Return Networks

Daniel Dumke — Wed, 22 Dec 2010 08:50:00 +0000

I haven’t written anything about reverse logistics, yet. Mostly because it’s not a focus of in my own research. Nontheless, especially after the holidays returns will be on the mind of many supply chain professionals.

Reverse Logistics

The goal of reverse logistics is to efficiently and effectively handle returned products by establishing infrastructure and processes to accept incoming products and prepare them for resale, reuse, or recycling.

Derek Singleton, ERP Market Analyst, Software Advice highlights best practices for designing the return network. He argues that businesses lose a tremendous amount of money each year by mishandling returned merchandise.

Curtis Greve, revere logistics consultant, estimates that retailers and manufacturers lose 7-13% of sales revenues handling returns each year. This amounts to handling costs of over $40 billion annually. Greve estimates that efficiently handling returns can add as much as 5% to the company’s bottom line. For retailers and distributors operating at narrow margins, this is a big deal.

Best Practice

Singleton offers suggestions on how to limit these costs by profiling five best practices and five companies that are making them work for them. Here’s the listing:

Investing in reverse logistics systems
Outsourcing logistics operations
Accessing secondary markets
Offering recycling services
Preventing returns in the first place

Conclusion

The points mentioned in the article can be used as a basis for an deeper analysis of your own return network.
But the article has some limitations as well:

Most of all there is no mention on how these best practices have been discovered, I am missing some insights into the methodology used and how and if this listing has been verified for completeness and priority.
Prioritization poses another caveat; the first recommendation is to “invest in IT systems”, which is an important part of every supply chain process nowadays. But considering that this article has been written by a software broker, one has to decide for herself, if this best practice is motivated by the expected improvements in operations or self marketing.

Reference:

The complete article can be found here.

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