Posts Tagged ‘Sustainability’

When the manager of a 3PL or aftermarket service provider looks at the logistics world, why on earth would he or she want to get into reverse logistics? It is the opposite of traditional or forward logistics. It is like flushing things up the pipe, not a natural thing to do. Reverse logistics providers deal with unusual problems. Nothing is in a new box. Everything is “broken” or “unwanted”. The service offerings seem unrelated and fragmented. There are no beautifully cubed out truckloads riding on pallets. Yet reverse logistics is becoming an ever more important link in the supply chain. 3PL’s and aftermarket service providers would be wise to think about the possibilities. Some would argue that the changing supply chain landscape makes adding a strong, state of the art, reverse logistics offering a survival move, not just a strategy to add incremental revenue.

The cost of fuel and the lack of qualified commercial drivers are causing the buyers of 3PL and aftermarket services to include reverse logistics more and more into their planning. The rise of sustainability initiatives and the confusing morass of state level end-of-life regulations for Consumer Electronic manufacturers are a big cause for concern.

These are all important factors. However, in the future the largest driver behind the need for reverse logistics and the least understood, is the coming shortage of rare earth minerals. This shortage will force manufacturers to examine their entire supply chain to uncover ways to reclaim, not only the parts, but the minerals and metals as well. This process will compact and shorten the supply chain and those 3PL’s and aftermarket service providers who can’t provide this service in an integrated way run the risk of becoming as extinct as dinosaurs.

 

Minerals – Years of Reserves Left

Hafnium – 5 to 10 years of supply

Indium – 5 to 10 years of supply

Platinum – 10 to 15 years of supply

Silver – 15 to 20 years of supply

Antimony – 15 to 20 years of supply

Tantalum – 20 to 30 years of supply

“Earth Audit” by David Cohen – New Scientist – May 2007

In the future, we believe, we will see many more distribution centers that have reverse logistics centers co-located within them. These facilities will handle the reverse logistics function of maximizing the value of the returned product through product disposition management. Cleaning, parts and raw material harvesting, refurbishing, product liquidation, recycling, repackaging, repair and remanufacturing will all occur alongside the much less complicated process of shipping products to customers.  These high end, technically complex processes will command a higher margin than simply shipping pristine cases to customers.

Todays distribution and reverse logistics network was built on the foundation of fuel prices at $2.00 per gallon and on the concept of unlimited natural resources. We now know that foundation was built on shifting sand. Fewer miles must be driven and raw materials must be recovered and reused at a much higher rate in order to provide electronics at an affordable price. The challenge for 3PL’s and aftermarket service providers is to understand what these changes mean to their customers and how they can develop their capabilities in order to deliver cost effective services that will meet the future demands of their customers.

Back in 2004, Dr. Dale Rogers, now of Rutgers University, suggested that we work together to develop a sustainable supply chain model that would focus on complete life cycle management and developing what he called “Sustainability”.  I had no clue what he was talking about but was sure it was nothing more than an academic diversion that I needed to avoid.  How would my life have been different had I listened and focused my efforts to learn more.  Dr. Rogers saw a revolution coming and I was totally oblivious to it.

Today, sustainability is everywhere.  Over 80% of the Global 1000 companies issue a separate sustainability report to stock holders.  Every manufacturer of consumer goods, in large part thanks to Walmart, has made major strides to incorporate sustainability into their manufacturing and logistics process.  Dr. Rogers and I even produced a series of podcasts entitled Sustainable Supply Chain Management.

Today, virtually every company talks about their sustainability efforts.  While many of these companies do commit one of the Six Sins of Greenwashing it is clear that there is a concerted effort to develop sustainability throughout the corporate world.  An often confusing and overlook piece of the sustainability puzzle is “End-of-Life” management, which depends on an organizations reverse logistics capabilities.

Factoring in “End-of-Life” strategies into product manufacturing and sales are key to making the products and processes truly sustainable and to maximizing the value of those assets.  Reverse Logistics provides the infrastructure used to realize the value of assets that are at their “End-of-Life”. The reverse logistics process completes the full loop of product life cycle management.

Recently I gave a presentation at a conference on reverse logistics and asked the 300 or so reverse logistics executives in the room three questions about sustainability within their organization and received these responses:

• How many of you work for companies that have ongoing sustainability initiatives? Everyone raised their hand.

• How many of you work for companies that have a cross functional team working to develop sustainability initiatives? Again, everyone raised their hand.

• How many of you sit on that cross functional sustainability team within your organization? Only TWO people raised their hand.

Companies that are serious about developing sustainable practices must incorporate reverse logistics into their efforts or they will find their efforts incomplete, ineffective and more costly. Reverse logistics adds value to sustainability efforts in three major ways:

• Provides the infrastructure to remove outdated, obsolete, recalled, and defective assets from the primary stream of commerce and disposition the assets in an alternative stream, such as liquidation, recycle, or trash.

• Processes inventory and other material in an affordable, controllable, and visible manner that will greatly reduce the total cost of processing returns and greatly reduce legal risks.

• Extends the life of assets by remanufacturing, repairing, reselling, or recycling goods that flow through the reverse logistics pipeline.

There are many facets to sustainability.  At the end of the day it is always about eliminating waste.  A reverse logistics program is the end of the supply chain where assets are either repurposed or destroyed. If your organization does not have a reverse logistics process or if the reverse logistics team is left out of the sustainability strategy sessions, you have an opportunity to dramatically improve your overall sustainability efforts.

