If reverse logistics were simply a matter of easing the pain in the retail and wholesale sectors, it would be challenge enough. But there's a lot more to reverse logistics today.
Art van Bodegraven was, among other roles, chief design officer for the DES Leadership Academy. He passed away on June 18, 2017. He will be greatly missed.
The term "reverse logistics" may be relatively new, but the basic concept is not. Even decades ago, it wasn't uncommon for distribution centers to contain a returns processing function. You could spot them right away because all the people were moving with the speed and purpose of extras in a George Romero film. They clearly weren't happy about having to deal with returns. Neither was management.
Businesses still hate the hassle of dealing with returns, but returns remain a fact of retail life. And the numbers are staggering—anywhere from 10 to 30 percent or more of merchandise is returned annually, depending on the product category. In one business, the returns rate is 100 percent. Can you guess the business? (It's tuxedo rental.)
For most people, "returns" means taking a garish tie back to a department store after Christmas, or sending the size 8 sweater that doesn't fit a size 12 body back to the catalog retailer. But it's not just apparel that gets returned. Beyond clothing, there's electronics, books and magazines, greeting cards, processed foods, auto parts, anything sold at The Home Depot, and so on.
If reverse logistics (RL) were simply a matter of easing the pain in the retail and wholesale sectors, it would be challenge enough. But there's a lot more to reverse logistics today. Besides returns, reverse logistics managers have responsibility for a host of other R-factors: Repairs and Refurbishment, Recycling, Recovery and Recalls. Let's take a closer look at them:
Repairs and Refurbishment. Some items are returned at the customer's whim. Others—electrics, electronics, auto parts and technology components, among them—are returned because they don't work. If these items, which range in value from a few dollars to more than $100,000 per unit, are repairable, they're typically sent out to be fixed and readied for resale. (Sometimes it turns out that the item wasn't broken or defective at all—in which case, it's simply repackaged and readied for resale.)
As for the disposition of these repaired/refurbished items, their fate varies. Some are resold at retail stores, others are resold through alternate (usually discount) channels, and still others are reinstalled in different operating configurations (more on that later).
Recovery. In reverse logistics, "recovery" refers to the process of turning products into their component parts or materials for reuse in other products or reintroduction into production processes. It might mean disassembly for component reuse, wire stripping for raw plastics, transforming telephone cable into granulated copper, or even isolating components and melting them down into basic elements.
Recycling. Though many of the processes are similar, "recycling" is different from "recovery" in that it's largely driven by federal, state or local regulations and mandates.
Even foreign environmental policies may play a role. Take the European Union's environmental directives, for example. Though they don't have the force of law in the United States, the rules are still having an impact on this country. Most domestic electronics manufacturers have adopted the EU standards rather than try to manage their domestic and international supply chains separately. It's worth noting that the EU's Waste Electrical and Electronic Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) directives make corporations responsible for end-of-lifecycle product disposition. Imagine the RL supply chain planning required to come up with effective solutions to that!
Recalls. The topic of recalls is much too complex to cover here. For now, we'll just note that more industries, companies and products than ever before have become vulnerable to recall actions. Any company that faces even the remotest chance of a recall should have a reverse logistics recall plan and should test that plan periodically—just the way you would conduct a fire drill.
Challenges in RL supply chains Unfortunately, the reverse logistics chain is not simply the outbound chain stood on its head. Along with the usual logistics challenges, reverse supply chain managers face some added complications. For example, they rarely receive much warning of RL arrivals; they're likely to end up shipping quantities of one, as opposed to more economical truckloads; and they often have to ship goods to destinations other than the manufacturing source.
On top of that, there's the challenge of designing the network: deciding where to collect the returns, where to process them, and where to redistribute from. Intake requires some planning as well. With the exception of retail giants like Sears, few companies have local outlets nationwide where they can accept returns. That's opened the door for a host of new services— like the new combinations of FedEx/Kinko's, UPS/MBE, and DHL/OfficeMax—that can reach most of the nation's population. This need may finally provide a genuine value-adding role for the U.S. Postal Service.
Once they've collected the returns, managers must decide what to do with them. It used to be a simple matter of sending them back to the factory. But times have changed. Today, deciding which disposal route to take has become a complex analytical question. And we do mean complex. First, you have to weigh the many disposition options. In addition to recovery and recycling, they include liquidation; resale in offshore or secondary markets; resale at auctions, in outlet stores, or in employee or company stores; and donation to charities. Then you have to factor in the product's age, quality, condition, style and seasonality, potential liability risks, repackaging requirements, and whether "de-kitting" will be required. Other factors may come into play as well. For example, saturation in one channel may force a product's diversion into an alternate channel.
Reverse logistics is not just a matter of getting stuff back, either. Managing the process involves a host of other tasks as well. They include returns authorization management; collection, sorting and testing; transportation and distribution; warehousing and storage; spare parts management; replacement management; warranty and service contract management; remanufacturing or refurbishment; redistribution and resale; end-of-life management; and IT management. Small wonder that a whole sub-industry of third parties specializing in reverse logistics has sprung up. They range from suppliers that offer software to companies that will take over the entire returns process, from providing customers with preprinted labels to handling final disposition of the merchandise.
Secrets of success Though it's not always easy to convince companies of this, reverse logistics can be made to work well. It is working well for those who've invested in learning how to make it work.
As for how to make it work, we've identified several keys to success. Here's what you need: dedicated (separate) management and organization; independent processing/storage facilities; strong IT support; accurate, up-to-date data; good process design and staff training; strategic context (often overlooked, but vital); and a solid dollars-andcents business case.
With these, you've got a better than fighting chance. Without them, you may never realize the potential of reverse logistics in your organization.
Editor's note: For more information, contact the Reverse Logistics Executive Council (www.rlec.com), which is a collaboration of manufacturers, retailers and academics, or the Reverse Logistics Association (www.reverselogisticstrends.com), which is a trade association of third-party service providers.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.