The challenges of returns processing
Supply Chain Standard April 2008
LCP contributed to an industry round table discussion on the status of reverse logistics and returns management. The Key findings were that:
- This is becoming increasingly important through combination of growth of the direct and internet fulfilment channel and increased regulation on environmental waste management
- It is also becoming a consumer issue both from the ease of return but also increasing environmental concerns
- The dominant economic issue for both retailers and manufacturers is maximising the recovery of value in the goods themselves of which the cost of handling the return is part of the net yield calculation
- Yields from disposal channels have declined and the risk of return has increased; as a result this whole thing needs managing with greater intensity and care
- Key decisions are about scrapping or holding and refurbishing; also it is important to be able to identify both disposal channels for product that is usable and recycling channels for items that will not repay the investment in extra effort
- While the established mail order and direct fulfilment players have managed returns and their reprocessing for years, this is a new area for many retailers and the environmental requirements are new for everyone
- Many retailers have simply opted for industry schemes to avoid the issue; the round table raised the question as to whether this will be enough for the future?
- LCP's view is that progress to industry solutions is being hampered by a confusing regulatory environment where further changes are expected; this will lead to companies delaying their decisions on how to invest and organise for this key and growing area
- However, it appears that the core driver for change will be financial risk in the product; speed and route to recovery will be critical and this will need external skills; iForce who sponsored the discussion are one of th few with a complete support offer on this space
- In the eledtronics sector LCP estimates that there have been more financial losses on product obsolescence and return than have been made in the entire history of the industry - if that is not a reason to focus then nothing is!
- You can read the full brief of the round table discussion as published in SupplyChain Standard April 2008.... Managing Reverse Logistics (20 March 2008: 59kb) http://www.iforcegroup.com/