Benefits of an Efficient Reverse Logistics Process

In an ideal world, your production line and business as a whole would be a one-way street. Your sales team would get a set number of orders, which your manufacturing team would be able to produce and ship out. The customers would love every single one and the process would start anew. Unfortunately, life happens. Products are damaged on the line or in transit or a customer simply isn’t happy with them. Trying to get the pieces back in a useful way has hamstrung nearly every company with a product. Trying to reduce the costs and in fact even try to maintain revenue with an effective reverse logistics process makes a lot of sense.

Where Are All Your Products Going?

As much as manufacturers see retailers as businesses operating in a different sector, there is plenty of carry-over. Thanks to accounting practices and ordering protocols, the difference between standard purchasing and a holiday layaway program just are not that different. Moving in the opposite direction, however, some manufacturers are still getting hung up on how to properly manage reverse logistics. That’s a big problem.
In both the case of retailers and manufacturers, returns reduce profit margins, not just revenue, by about four percent. There are several causes of lost money, of course, that can include:

  • Deadheading
  • Sorting equipment based on reusability
  • Labor used for re-packing
  • Disposal – any components and equipment that cannot be used must be disposed of and usually by the same shippers that should be sending out products

Each of these can be addressed by improving the efficiency of your reverse logistics process. For example, back at the facility, issues two and three can be covered by having sorting and identification processes that assess what can be reused in new products and what can be refurbished. Creating staffing positions that focus on these issues reduces the amount of waste noted in step four.

Deadheading gets into some of the more difficult elements of devising an efficient reverse logistics process. You likely outsource your shipping to someone else, and therefore incur the same shipping costs to have returns sent back to you. Unfortunately, those are unexpected, although not unforeseen, costs that can really throw revenue modeling out of whack.

The Obvious: Fixing These Helps Your Bottom Line

Reducing costs along the supply chain going backwards adds to your profit margin just as much as it does in the more common direction. Original equipment manufacturers save money when they can ship refurbished items as replacements rather than brand new product (Apple does this through its AppleCare program, to name just one). Even equipment that can just be repaired or issues that can be solved via technical support personnel all reduce the overall costs.

Of course, the benefit scales as the orders for products do, usually. But imagine a situation where an OEM is attempting to enlarge an assembly process and it finds that it is seeing a higher rate of product failures. The additional cost of solving that problem as well as end-user headaches becomes a much less daunting prospect when it comes with a truly efficient reverse logistics process. If a product is highly successful but also requires some hand-holding, the same is true even if the key issue revolves around well trained support technicians who can answer key questions.

Establishing Your Own Reverse Supply Chain vs. Outsourcing

Depending on the size of your shop, employees might wear many hats in terms of duties they perform. This versatility is great when you are trying to manage different processes at the beginning but becomes much more of a problem when you are trying to lead your company on a path that requires mature roles.

Choosing a company to outsource support, repair and reconditioning requirements allows OEMs to scale up at a more natural rate than they might be able to if they had to create their own systems and hiring in-house. While the steps are similar moving backwards along the supply chain, the duties are in fact very different for employees.

Learn More About Reverse Logistics with RiverStar

To learn more about integrating your OEM processes with our electronics manufacturing expertise, contact us today. Our team of consultants will review your project specifications and work with you to devise the right strategy for the best combination of refurbishing, return management and recycling to fit your goals for your products. We look forward to the opportunity to become your trusted partner.