It's not easy being green; nor is it cheap. Reclaiming returned products requires investments in technology and labor. But there are a lot of good reasons to make the effort.
Some retailers got a pleasant surprise at the end of the 2003 holiday selling season—and it wasn't just fat wads of cash register receipts or shelves stripped bare. What they found was that when it came to handling the inevitable returns, the process wasn't quite so painful as in the past. Gone were the phone confrontations with snarling customer service reps; gone were the piles of goods gathering dust in the corner of the stockroom until someone could get around to it. Instead, they discovered that many of their suppliers had adopted a sophisticated reverse logistics strategy that made the returns process smoother, cheaper and relatively hassle free.
What's changed is that manufacturers are no longer treating returns as exceptions. They're planning in advance—often as far back as the design process—to take back what they sell at the end of its life cycle. They're developing effective methods for reclaiming returned products and refurbishing, reselling or recycling them (or at least their component parts). Everybody in the supply chain benefits.
Known as closed-loop logistics, the strategy typically works like this: The original equipment manufacturer (OEM) sets up a channel for recovering its returns either using its own service force or by hiring a third party. These may be units in the field that have failed or need to be repaired; parts and subassemblies that can be re-used; products that have been recalled or have become obsolete; and even products at the end of their lease or end of their useful life. Once recovered, the products, along with subassemblies, parts and components that are in the field after delivery, are channeled either back into inventory for resupply to the field, or into a qualification and reconfiguration process, which leads to either re-use at the manufacturing level or full field disposal.
As it turns out, there's often gold in those piles of obsolete computers and DVD players. "Companies have discovered that if they introduce a function into their supply chains to take material as it's returned and make use of it, they can actually make money," says Don Blumberg, president of Fort Washington, Pa.-based D.F. Blumberg Associates Inc.
In some parts of the world, accepting returns is no longer optional. In Europe, for instance, so-called "green laws" require that manufacturers take ultimate responsibility for the disposal of certain products. So if an end user decides to replace his computer, rather than ditch the old one in the trash, he simply contacts the manufacturer to arrange for its return. The manufacturer then recycles or refurbishes the computer, keeping it out of a landfill. If the manufacturer fails to control and manage the full return process and the product becomes a hazard, the manufacturer is held responsible.
"This makes manufacturers very concerned with getting their materials back," says Blumberg. "These laws will eventually make their way to the United States because they're becoming increasingly accepted throughout the EU. It's important, because if no one worries about what happens after disposal, all this stuff piles up."
Today, a wide variety of industries are embracing closedloop logistics, with the predictable result that a wide variety of companies are springing up to help them carry out their programs. In fact, the total market for closed-loop service logistics in North America in 2002 was estimated at better than $35 million for transportation, warehousing and repair services, according to Blumberg. From high-end electronics to health-care products to books and consumerpackaged goods—where there's a need, there's a way to turn a return into a profit.
Staying in the loop
Despite the sometimes considerable startup costs, companies that have put a formal closed-loop system into place find that it offers them an edge over the competition. "So many competitive factors are a given," says James Stock, professor of marketing and logistics at the University of South Florida in Tampa. "Things like on-time delivery and good product quality are the price of admittance today—a closedloop system gives a company a competitive advantage."
One of the more aggressive companies when it comes to cashing in on its returns is computer giant Hewlett-Packard. "As long as we've been getting products back,we've been working on how to get something out of them," says Mark Colaluca, director of HP Services Americas' customer support logistics operations in Palo Alto, Calif. "But over the last three to four years, we've really increased our focus on a closed-loop system."
Today, almost every service part has a closed-loop expectation for repair, refurbishing or recycling at HP. Not surprisingly, given the scope of its program, HP has sought outside help. In North America, for example, the company partners with UPS Supply Chain Solutions (UPS SCS) for its warehousing, distribution and transportation. "We manage our closed-loop system together," says Colaluca. "It starts with the order and goes on through to the end with returns to their facilities." He credits technology with making these partnerships possible. HP's SAP enterprise resource planning system is able to talk to the warehouse management systems used by its third-party logistics service (3PL) partners, which enables all parties to exchange information throughout the process.
