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"Try to determine objectively if the company can successfully manage returned goods resulting in saleable products," Marcellino suggests. It's not easy to be objective about one's own operation, though, and it may be worthwhile to bring in a consulting firm to conduct an analysis, he adds.
A determining factor for many shippers is whether keeping reverse logistics in-house will make a difference in the quality of service to the customer, as well as in the cost to provide that service. Similarly, another consideration is whether managing returns is something in which the company wants or needs to invest significant physical and financial resources.
"In our experience, many companies come to the realization that while the reverse logistics process is critically important, it is not necessarily a discipline related to their core business and capabilities," says Marcellino. (For an example of a shipper that does consider returns management to be a core competency, see "L.L. Bean: Doing it Their Way" on Page 64.) Worthy of Attention
To effectively manage reverse logistics, industry experts say, shippers need to look at this function as part of the whole service and operations picture, not as an isolated activity that's treated as an afterthought.
In South's experience, many shippers have only recently overcome the perception that forward distribution is the highest priority and returns management is a "necessary evil" to be dealt with in someone's spare time in a back corner of the warehouse.
"As late as 15 years ago, a real focus on returns didn't exist among retailers or manufacturers," South says. "There was no 'owner' of reverse logistics." Instead, a cross-functional committee that included people from finance, logistics, and store operations might have been responsible for overseeing returns, he explains.
Today, however, reverse logistics is recognized by many companies as a bona fide supply chain discipline that deserves to receive the same level of attention as does forward logistics, South observes.
That makes good business sense, he says. "Both have the same objective: Finding the optimal way to do the job better, faster, and cheaper."
| Author Information |
| John Paul Quinn reports on a broad range of business topics for journals in the United States and Europe. |
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L.L. Bean Inc. has been processing the company's returns in Freeport, Maine, for the last 30 years and wouldn't do it any other way.
"We've always done it ourselves because it's just part of our 'customer-centric' philosophy of business," says Richard Donaldson, senior manager of public affairs for the catalogue retailer. "We want to be able to say that we handle the customer's needs from start to finish."
Despite the fact that the company's business volume continues to increase, executives say that merchandise returns have been trending downward over the past few years. L.L. Bean does not disclose statistics, but does say that the majority of the returns it receives are simple requests for a different size or different color.
Part of the company's rationale for keeping returns management in-house relates to its private-label status and the need to manage and protect its well-known brand, Donaldson says. A company that operates under a different model, selling various brands and competing on price and speed of delivery, may want to go with a third-party logistics provider (3PL), he suggests.
Donaldson's advice on doing it yourself:
- The higher the quality of your product and the more carefully manufacturing adheres to specs, the better your ability to keep returns to a minimum.
- Set specific cost management criteria regarding disposition of returned merchandise, including what should go back to stock and what should be sent for liquidation.
- The better you manage returns, the greater the dividends in customer satisfaction and keeping costs down on the profit-and-loss side.
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If you're considering keeping reverse logistics operations in-house:
DETERMINE THE VOLUME of your returns.
SET ASIDE THE REQUISITE SPACE in your warehouse to accommodate workflow needs, and keep that space orderly.
FENCE OFF THE RETURNS -handling space to prevent loss or misdirection of returned items.
HAVE A DEDICATED ENTRYWAY or a specific, scheduled time for returns shipments to prevent conflicts with forward distribution.
HAVE A DEDICATED reverse logistics manager on staff.
HIRE A DEDICATED reverse logistics staff that has been trained with regard to both product disposition and company returns policies.
If you're considering outsourcing returns:
CAREFULLY ANALYZE your returns volume and your disposition channels.
DETERMINE WHETHER PERFORMING your core business and simultaneously managing returns in-house makes sense from both an operational and a financial point of view. Seek the counsel of an objective consultant if necessary.
THOROUGHLY REVIEW any prospective third-party provider's experience and track record in managing reverse logistics. | | |
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