Cisco Systems Inc.'s three-year effort to retool its vast reverse logistics operations has transformed the company's returns from a cost center into an asset-recovery profit source generating $100 million in net profit for Cisco's 2008 fiscal year ending in July, Dan Gilbert, vice president, supply chain operations, told attendees at the CSCMP conference.
When Cisco began the program in 2005, it was disposing of about $500 million of returned equipment each year and re-using less than 5% of returned merchandise, Gilbert said. After a detailed analysis, it found that 80% of the returned products were "perfectly fine" and much of that deserved a "second or third life" before being disposed of.
"The myth was to treat all returns the same," he said. "The reality is there is a huge variation (in returns) and you have to dig into details."