Reverse Logistics: Opportunities, Insight and Savings

In the current issue of Industry Week, David Blanchard digs into the back door issue of "reverse logistics -- the process of moving product back through the supply chain to accommodate overstocks, returns, defects and recalls..." in a piece titled Moving Ahead by Mastering the Reverse Supply Chain. "According to Jonathan Wright and Michael Joyce, with Accenture's Supply Chain Management practice... it takes 12 times as many steps to process returns (assessing, repairing, repackaging, relabeling, restocking, reselling, etc.) as it does to manage outbound logistics. A study by the analyst firm Aberdeen Group indicates that reverse logistics in the United States costs companies roughly $100 billion per year...[and] based on Accenture's findings, reverse logistics also represents a huge source of untapped value."

The vast amount of information that can be gleaned by performing CPR and post-mortems on these returns can provide valuable insight into supplier and in-house manufacturing / packaging performance. Citing Wright and Joyce from the article: "product failure and returns information can be fed back to sales or research departments to be used to identify root causes such as packaging or product design errors."

While pre-release product and packaging testing can never fully replicate the market place, it would seem that considering "up to 20% of returned items are ultimately classified 'no trouble found' ", along with the other incredibly laborious and costly processes involved in reverse logistics, it might be worth offering many products with a two tiered pricing system: Warranted and As Is.

Now I'm not suggesting that product safety and other quality of life transgressions be ignored for a second. But in these overwhelmingly frugal times, I suspect that many buyers would gladly opt for an up-front discount in return for relinquishing their right of return.

William Busch

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