It happens every minute of every day -- a product is returned by a customer, for any number of reasons. Maybe the product was defective, or it didn't come as advertised (blue instead of red), or it was the wrong size. Perhaps the consumer just decided they didn't want the thing after all. Whatever the case, up until recently, manufacturers spent relatively little effort addressing the causes and effects of product returns.
As the concept of reverse logistics has gained acceptance, though, companies have woken up to a startling statistic: Product returns cost U.S. manufacturers and retailers $100 billion every year in lost sales, transportation, handling, processing and disposal. Looking at it another way, customer returns can reduce a manufacturer's profitability by an average of 3.8%.
Many manufacturers have yet to identify exactly where and how the reverse logistics "leak" exists within their operations. A good starting point is to figure out what a company's actual return rate is, and then determine what return rate is acceptable. According to analyst firm Aberdeen Group, best-in-class companies have improved their situation by following this type of strategy:
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Restructure the service organization with higher-level oversight and accountability.At A Glance: Reverse Logistics
Reverse logistics is the process of moving returned goods from their consumer destination for the purpose of capturing value or proper disposal. It includes processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory, as well as packaging and shipping materials from the end user or reseller.
- Upgrade technology solutions to automate portions of the returns process.
- Recover more costs from suppliers.
- Integrate the service organization closely with sales and marketing, as well as with design and manufacturing.
Aberdeen's analysis indicates that manufacturers typically use one or more of four technology solutions to support their reverse logistics efforts: customer relationship management systems, service management systems, transportation management systems and warranty claims processing systems.
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About the Author
Dave Blanchard
Senior Director of Content
Focus: Supply Chain
Call: (941) 208-4370
Follow on Twitter @SupplyChainDave
During his career Dave Blanchard has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeek, EHS Today, Material Handling & Logistics, Logistics Today, Supply Chain Technology News, and Business Finance. He also serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), which has been translated into several languages and is currently in its second edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.