Meeting the Reverse Logistics Challenge

Hard data and sophisticated planning are key when goods and materials start flowing upstream through the reverse supply chain


Moreover, Ed Wodarski, chief strategist for the Service Parts Optimization group of Click Commerce, which in May acquired service parts optimization and reverse supply chain specialist Xelus, says that reverse logistics processes must often be customized around each product coming back into the supply chain. "Historically, in operations activities, companies have tried to create standardization and routine so that people can do the same thing over and over again at maximum efficiency," he says. "The problem is that not all return situations are the same. The process needs to be unique for each return based on the product, the demand for it, or its condition." Having all returned goods automatically sent back to a single clearinghouse might make sense operationally, but it would make more sense, Wodarski says, to triage a returned good in the field, say, at the store level, to determine whether it is even repairable before going through the trouble of shipping it back to the clearinghouse.

Hartmut Liebel, president of Jabil Global Services, the post-manufacturing services subsidiary of St. Petersburg, Fla.-based contract manufacturer Jabil Circuit, adds that reverse logistics requirements can force companies to make decisions about where to place facilities that are at odds with the priorities in their forward supply chains. Many original equipment manufacturers (OEMs) have moved manufacturing operations to low-cost countries to save on labor, for instance, but service facilities more frequently must be staged closer to the end user. "Ten years ago you might have had a manufacturer with a big location in Texas, where it could also easily perform the service work in the same facility, close to a local customer," Liebel says. "Now this manufacturing activity is performed in a low-cost area, probably offshore, but the customer is still in Texas, so you still need to have some service capability near that customer."

Track and Trace

As a result of factors like these, many companies have elected to either implement new solutions to better manage their reverse logistics process or, alternatively, to outsource their reverse logistics operations to service providers to take advantage of economies of scale and specialized expertise in planning reverse logistics operations. Solution providers in this space include such companies as Andlor Logistics Systems, offering software to help manufacturers manage product returns; Click Commerce, offering after-sales service management and service parts optimization solutions; eBoomerang, providing enterprise returns management applications; myRMA.net, providing a Web-based system for returns administration, reverse logistics and service center management; and Newgistics, specializing in returns management solutions; among others.

The outsourcing side has seen both vertical-specific and more general offerings. In the electronics world, for example, EMS providers such as Liebel's Jabil and Manning's Solectron (both of which use the legacy Xelus solution from Click Commerce for service parts management) — along with rival Flextronics, of Singapore — have been gearing up since the late 1990s to offer a range of reverse logistics services. Meanwhile more traditional logistics service providers such as DW Morgan, Fidelitone, GENCO and UPS Supply Chain Solutions have either been longtime players in this space (particularly around the retail sector) or also have been ramping up their reverse logistics offerings. (See the sidebar "Reverse Logistics Providers" at the end of this article for additional players in this space.)

Regardless of the approach that a company takes in addressing its reverse logistics challenge, a key goal of these initiatives is to improve visibility into the goods in motion throughout the reverse supply chain. That's where the data come in, and that's why information technology is playing such a critical role in the growth of reverse logistics. "It's a very heavily IT-driven process," says Liebel, "because it is critical for our customers — and for our customers' customers — to be able to track the status of products in the reverse logistics supply chain so that they can fulfill their own service obligations."

Beefing up Analytics

In addition to building up track-and-trace capabilities, enterprises are also looking to make better use of the data that they are generating out of their reverse logistics processes. "There's a wealth of data collected through a service event, but it has not been very well analyzed because of the fragmentation in the supply chain," explains Manning. Solectron has attacked this problem by extending its analytics for returns down to the level of the call center, collecting information on reported problems, substantiating those problems when goods come into a return site, analyzing failures for trends, and then pushing that information back to its customers' design staff to make corrections in future products. Or, when no failure is detected, as happens with anywhere from 15 to 50 percent of returned products in electronics, Solectron pushes the information back to the front end of the process, to the call center staff, so that the support technicians can deflect those returns.

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