When HP takes a customer order and it's picked, packed and shipped, DC employees attach return labels to each item. "This makes it easy for the end users," explains Colaluca. "They simply have to add the return label and drop it off at a convenient location."
As soon as the product comes back to a distribution center operated by one of HP's 3PL partners, an employee scans that label, which automatically enters the information into both parties' systems. Customers have the option of buying a new part or accepting a refurbished part, both providing the same warranty.
The returned parts are then processed to determine how they should be treated—either refurbished or recycled, if possible. Items slated for refurbishment are sent directly out to repair locations. The speed at which the parts are returned from customers can be adjusted based on the demand for the item—those with higher demand are usually whisked through the process, while others follow shortly behind.
Colaluca says that HP benefits from its closed-loop system in several ways, including a big reduction in touch points. "Traditionally, returns went back to a central point for sorting before they were finally handled," he says. "Now, items go directly from customers to repair or recycling. The system reduces cycle time, labor and storage costs."
Seeking professional help
What makes all this possible, of course, is sophisticated technology. "The movement of information is just as important as the physical movement," says Buzzy Wyland, president of manufacturing services at Pittsburgh-based GENCO Distribution. "Web-enabled technology gives the visibility that's needed to close the loop."
Any company considering a closed-loop system will need to have a robust execution software package in place, preferably one that includes warehouse and transportation management systems, a reverse logistics component and even a component that focuses on providing value-adds. All of them must be integrated and Web-enabled. "You need a computer infrastructure that allows you to track product out into the field and back," says Blumberg.
Most large manufacturers already have such systems in place, while smaller and mid-sized companies typically still work with home-grown systems. "The interfaces exist, so integration is possible in both scenarios," Wyland says. "But if you don't have an enterprise system, a 3PL can be valuable because most have the systems savvy to get you where you need to be. Doing it internally is a daunting task."
In addition to acquiring robust technology, Stock says, companies have to make sure that their closed-loop programs are adequately staffed. "Too often you see a part-time effort by management and staff," he says. "You have to have a manager dedicated to it full time, and employees who are trained and compensated accordingly."
Technology and staffing aren't the whole story, however. Someone within your company must also have a good handle on forecasting. "Parts will change and demand will ebb and flow," says Blumberg. "You need someone who can stay on top of that because it has a big impact on closed-loop practices." In addition, someone in the company must identify and develop secondary markets for those items that aren't going back to the customer.
Not every company can do all this alone. If you can't dedicate enough resources to the effort, hire a 3PL, says Blumberg. "This is a specialization that not everyone can handle," he says. "3PLs can do it cheaper and faster—this is an emerging field and they're working hard to specialize in it."
HP, for one, has no regrets about its decision to outsource. "We've leveraged the industry experts so that we can focus on our core competency," says Colaluca.
And for now, Colaluca says a closed-loop system provides the company with an advantage over the competition. "Others will catch up, though," he says. "That's why we'll continue to look for ways to differentiate ourselves."
RJW Logistics Group, a logistics solutions provider (LSP) for consumer packaged goods (CPG) brands, has received a “strategic investment” from Boston-based private equity firm Berkshire partners, and now plans to drive future innovations and expand its geographic reach, the Woodridge, Illinois-based company said Tuesday.
Terms of the deal were not disclosed, but the company said that CEO Kevin Williamson and other members of RJW management will continue to be “significant investors” in the company, while private equity firm Mason Wells, which invested in RJW in 2019, will maintain a minority investment position.
RJW is an asset-based transportation, logistics, and warehousing provider, operating more than 7.3 million square feet of consolidation warehouse space in the transportation hubs of Chicago and Dallas and employing 1,900 people. RJW says it partners with over 850 CPG brands and delivers to more than 180 retailers nationwide. According to the company, its retail logistics solutions save cost, improve visibility, and achieve industry-leading On-Time, In-Full (OTIF) performance. Those improvements drive increased in-stock rates and sales, benefiting both CPG brands and their retailer partners, the firm says.
