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When Do It Yourself Is A Waste of Money

By Tony Coletto

Reverse logistics on a global scale is often best done through a third party to save time, money, and resources.

Reverse logistics may be the last step in the manufacturer's supply chain, but for many products it's a new beginning.

From an engineering logistics perspective, reverse logistics programs allow companies to efficiently and effectively reuse, replace, recycle, and dispose of products. These same programs give companies advantages on servicing returned defective products or handling guaranteed sales returns.

New Life for High Value Products

In the office-equipment industry, for example, high-performance equipment facilitates communication and allows businesses to be more productive and more competitive. However, this same equipment ages or comes off-lease, becomes defective, or is replaced by a newer, better model. To fulfill equipment service contracts, the manufacturer must make sure that this same equipment is picked up, replaced if necessary, or refurbished, scrapped, or disposed of to a wholesaler for sale either as used equipment or to the resale market.

Xerox Office Printers

Xerox is a case in point. The company offers its customers the Xerox Total Satisfaction Guarantee (TSG). Simply stated, if a customer is not satisfied with the equipment for any reason, it is picked up and replaced with an identical machine, no questions asked.

Xerox replaces or upgrades hundreds of office printing machines every month. They rely on their third-party logistics provider to act as on-site de-installation technicians. Outside driver teams are trained by Xerox in-house technicians on proper installing and de-installing practices so the equipment is handled without damage. These outside driver teams, once trained, effectively act as technical support specialists for the company.

Here's how the process works. With Xerox's "call-ahead" program, a customer-service engineer takes the de-installation order. There is little waiting time for the customer to get the old model out: The customer is called to arrange a pick-up within 48 hours. A technical support team is then dispatched to pick up the old printer, which may have defective internal parts or may be on an exchange or upgrade program. The product then moves directly to a triage center in California, the equipment's condition is assessed and is scrapped, stripped for parts, held for resale or shipped out to Xerox Southern California spare parts and refurbishing facilities.

This reverse-logistics service also provides asset management for Xerox by tracking model and serial number, managing the equipment that needs to be deployed, and expeditiously returning damage-free equipment to the manufacturer.

Manufacturer and Customer

Save Money

By using a third party, the customer's bottom line is affected because the manufacturer's fixed overhead costs are reduced. The cost of deploying a highly paid technician to provide the de-installation service is eliminated as a customer pass through, and benefits Xerox by retaining its technical staff for more critical service responsibilities. In this environment, Xerox is paying only a customer-transactional fee for the service, and the cost of temporary space used in the logistics provider's warehouse. This allows Xerox to flex up and flex down to adapt to various business surges without draining in-house staff resources. For Xerox, this has translated into a huge increase in their used equipment recovery rate.

Gatorade Single-Serve Coolers

Gatorade sells more than 400 million gallons of its "sports drink" daily. A portion of this volume is in the form of single-serve refrigerated units kept chilled in more than 15,000 refrigerated glass-door merchandisers and vending machines that Gatorade owns.

To maintain this sales volume, quipment repair or replacement must be handled expeditiously. Some units may need to be upgraded or replaced because of changes in a retailer's business situation. Many units are outdoor displays subjected to severe weather changes, and others are in locations where they are constantly in use.

Managing new and used distribution equipment inventory is a critical supply chain step that keeps the product on the shelves. When equipment needs servicing, third-party logistics teams from distribution centers throughout the country can service or replace the equipment in 24 to 72 hours. They pick-up used equipment (due to upgrades, defects, or damage) perform an equipment triage, and communicate the status to Gatorade. They may then dispatch specially trained personnel to the equipment site for immediate repair, or have the used equipment consolidated to be shipped in quantities to refurbishers for more extensive repairs.

The value of a third-party logistics company to Gatorade is that it provides a third-party network with inventory tracking in place, so Gatorade can compete with large soft drink distributors that have dedicated, in-house distribution networks. Through a national, uniform service provider, Gatorade can realize quantity runs on repairs, which average between 50 to 100 units per month, at a significantly lower per-unit repair cost.

Picking up the E-Tail Pieces

Although mail-order retailers have been outsourcing fulfillment to pick-and-pack logistics firms for years, the rapid rise of e-commerce-driven retail has created a new form of reverse logistics: returns management.

Between 10% and 30% of home-delivery shipments are returned. In the retail industry, returns have become a major problem and a cost-effective avenue is necessary to get returned products redirected or back to the manufacturer.

Shipments may be refused for any of several reasons: damage, manufacturer defect, packaging defect, wrong SKU, not meeting quality, value, appearance or service expectations, wrong size, or simply a customer changing his or her mind.

Specialized handling and value-added home delivery for the e-commerce industry is in the process of developing efficient programs for returns-management. Skilled customer service is a critical element in providing the best door-to-door shopping experience for the customer, and must include managing shipment refusals and returns.

A key element in the returns-process cycle is liquidation of the returned item. For example, if a brick-and-click furniture customer refuses a shipment, for whatever reason, the item is automatically returned to a central warehouse. It is then immediately returned to inventory electronically, so the furniture retailer has the item available for resale. Another option in the returns cycle is to liquidate the product at a central or regional warehouse. The crucial element is to work with customers to identify the most effective way of handling their specific return since the bottom line is to keep the customer satisfied.

Sometimes the margins for the product are not high enough to justify the additional costs of multiple transportation. Based on pre-set criteria, the third-party logistics provider can return product to the manufacturer or to a central inventory location, liquidate the inventory, or donate the product to a charitable institution.

Accurate data, recorded by the shipper at the time of delivery, can greatly benefit the manufacturer in a variety of ways. For example, the order can be reconsigned to another customer destination, or if a particular product style or color has a high refusal rate the manufacturer can actually use the data to tackle root causes such as poor design or color selection.

In all situations, a good reverse logistics company should provide a seamless turnaround, which includes swift order pickup (within 48 hours), safe transportation, damage-free delivery and installation or unloading, and proper classification of refused shipment.

A good reverse logistics company should provide a seamless turnaround


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