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Higher Recoveries and Consumer Satisfaction through Reverse Logistics

When you look at the value of your customer base, specifically in regards to reverse logistics, you can’t help but notice the trends that are occurring in the marketplace today. Consumers are looking for alternatives both in cost and brand; and as a tactic to capture more market share, manufacturers and retailers are utilizing remanufactured or refurbished items in order to offer savings to customers on brand-name technology as an alternative to new “second-tier” or generic brands.

There also is a growing awareness regarding technology lifecycles and end-of-life environmental concerns. Companies that offer solutions such as trade-in programs or recycling credits are utilizing these programs to increase consumer traffic in stores (or on-line).  These programs also promote a “going green” initiative for the host company. By providing lifecycle solutions and actively offering remanufactured and refurbished products, they show the consumer that older products are not being taken to the landfills, but are continuing to be useful throughout their extended lifecycle. This leaves a positive impression to the consumer and can preempt legislative action which forces recycling solutions on the industry.

Another benefit to the retailer or OEM is that these strategies bring in new demographics and help capture untapped markets. As product returns typically range between 1-6% of all product sold, manufacturers, retailers and distributors are forced to deal with the question of what to do with their returned material. Oddly enough, the same tendencies and concerns that kept the computer industry selling returned material at just 10% of original cost for a decade (the 90’s), still prevail in many product categories. Today however the consumer PC market has matured and it isn’t unusual to see remanufactured products sell at 90% of original cost. The lessons learned from the PC industry were forged through the combined market pressures of high cost technology, introduced in short production cycles, in high volumes, with a high percentage of returns in a landscape of diminishing margins for new products. In other words they had to optimize their reverse logistics. These same lessons can be shared (without the corresponding pain). Try this as a test of where you stand on the evolution of optimizing your product returns.

Here are the symptoms -

Fear of cannibalizing the sales channel with refurbished goods. A lack of knowledge about product grading, remarketing channels and the related recovery values (or corresponding costs for repair/remanufacturing). A lack of resources to handle returned material or remarketing. Yield rates of less than 95% on returned material. Turn-times of greater than one week. All these can contribute to low recovery values.

The key indicators -

Recovery values of less than 50% of original cost.

Slow turn-times or repair/remanufacturing

No developed channel for A, B or C Grade product (if you only have a channel that can take A grade material, the costs for cosmetic repair and delays in turn-times due to parts availability can significantly impact your net recovery).

It’s amazing that so many businesses (and industries) still do not have a total solution in place for their product returns or client trade-ins. With consumer acceptance of refurbished material and recent trends towards recycling, working in partnership with a reputable and experienced reverse logistics service partner that can handle all aspects of processing your returns and consult on value recovery strategies is a smart move. A reputable reverse logistics company can create a customized solution and bring additional revenue from such areas as:

  • Warranty recovery
  • Proper Application of Repair/Re-Kitting/Remanufacturing based on balancing Cost against Recovery
  • Product Remarketing Solutions
  • Harvesting of Parts for Service
  • Data Destruction
  • Proper Disposal of E-waste
  • Compliance with Government Regulations
  • Reduction (consolidation) of Returns Logistics Costs

Just because you “make it” or “sell it” doesn’t mean you can handle your returns efficiently. Saving money by trying to do it all in-house could be costly in the long run, especially in the area of data disposal and the corresponding liabilities.

A strategic partnership with a premier reverse logistics company like Product Support Services, Inc. “PSSI” will allow any manufacturer, retailer or distributor to increase their net recovery value on returned assets and provide lifecycle to their customers.

 

Resources:
Supply Chain Brain – The Top 11 Positive Supply Chain Value Creation Opportunities for 2011: http://www.supplychainbrain.com/content/nc/logisticstransportation/reverse-logistics/single-article-page/article/the-top-11-positive-supply-chain-value-creation-opportunities-for-2011/