"After several years of mitigating inflation, disruption, supply shocks, conflicts, and uncertainty, we are currently in a relative period of calm," John Paitek, vice president, GEP, said in a release. "But it is very much the calm before the coming storm. This report provides procurement and supply chain leaders with a prescriptive guide to weathering the gale force headwinds of protectionism, tariffs, trade wars, regulatory pressures, uncertainty, and the AI revolution that we will face in 2025."
A report from the company released today offers predictions and strategies for the upcoming year, organized into six major predictions in GEP’s “Outlook 2025: Procurement & Supply Chain” report.
Advanced AI agents will play a key role in demand forecasting, risk monitoring, and supply chain optimization, shifting procurement's mandate from tactical to strategic. Companies should invest in the technology now to to streamline processes and enhance decision-making.
Expanded value metrics will drive decisions, as success will be measured by resilience, sustainability, and compliance… not just cost efficiency. Companies should communicate value beyond cost savings to stakeholders, and develop new KPIs.
Increasing regulatory demands will necessitate heightened supply chain transparency and accountability. So companies should strengthen supplier audits, adopt ESG tracking tools, and integrate compliance into strategic procurement decisions.
Widening tariffs and trade restrictions will force companies to reassess total cost of ownership (TCO) metrics to include geopolitical and environmental risks, as nearshoring and friendshoring attempt to balance resilience with cost.
Rising energy costs and regulatory demands will accelerate the shift to sustainable operations, pushing companies to invest in renewable energy and redesign supply chains to align with ESG commitments.
New tariffs could drive prices higher, just as inflation has come under control and interest rates are returning to near-zero levels. That means companies must continue to secure cost savings as their primary responsibility.
Freight transportation sector analysts with US Bank say they expect change on the horizon in that market for 2025, due to possible tariffs imposed by a new White House administration, the return of East and Gulf coast port strikes, and expanding freight fraud.
“All three of these merit scrutiny, and that is our promise as we roll into the new year,” the company said in a statement today.
First, US Bank said a new administration will occupy the White House and will control the House and Senate for the first time since 2016. With an announced mandate on tariffs, taxes and trade from his electoral victory, President-Elect Trump’s anticipated actions are almost certain to impact the supply chain, the bank said.
Second, a strike by longshoreman at East Coast and Gulf ports was suspended in October, but the can was only kicked until mid-January. Shipper alarm bells are already ringing, and with peak season in full swing, the West coast ports are roaring, having absorbed containers bound for the East. However, that status may not be sustainable in the event of a prolonged strike in January, US Bank said.
And third, analyst are tracking the proliferation of freight fraud, and its reverberations across the supply chain. No longer the realm of petty criminals, freight fraudsters have become increasingly sophisticated, and the financial toll of their activities in the loss of goods, and data, is expected to be in the billions, the bank estimates.
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”
A measure of business conditions for shippers improved in September due to lower fuel costs, looser trucking capacity, and lower freight rates, but the freight transportation forecasting firm FTR still expects readings to be weaker and closer to neutral through its two-year forecast period.
Bloomington, Indiana-based FTR is maintaining its stance that trucking conditions will improve, even though its Shippers Conditions Index (SCI) improved in September to 4.6 from a 2.9 reading in August, reaching its strongest level of the year.
“The fact that September’s index is the strongest since last December is not a sign that shippers’ market conditions are steadily improving,” Avery Vise, FTR’s vice president of trucking, said in a release.
“September and May were modest outliers this year in a market that is at least becoming more balanced. We expect that trend to continue and for SCI readings to be mostly negative to neutral in 2025 and 2026. However, markets in transition tend to be volatile, so further outliers are likely and possibly in both directions. The supply chain implications of tariffs are a wild card for 2025 especially,” he said.
The SCI tracks the changes representing four major conditions in the U.S. full-load freight market: freight demand, freight rates, fleet capacity, and fuel price. Combined into a single index, a positive score represents good, optimistic conditions, while a negative score represents bad, pessimistic conditions.