[INFOGRAPHIC] Reverse Logistics: Managing the Business Circle of Life
It's a story we have all heard: nature is a repetitive circle of events. From the grass to the antelopes to the dirt beneath our feet, life moves in a circle, and business practices move in a similar fashion. Reverse logistics could be the business equivalent to the passage of time and life for nature. While businesses want to believe moving forward through selling product is the only way to achieve success, reality tells of customer returns, environmental considerations for equipment recycling and reuse, cost management, and the effective management of all the aspects between the three. And at the end, check out a nice infographic speaking more to reverse logistics strategies and practices.
Throughout the course of business, there will be a series of recurring updates for equipment, software, and materials. Reverse Logistics allows businesses to recoup a portion of the original purchase price of this equipment. Many business IT departments routinely send out previously used computers for a second life in the hands of other businesses and ordinary people. Furthermore, when an item is returned by a customer to the respective business, the item becomes a wasted cost if the item is simply trashed. Reverse Logistics provides a guide for ensuring these returns do not become lost costs and have a second life. For example, a returned product may only require rewrapping of exterior for sale to a secondary consumer. Alternatively, the same item may be sold to discount stores at a portion of the original cost-of-manufacture.
In 2013, 35 percent of businesses reported using Reverse Logistics as a means of cost management for supporting additional sales, described the Hi-Tech Reverse Logistics & Aftermarket Services Report from eyefortransport. However, 70 percent of respondents within the survey saw Reverse Logistics as a burdensome cost for the business. Unfortunately, this means that the associated revenue from using Reverse Logistics for these companies has been lost. In many cases, the rationale behind this response remains in-house RLS (Reverse Logistics Strategy). If a RLS provider is employed, the cost of such employment may be much less than the actual revenue garnered from the RLS. Ultimately, the company would make more money through Reverse Logistics.
Around the world, more people have become concerned about mankind’s carbon footprint. “Going green” through recycling and protecting natural resources stand at the top of much of the public’s values. Unfortunately, businesses have gotten into the slump of ignoring this trend for much of the past few decades. However, the rise of social media has given the public a new voice for speaking out against environmentally-harmful business practices, such as those implied when a company does not engage in some form of RLS.
With a few words, an irate customer can post images, video, and other media proclaiming traditional “out-with-the-old-stuff” business practices as atrocious and call for a massive boycott. To the dismay of former business professionals, the public can destroy a business with this principle alone. As a result, today’s businesses must ensure they have a successful, viable RLS to maintain harmony with public perception. Additionally, the growing concern of the public can be of great benefit to the company. For example, customers may favor your company over your competitors when you implement an RLS.
Materials within electronics or automotive aftermarket parts are not just an eyesore for the public, they can destroy the ecosystem. Silicon parts, acids within deteriorating batteries, and metals become useless parts in landfills when a reverse logistics strategy is not used. In 1997, US Congress passed legislation for the monitoring of landfills, which requires landfill owners to provide landfill liners that will last for the required, 30-year monitoring period. Unfortunately, after 30-years, the respective owner is no longer liable for contamination to drinking water and the environment if the liner fails.
Ultimately, the electronics and automotive aftermarket parts of today will affect the environment in the next 50 years if not recycled and reused. Additionally, more metals, plastics, and other materials have an inherent problem; they are limited in number. This means failure to recycle may result in extra costs to meet the growing demand for electronic materials in the future if the resource supply drops. An RLS eradicates all, except for non-reclaimable materials, electronic hazards from becoming an environmental disaster.
Although opponents to the 1997 Final Rule for Landfills see Congress’s actions as a mistake, the Environmental Protection Agency (EPA) and government organizations around the world recognize the importance of ensuring proper disposal of hazardous materials. Businesses tend to forget about how a single issue may impact an ecosystem. For example, leaking acid from batteries may contaminate the water of a lake, which then impacts drinking water for various towns. As a result, the rates of intestinal problems, cancer, and other illnesses begin to grow. Time passes, and the respective town dies, and with the town, dies the business.
This represents the worst-case scenario of the business cycle: start-up, growth, garbage, and failure. However, the cycle can become a positive, fulfilling circle of life if an RLS is implemented and maintained. Not only will it ensure the success of the business, but it will benefit all of society beyond the simple product did to begin with. If you’ve considered employing a Reverse Logistics strategy previously, decide which path you want to take:
- The Cycle of Business Death (NO reverse logistics strategy), or
- The Cycle of Business Life.
If you need help in establishing a reverse logistics strategy with technology tools included, contact Cerasis and we'll steer you in the right direction.
Infographic: Reverse Logistics: Managing the Business Circle of Life & The Spectrum of Reverse Logistics
Don't let the consumer product gifts fool you into thinking that reverse logistics isn't great for the more manufacturing, distribution, and bigger shipping (LTL) world. Core returns, huge pieces of IT equipment, and more. Here are some common categories which are great for the application of reverse logistics:
- Recalls: For manufacturers in today’s world, it is not a matter of if they will have a product recalled; it is only a matter of when they will have a product
- End-of-Life Products: End-of-life programs are used to pull older, outdated products from the primary sales channel in order to make way for new models. This is often
the case for product categories such as consumer electronics, household goods, software, security equipment and electronic accessories.
- Seasonal Products: There are many organizations that depend on a particular season to drive sales. They often provide special packaging to promote their products and plan on repackaging any unsold inventories for sale the following season. Unsold items are recalled by either the original manufacturer (OEM/ODM) or the wholesaler as stipulated in the original sales agreement.
- Parts: Parts fall into the last category of assets that depends on a company’s reverse logistics program. Companies with significant field repair operations can expect 16% of all parts to be returned. Of the parts that are returned, studies have found that roughly 25% are inspected, repaired, and/or repackaged and quickly sent back out to the field for use. Reverse logistics
programs enable OEMs and ODMs to reduce their overall investment in parts while maintaining the highest level of service, especially in repair networks that depend on the availability of parts. Providing a way to return unused, reclaimed, overstocked or defective parts streamlines the repair process and minimizes the investment by both manufacturers and field service companies.
In all of these categories, reverse logistics is much larger and includes a broad range of assets that, taken together, can have a significant impact on a company’s bottom line. It is worth repeating that while the cost of processing returns is less than 4% of total logistics costs, high-tech companies can average a recovery value of 28% on returned assets and enjoy a 12% competitive advantage in overall customer satisfaction with best-in-class reverse logistics.
How are you using reverse logistics strategies to recover the value of assets? Let us know in the comments section below!