How to Move Forward with Reverse Logistics
Everyone has experienced this scenario: a great event is planned in advance, a timeline is set with a predetermined flow of the party, from when guests arrive to the food and music, all the way to their departure at the end of the evening. But as with most events, the host may experience some hiccups along the way. The same goes for many planned and well-organized supply chain processes – they carry with them the threat of unplanned and unintended events, especially when moving product from the point of origin to its final destination. And it is when that shipment does not arrive in its best condition that shippers experience the reverse logistics process.
Reverse logistics (RL) is the invariable result of unintended consequences, which are typically referred to as “over, short and damaged” (OS&D). This includes unsold and returned items that must be dealt with in a timely manner. It can also represent a significant supply chain cost, as there tends to be disorganization around managing reverse logistics that is more challenging than conventional “forward” logistics management. The critical difference is that transportation is the last step in forward logistics and the first with reverse, which can cause problems.
Some of the issues that can and often occur in moving product though the pipeline include:
- Order inaccuracies
- Damage to product when handled or in transit
- Customer returns
However, there is ample opportunity to foster continuous supply chain performance and overall cost efficiencies within the reverse logistics process. And a key aspect of managing RL is installing processes as “preventative medicine” during the forward logistics stream, particularly during the unloading process. A few examples of processes to integrate during unloading include:
- The distribution center (DC) team needs to be watchful and catch any number of possible problems such as missing or damaged cartons, wrong quantities, etc.
- It should be noted if the product may be late and needs to be expedited, or if the product may arrive so late that it will be refused upon delivery.
- If noticed during the handling process when coming off the truck in the DC or in the loading process for delivery, any damaged product needs to be removed immediately.
- Was it because the product is unwanted, dysfunctional or damaged? It’s important to determine the customer’s reason for return to avoid similar issues in the future.
And even when dealing with highly complex networks, retailers have a great opportunity to optimize their supply chains by focusing on the following:
- Forensics: Get to the root of why returns happen in the first place. Is there a surplus driven by product purchases that exceeded consumer demand? Were there problems with the packaging, shipment time or incorrect orders? Did the shelf life of the product expire? Was that product not delivered in time during its peak freshness?
- Recovery: Optimize the profitability and income recovery by maximizing the value of these assets. This can include re-packing, refreshing/refurbishing, sale to export merchants, return to supplier and return to stock.
- Risk Mitigation: This is important when it comes to expired or hazardous products, which increase the complexity and rigor associated with unsold product. The education of field personnel in stores and DCs is critical in order to avoid violations that may lead to fines and damage a company’s reputation.
Lastly, it’s important to stick to a few rules to ensure that the forward process doesn’t turn into a morning-after mess. Each supplier’s terms and rules are different – so partnering with a third party logistics provider can help to ensure full end-to-end supply chain visibility and that your decision support technology is in line when arriving to the reverse logistics party.
Which factors do you find most challenging in the reverse logistics of your supply chain network?
To read more about how to get reverse logistics right, click here.