THERE AND BACK AGAIN
Days before the height of the seasonal shopping frenzy, UPS announced a strategic alliance with reverse logistics specialist Optoro to handle an expected flood of returns totaling more than 1.3 million packages on National Returns Day (Jan. 5) and another 5.8 million more over the first full week of 2017. If you’re wondering if you’re handling returns well in house, consider that even the experts see opportunities to bolster their reverse logistics abilities.
With the massive volume of holiday returns looming, efficiency is paramount. By using comprehensive data analytics and multi-channel online marketing, Optoro’s software platform determined the best path for each item, maximized recovery and reduced environmental waste. It also leveraged a number of digital platforms including Amazon and eBay to sell returned items.
U.S. companies that ship their goods to international markets do not face such an avalanche of returns, but they ignore reverse logistics at their peril. By some estimates, this element can gobble up as much as 10 percent of a company’s supply chain costs.
“Some retailers price in a 5 percent return ratio. In fashion it may be 50 percent,” says Brian Bourke, vice president of Marketing at SEKO Logistics.
Jerry Levy, director of marketing and communications at logistics provider OIA Global, stresses that reverse logistics is not a necessary evil. For logistics firms it is another profit center, for logistics firms and their clients it is another opportunity to stand out, he says.
“Before offering reverse logistics to their end customers, shippers should establish very clearly what constitutes an acceptable return, and what are the conditions and timelines to the market,” advises Anabella Mas, head of Integrated Warehousing Services at DHL Global Forwarding, Americas. “Also, they should receive a detailed quote from their logistics provider of choice, making sure it covers all possible instances. They should make sure that their pricing to market covers the costs of the reverse process in full.”
In many cases reverse logistics is part of the overall logistics package. “We offer reverse logistics in every business,” Levy says. “Some companies put it in their RFP. We put it in because we know they are going to need it.”
At SEKO returns are usually part of the broader deal, but some clients engage different logistics providers for inbound and outbound flows. According to a white paper produced by supplychain247, few companies integrate reverse logistics fully into their enterprise software solutions and many shippers manage returns through disjointed and fragmented systems.
Product recalls are often bolts out of the blue for logistics providers. An online poll conducted last year by Deloitte found that a mere 8 percent of auto manufacturers were using advanced predictive analytics to help prevent, prepare for and manage recalls, and 23 percent had no operational product safety and recall anticipatory analytic capabilities.
Mas observes that reverse logistics are determined by a company’s strategy to market. Some industries—notably electronics, apparel, pharmaceuticals and consumer goods—are frequent users, she adds.
“Our reverse logistics programs are almost entirely for clients from the apparel, retail and outdoor sectors,” remarks Levy.
Cost has traditionally been the overriding factor in the choice and creation of reverse programs. However, this has been changing, as the customer experience and ease of handling returns have become more important factors for many companies, Levy says. “Speed has gotten big. In the past the metric was only cost,” he adds.
Levy finds that some sectors are most concerned about speed of returns, while others emphasize reliability. Companies that sell high-end goods usually rate quality of service the highest. “Getting it right is their main concern,” he says, adding that in the fashion and technology sectors, there is a stronger sense of urgency of moving returns quickly, as products become obsolete sooner.
The longer a returned item sits in a warehouse or on a truck, the less value its producer or vendor can recuperate, according to Ryan Kelly, senior vice president at Genco, a FedEx company that focuses largely on return flows. He advises shippers to embrace a data-driven approach, which should start with standardizing processes and establishing baseline key performance indicators for these.
“The metrics to control both outbound flows and reverse logistics are very similar in composition,” Mas comments, “but the reverse goods flow is much slower since the points of origin and conditions of the merchandise vary significantly, adding complexities to the process.
“As with any other logistics process, standard operating procedures are required to ensure reverse logistics operations are performed in a professional and consistent way. Specific SOP details will depend on what type of service the customer wants performed,” she adds.
Levy says that SOPs and processes can differ markedly between some commodities. “We build a customized SOP for each of our customers,” he says.
When it comes to measuring performance, Levy finds that the biggest factor is the timely transmission of status messages to the client’s enterprise resource planning system. “It is critical how quickly we can get the information to them so they can tell their customers how long it will take to get the new product to them,” he says.
Logistics providers identify the customs clearance process as the most complex aspect of returns when it comes to international business. However, returns seldom go back all the way to the point of origin, Levy notes. “The last thing you want is to trigger transportation cost all the way back, plus the documentation you have with international moves. And it would take a lot of time,” he says.
More likely the goods will go to a regional distribution center where they are assessed if they can be re-packaged, repaired or disposed. “The first decision is: Can we repackage, reconfigure? Is there any damage?” Levy says.
This is where the capabilities of a logistics firm to offer services beyond warehousing and transportation come into play. Besides the initial assessment of the state of retuned product, many providers handle repackaging, re-kitting and cleaning. Some go as far as performing repairs. Last year DHL clinched a five-year contract with Getac Technologies, a Taiwan-based manufacturer of rugged notebooks, tablets and handheld computers that usually operate under harsh conditions. The deal calls for the logistics firm to move defective items within Europe to and from a repair facility that it operates at Brussels Airport. Technicians in the facility’s dedicated repair wing perform between 200 and 300 repairs in a month.
Levy says OIA Global keeps “part banks” for clients in some of its facilities—a small supply of parts to replace faulty ones and carry out basic repairs.
Disposal of products that cannot be used anymore is a feature on many reverse logistics contracts, too. This can open doors to closer alignment between logistics providers and clients on environmental issues.
XPO Logistics manages the flows of British supermarket chain ASDA Stores to and from nine service centers, tracking assets, managing hundreds of supplier accounts for the retailer, and mending some returnable equipment. This contract extends to environmental aspects. XPO has developed and implemented a “zero waste to landfill” program to help the retailer meet its environmental sustainability goals. When the agreement was renewed last year, ASDA identified the environmental aspect as a major factor why it decided to continue to collaboration with XPO. n