you will like what your bottom line evolves into.