One area that’s often ripe for optimization is your company’s reverse logistics system. Optimizing reverse logistics isn’t the most exciting task, but it’s usually favorable for cost savings. Reverse logistics is typically messy, can be politically charged, and exists to give money and resources back to customers. It’s for these reasons that little attention is paid to it. But the reality is that it’s a cost center and, potentially, a large one at that. Regardless of your position in the market, you should be paying attention to your reverse logistics strategy and doggedly finding ways to reduce costs while maintaining service levels. Kick off your team’s journey to achieving your optimal reverse logistics system by digging into the areas outlined below.
5 Ways to Improve Your Reverse Logistics Operations
1. Collect Data, a lot of it
Currently, the key to success is to collect tons of representative data from your operations, thoroughly analyze it, draw conclusions and then create new initiatives to improve your business. Data is everywhere these days, and with the advent of smart tracking and 5G wireless technology data, availability will continue to explode. Use this new technology to collect data on actions like which items are being returned, how long it takes them to be returned, why they’re being returned, how they’re being returned, etc. The more data you have in these areas the more vision you have into your reverse logistics cost centers and what’s driving them. Next use advanced analysis methods such as linear regression and machine learning to draw new conclusions backed by big data. These conclusions and the new initiatives generated from them are invaluable when trying to take your reverse logistics system to the next level.
2. Collaborate with Key Stakeholders
The next area to look closely at is your relationship with all the stakeholders in the reverse logistics chain. These stakeholders can be obstacles or resources. In many cases they hold key data that can significantly impact your operational strategy, so it’d be wise to engage in efforts to develop a deep collaboration. Work to determine how you can help each other reduce costs and improve service levels. There could even possibilities to monetize the data you capture together or individually. The key is to look at your adjacent reverse logistics partners and determine how can you improve each other’s position.
3. Consolidate Logistics Operations
One common trait that we often see throughout many different marketplaces is redundant logistics functions between forward and reverse logistics. Markets tend to grow organically and so do the logistics systems that service them. You may be surprised, but often companies leverage completely different partners and structures to service their forward and reverse logistic systems. These different partners don’t frequently communicate or collaborate directly with each other, which presents a great opportunity to reduce complexity and costs. When diving into this area focus on uncovering ways that you can combine frequent forward and reverse logistics moves. Strategies like this are often employed in markets that have a large amount of reusable dunnage (plastic totes, pallets, etc.). The semi-truck making a delivery to a customer will now load up with as much returnable dunnage as possible and deliver it back to the shipment origin. No longer is there a need to use two trucks or multiple companies when one will suffice.
4. Triage Your Return Requests
The fact of the matter is that not all returns are created equal. Some are more valuable than others. Because of this, it’s important to determine if and what the actual value of completing the return is. Can you resell it? Can you reuse it as raw material? If you can understand what the cost is to process a return at the product level, you can develop a cost benefit analysis of processing the return. Smart companies have concluded that for many low-cost high-volume parts it makes more sense to have the customer dispose of the items themselves and send them a replacement right away rather than send them back before receiving a refund or replacement item.
5. Outsource Expensive Functions to Build Flexibility
Companies that traditionally receive high volumes of returns must rely on a significant amount of infrastructure to bring the product back into their possession. Examples of this infrastructure are customer drop-off points, return consolidation warehouses, recycling operations, etc. Building and managing these assets will carry a significant cost. Furthermore, you must forecast and plan capital expenditures long into the future to ensure that you have the assets to meet your market requirements when the time is right. Because this is highly uncertain and capital intensive it’s a great opportunity to explore flexible outsourced services. By identifying and engaging functional partners to develop agreements that allow you to scale as your business needs rapidly evolve, you remove the need to predict the future and invest accordingly. Additionally, if markets collapse and volumes decrease, you’re not stuck with highly under-utilized assets.
By closely evaluating these areas outlined above your reverse logistics system and strategy are primed for an overhaul and a significant cost reduction. Thoroughly exploring these areas will also bring new questions to light and help you define new initiatives. Plan on revisiting this overhaul annually with your team to continuously drive exciting results.