Supply Chain

Supply Chain & Logistics: Switching Channels Offers a Better Way of Managing Returns

March 7, 2013

An effective returns management process is required to efficiently collect used and recyclable materials for subsequent lifecycles. Unfortunately, the economics of future material flows will be highly inconsistent with those found in the forward deployment of product.

Dave Blanchard

"An effective returns management process is required to efficiently collect used and recyclable materials for subsequent lifecycles. Unfortunately, the economics of future material flows will be highly inconsistent with those found in the forward deployment of product. Whereas full pallet-loads of homogeneous (similar) products are distributed in the forward channel, the reverse channel consists of odds and ends that are usually poorly contained and lack the original packaging. This will increase as customer segments diversify around the globe….

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"[R]eturn flows will be harder than ever to integrate with forward flows and often will simply be ignored by management. They can represent significant costs, however, with returns reaching as high as 40% of sales for some goods, particularly those sold online. Furthermore, returns provide closure to one lifecycle and the requirement for subsequent cycles. Strategic thinking therefore is required to manage returns.

"Given their strategic importance, wholly separate channels are often devised for returned goods. Specialized service providers [3PLs] are often called on to support the collection and flow of returned goods."

-- from "Global Macrotrends and their Impact on Supply Chain Management" Chad W. Autry, Thomas J. Goldsby and John E. Bell (FT Press, 2013)