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

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

Seasonally-adjusted (SA) for-hire truck tonnage in October at 135.7 (2000=100) was up 1.9 percent compared to September’s 133.1, and the ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment was 139.8 in October, which was 0.9 percent ahead of September.

The average price per gallon of diesel gasoline fell 3.7 cents to $2.445 per gallon, according to data issued today by the Department of Energy’s Energy Information Administration (EIA). This marks the lowest weekly price for diesel since June 1, 2009, when it was at $2.352 per gallon.

In its report, entitled “Grey is the new Black,” JLL takes a close look at supply chain-related trends that can influence retailers’ approaches to Black Friday.

This year, it's all about the digital supply network. In this virtual conference, we will define the challenges currently facing supply chain organizations and offer solutions designed to transform linear operations into dynamic, automated networks that offer seamless communication, visibility, and the ability to respond and optimize processes at any given time.

In his opening comments assessing the economy at last week’s RailTrends conference hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch, FTR Senior analyst Larry Gross said the economy continues to slog ahead at a relatively tepid pace, coupled with some volatility in terms of overall GDP growth. And amid that slogging, Gross said there is currently an economic hand-off occurring between the industrial sector and the consumer sector.


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

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA