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

Hi-tech=high value
As companies within the hi-tech and electronics industry work to differentiate themselves, add value to their products, and develop new revenue streams, reverse logistics and after sales services are proving to be valuable tools, say researchers for Eyefortransport (EFT), a London-based logistics and transportation think tank.

In a recent EFT survey, respondents were asked to classify the strategic role of after sales services and reverse logistics in their businesses. Not surprisingly, a clear difference was seen in the responses from hi-tech companies and the lead logistics providers (LLPs) they rely on.

Researchers say that the vast majority of hi-tech companies see after-market sales services and reverse logistics as either a cost center supporting product sales (45 percent), or as a cost center supporting product sales and creating competitive differentiation (43 percent).

“What’s interesting here is the number of hi-tech companies that don’t consider aftermarket services and reverse logistics as a competitive differentiator or as a profit center,” says Katherine O’Reilly, EFT’s executive director. “Clearly some companies are able to leverage after-sales services and reverse logistics into profits, some add value and differentiation to their products, while some are just using it as a support mechanism for sales.”

When it came to costs and performance in product returns, hi-tech companies favored greater transparency. In fact, 18 percent of shippers had complete transparency—as opposed to 2 percent of their lead logistics providers—with 36 percent being very transparent. In contrast, the majority of the LLPs (53 percent) could only claim to be somewhat transparent.

“Consequently, the survey shows a mismatch in expectations between hi-tech companies and LLPs with regards to transparency expectations,” says O’Reilly.
Respondents were then asked to identify the extent to which they’re collaborating with partners (retail customers, call-center providers, repair providers, and reverse logistics providers) in after-sales processes. Again, a notable contrast was seen in the responses from hi-tech companies and LLPs.

While both groups had the highest number of respondents seeing their level of collaboration as either partial or substantial, a much greater number of solution providers (23 percent as opposed to 8 percent) saw full collaboration, while a much greater number of hi-tech companies (25 percent as opposed to 11 percent) saw minimal collaboration.

“In essence, shippers found there to be less collaboration in after sales services than LLPs—further emphasizing the disconnect between the two parties with regards to transparency,” O’Reilly says.

Effective outsourcing
Gary Cullen, chief operating officer of 4PRL, the reverse logistics arm of the supply chain consultancy The Georgetowne Group, tells shippers that there are two reasons for signing a contract with a third-party when outsourcing reverse logistics.

“The first reason is so that there are clear terms and conditions for running the operation and billing,” says Cullen. “The second reason is to have a framework to dismantle the operations if something goes awry.”

Finally, if all else fails, know when to call it quits, says Curtis Greve, Principal at Greve Davis, a reverse logistics consultancy. “Many companies that outsource don’t seem to think about the details and what they are going to do if they have to fire the service provider,” he says. “Make no mistake, terminating a contact with or without cause can cost millions.”

Davis advises shippers to think about what happens to the inventory, the capital equipment, the building, ongoing worker compensation issues, shut down and closing costs, and what they’re going to do after the third-party is gone.

“Once they’ve decided to end the relationship, they could save a lot of money if the contract addresses the shut down process correctly,” adds Davis. “There are many valid reasons to outsource reverse logistics to a third-party, but the key is to have a good contract that will protect everyone’s interest, achieve the original goals that drove the decision to outsource, and ensure a win/win relationships between the parties.”

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

Supply chain security provider Freightwatch International has released its semi-annual report on cargo theft in the Asia Pacific region for the first half of 2014, which contains some heartening news for U.S. shippers reliant on trucking, warehousing and retail.

FedEx Ground, a subsidiary of FedEx Corporation, reports today that a decision by a three-judge panel of the United States Court of Appeals for the Ninth Circuit reversed previous rulings by the District Court for the Northern District of Indiana in three class action cases involving mostly former independent contractors for FedEx Ground

More talking remains before the deal is done

The transpacific U.S.-flag carrier has been ranked number one in the ocean carrier category for Logistics Management magazine's Quest for Quality award

This year, the Containerization & Intermodal Institute (CII) will be staging the “Connie” Awards dinner in conjunction with IANA’s Intermodal EXPO in Long Beach

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