Subscribe to our free, weekly email newsletter!


Global Logistics: Strip the risk out of reverse logistics

Forward logistics is the primary focus for shippers of all commodities, but fine-tuning the “reverse loop” is becoming more urgent. As high-end companies develop new revenue streams, reverse logistics and after sales services are proving to be valuable tools.
By Patrick Burnson, Executive Editor
June 01, 2012

When the FDA discovered that a second counterfeit version of the best-selling cancer drug Avastin had been found in the U.S. this past spring, an alarm was sounded in the global reverse logistics community. And for good reason: Shippers of other high-value and highly-perishable goods like electronics and food were also being judged by how well they protect the return process in their distribution channels.

According to a recent U.S. Congressional study, incidents of counterfeiting reported by drug makers had increased steadily over the decade to more than 1,700 worldwide last year—only 6 percent of those incidents were in the U.S. According to the report, the rise in counterfeiting comes as pharmaceutical supply chains are increasingly stretched across
continents, as more than 80 percent of the active ingredients used in the production of U.S. pharmaceuticals are now manufactured overseas.

“It’s becoming a huge problem,” says Dale Rogers, a professor of logistics and supply chain management at Rutgers Business School. “Not only does a shipper risk losing massive class-action lawsuits, but the damage to corporate image can be significant.”

While pharmaceutical and bio-med shippers place a premium on forward logistics, the reverse process dealing with product recalls and trade returns is getting a lot of attention these days. “The reason is simple,” says Rogers. “Once you have identified how a product moves through a sustainable loop, all players become transparent. If a bad product is not returnable, then a reaction is set off immediately.”

Indeed, the Healthcare Distribution Management Association (HDMA) estimates that 3 percent to 4 percent of product going out from pharmaceutical warehouses ultimately comes back. Some of this is redistributed, and some returned for disposition and destruction by a third party processor or manufacturer.

Furthermore, of the estimated 3 percent to 4 percent of the product returned, it’s also estimated that approximately 1.5 percent to 2 percent of pharmaceuticals manufactured will be returned for destruction with a resulting credit back to the manufacturers’ trading partners.

“Manufacturers currently spend up to 4 percent of cost of goods sold [COGS] on non-value-add distribution functions like returns and reverse logistics,” says Sameer Kumar, a professor in the operations and supply chain management department at the University of St. Thomas in Saint Paul, Minn.

“With such a large amount of product going through the reverse supply chain, returns should be an ideal touch point for mechanisms and technology to support a safer pharmaceutical supply chain,” adds Kumar.

Steve Vinsik, vice president of enterprise security at Unisys, agrees. He notes that results from the bi-annual Unisys Security Index show that shippers are demanding traceability from point-of-origin to end destination, irrespective of commodity. “Drugs and medicine are naturally among the most sensitive,” he says. “But supply chain security ranks high with shippers of mobile and high-end electronics goods as well. Shippers of any and all commodities can learn from these cautionary tales.”

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Lyon, France-based Norbert Dentressangle, a $5.5 billion global third-party logistics (3PL) services provider focused on global logistics, transport, ocean, and air services, said today it has acquired Des Moines, Iowa-based Jacobson Companies, a value-added warehousing (VAW) company, for $750 million from private equity firm Oak Hill Capital Partners.

Download the newly released research report, "Transportation Management Systems" conducted by Peerless Research Group (PRG) on behalf of Supply Chain Management Review and Logistics Management magazines. Learn what logistic experts are saying about their current supply chain technology infrastructures, how they tackle the transportation component, and revealed the gaps that still need to be filled in order to attain end to-end visibility of a streamlined supply chain.

From cost center to growth center. Get insightful opinions on changes in the marketplace from this independent survey of warehouse personnel. Motorola Solutions examined the current warehousing marketplace in our 2013 Warehouse Vision Report, conducted April-May of 2013.

Even though not all publicly-traded less-than-truckload carriers (LTL) have posted second quarter earnings yet, the early consensus for those that have issued results is looking very good.

The advance estimate for second quarter GDP at 4.0 percent could serve as a sign of a steadier and improving economy.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA