Three Keys to Picking the Right Reverse Logistics Provider

Small, medium, and large companies have been outsourcing reverse logistics for years and with good reason.Even Fortune 1000 companies with complex and robust supply chain management teams that expertly service the mother ship in the manufacturing process and the forward logistics area have chosen to outsource the reverse side of the cycle. The reverse part of the supply chain is often the hardest for even great companies to get right given the variability of the volumes, the pressure and focus on sales and delivery execution (thus the forward side), and often the lack clear visibility into the real costs to manage the reverse cycle. Therefore, reverse logistics is often the operation that involves a third party.

Great companies with great products cannot just pick a reverse partner with the throw of dart on the wall.  At the same time, simply picking a company based on the recommendation of business associate that had done business with ABC company some years back is also not good enough.  The same due diligence and planning needs to be employed in selecting a reverse logistics partner that you would employ in developing your manufacturing process, sales and delivery systems and internal controls procedures.  Following are three key areas you should consider when evaluating a Reverse Logistics Provider.

Scale and Fit: 

Not all RL companies are alike.  Some have expertise in certain lines of business and no experience in others.  Some are perfectly sized for your business…not too big, not too small.  Going with a big name can have its benefits, but if your company is not also a huge name, you may feel like you are getting pushed around and not receiving the response you need when you have problems.  Don’t just go with the big name or the referral name because it sounds good, they need to be the right fit for your business.

Stability and longevity: 

Price is always important…its supply chain!  However, don’t let yourself fall in the price trap.  Like most businesses, you are planning for multiple periods, probably at least three years.  You want a long term partner, one that is stable, profitable and has a track record for years.  The price can still be good with this type of company, but don’t be lured by the low-ball price.  There have been many RL managers that picked a 3rd party RL provider based primarily on price only to have it bite them later.  The RL provider wins the contract from you only to come back to you in six months saying they can’t make money at the contracted prices.
In the meantime your quality suffers and you are wasting more time at the negotiating table.

Quality and Process: 

The reverse logistics cycle is often dealing directly with your customers.  If not, it is dealing directly with your internal customers and has an impact in a lot of areas including forecasting, capex planning, cost containment, etc.  Given the potential adverse impacts that could arise in the process, you want to make sure your partner is maniacal about process, quality and reporting.  Look for partners that clearly state their mission around quality and process.  Look for partners that are SOX or SOC 2 compliant and invite you in to review their performance directly in their facilities and with their customers.  Be sure that you do actually go on the site visit!  There has been more than one RL manager that signed a deal with a provider without actually visiting the shop.  The likelihood of that manager staying around long is, like they say in the NFL…NFL stands for Not For Long. 

Getting this part of the business right will pay huge dividends for your company.  Fast, reliable and high quality return management and repair/refurbishment can help you out-distance your competitors, increase customer satisfaction, and minimize the capital needed for new or replacement units.  Alternatively, picking the wrong provider can have adverse impact to your business including customer dis-satisfaction, increased capex costs, and increase warranty repair costs.  Do your diligence and you will be very happy camper in the long run!

Robert Cook has been successfully running PSSI, a leading reverse logistics provider located just outside of DFW, for over 17 years.  To learn more, click here, or contact him directly at 817-527-6322.

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