Reverse Logistics: Waste Not, Want Not (Part II)

Editor’s note: This is the second of a three-part web exclusive examining the latest trends in reverse logistics. Today’s logistics managers are faced with three forces driving the reverse loop in distribution: Regulatory compliance, sustainable practices, and money saving strategies. Any one of these reasons will work, say business leaders, and the pay offs are similar in the extreme.  Indeed, by “doing the right thing” companies are helping themselves while saving the planet.

As noted in Part I of this series, supplier transparency is key to any reverse cycle. But supply chain scholars note that other risks must be examined as well.  Diane A. Mollenkopf, Ph.D., McCormick Associate Professor of Logistics Department of Marketing and Logistics University of Tennessee College of Business Administration says the tsunami disaster in Japan highlighted the vulnerability of being too lean in terms of inventory protection levels.

“One also runs the risk of having too few suppliers, especially when geographically concentrated,” she says.  “Shippers will surely be reconsidering how much inventory is really needed in the supply chain, and where that inventory should be located.” 

Mollenkopf notes that from a reverse logistics perspective, some shippers may find that they can increase their inventory protection by more effective and timely recapture of return goods.

“So an effective reverse flow may help mitigate some of supply risk,’ she says.  “Shippers just need to realize the inventory potential they may have within their existing market areas.”

Finding a third party logistics (3PL) provider capable of managing an offshore reverse process is still difficult, though. According to Mollenkopf, the economics of forward and reverse flows pose different challenges.

“A good 3PL not only handles transportation, but also has a network of facilities for sorting return goods,” she says. “This is a very specialized type of business, and shippers must make sure that the skill sets are in place before committing to a third party strategy.”

For Michael Blumberg, a certified management consultant and president of the Blumberg Advisory Group, shippers should seek 3PLs offering a “Reverse Logistics Management” (RLM) tailored to their specific needs.

“It should come as no surprise that reverse logistics will play a significant strategic role in supply chain development,” he says. “But it’s not a ‘one size fits all’ type of business.”
Blumberg contends that RLM also contributes to the bottom line by reducing cost, and protecting revenue.

“When you consolidate your administration, you have liability protection and resource optimization,” he says. “Then there are gains in productivity and efficiency. Ultimately, shippers provide customer service and good will that translates into more orders.”

Other analysts maintain that being a good “world citizen” also comprises customer service.

According to Gary Cullen, chief operating officer of 4PRL LLC, a growing trend of being “cheaper and nearer” seems to fit well within the cost sensitive and “eco conscious” reverse logistics chain of events. 4PRL LLC is the reverse logistics arm of The Georgetowne Group – a supply chain management consultancy.

“Much efficiency can be found in near-sourcing third party service providers (3PSP) who specialize in redeployment, repair, reuse, recycling, reclamation and resale,” he says.  “This appears to be a successful business model in today’s fuel conscious and green minded environment.”