Reverse Logistics Podcast #11 – Future Trends in Reverse Logistics

This podcast is a recording of a presentation given by Curtis Greve to the DRS Customer Symposium on September 9, 2010.  The subject of Curtis’ presentation covered four external drivers that will impact every reclamation center and reverse logistics process in the world between now and 2015.

This presentation was directed toward CPG manufacturers but the drivers behind the future changes in the reverse logistics ecosystem will impact every retailer and wholesaler as well.

The DRS Customer Symposium was a great event with a lot of take home value for all attendees.  It was attended by over 40 manufacturers who are customers of DRS.  For more information on this symposium or about DRS services and solutions visit DRSReturns.com.

The Reverse Logistics Podcast

Your host is Curtis Greve.

This podcast is a recording of a presentation Curtis Greve made at the June 2010 GBQ Redbank Executive Breakfast Series in Columbus Ohio.  In this presentation Curtis discusses the threats and opportunities posed by three external drivers every company will face in the next five to ten years:

1. Dramatic increases in transportation costs and the resulting changes that will be required in supply chain networks
2. Reverse logistics networks and how companies can increase their bottom line profits by as much as 4%  or more
3. Continued demand for development of sustainable solutions and how sustainability can dramatically increase profits

Curtis points out that most companies will agree these three drivers are going to happen.  Business executive also realize that these elements will have a negative impact on their business if they don’t address the situation, yet few are doing anything about it.  How a company deals with these inevitable changes will determine if they will thrive or if they will find themselves at a significant disadvantage that could result in their ultimate demise.

The Reverse Logistics Podcast

Your host is Curtis Greve.

The third party logistics business is nothing if not unique.  Providing third party reverse logistics services is an even stranger world to live in.  For some reason, companies don’t view outsourcing reverse logistics services like they do any other supply chain function.  Don’t believe me?  When was the last time you knew somebody who had trouble with a carrier, fired them and swore “Never to outsource transportation again!” 

But in the world of reverse logistics, there are plenty of people who tried outsourcing returns once and got burned so the company just reverted to the old process and never looked back.  There are a number of companies that tried outsourcing reverse logistics but either picked the wrong third party or the wrong manager to set up the internal support systems.  In both cases, everyone found themselves in a bad position and were happy to go back to the old way of processing returns.  When it comes to returns, failure often means never trying it again.

Going backwards seems to be too often the norm when it comes to returns.  However, if at first your don’t succeed, companies should ask themselves – “Why did we fail?”  Experience has shown there are usually a few things that both third party service providers and the executives did not do that could have made the difference.

First, the company outsourcing returns must realize there is one big difference between a returns processing center and a distribution center.  In a distribution center, you know what your are going to get, how much is going to come in, when it is coming and when it is going to ship.  In a returns center, nobody knows what your are going to get, how much is going to come in, when it is going to get there or what condition it is going to be in when you get it.  Nobody in the company can accurately predict asset returns nor can any third party service provider, at least to any reliable degree.  Because of these unknowns, third party return center agreements must be structured in a manner that is flexible. Inflexible plans, budgets and pricing will lead to trouble.  The structure of a reverse logistics outsourcing contract must be flexible.  The contact should provide a basis to adjust costs and pricing based on variability of unit volume, item condition, and preferred disposition.

The second tip to avoid conflict between the service provider and the outsourcing company is to clearly define all the assumptions made when developing budgets, pricing, incentives, physical facility attributes, and manpower plans.  In addition to detailing out these variables, there must be clear language about what is to happen if these assumptions are incorrect.  One thing you can be sure of is that the assumptions will be incorrect. The parties must agree on the tolerance level for each assumption and the process to make any adjustments in pricing, cost, or other areas that might be impacted.  It is for this reason that having a clearly defined change order process is critical.

If an organization outsources reverse logistics services to a third party logistics company, they may not see cost per unit they were expecting, but they will have an agreement that focuses on customer satisfaction and that promotes maximizing the value of goods flowing through the reverse logistics pipeline.  In the end, this is the most valuable contribution a returns process can make to an organization.

Today, every 3PL is looking for ways to increase margins and increase the cost of change for their customers.  They want to figure out ways for their customers to be as loyal to them as they are  to their customers.  One way is to develop additional services and many consider developing reverse logistics capability.

If you are a 3PL executive who is considering this, there are a few things you need to keep in mind.  First, the priorities in returns are completely different than normal forward logistics.  Timing is not as critical but having the ability to profile each individual SKU as it comes in is much more critical.  Every item can be handled one of six ways and you must know how to determine the disposition and what characteristics drive that disposition.

Returns processing could require a basic understanding of repair techniques, parts management, liquidation, and recycling.  The degree of each required depends on your customer and the category of product you will handle.

Finally, your WMS system will not work in reverse.  Your WMS provider may tell you it can but you will need Reverse Logistic Software to help manage the product flow and disposition.

It is possible to put together a virtual reverse logistics solution for your customers but your customers will expect a certain amount of expertise.  Time has shown that companies that simply offer to be the 4PL manager without any real value additive services are quickly by passed by the “real” service providers.

Does the development of reverse logistics capabilities make financial sense for most 3PL’s?  It depends on the 3PL.  For the most part, fees in the reverse world can be twenty to forty percent hire than traditional distribution and transportation.  It really comes down to the needs of your customer base, internal capacity to take on developing new services and your appetite for investing in a development process that may not see any real profits for eighteen to twenty-four months.

In today’s podcast Curtis Greve explains the basics of the secondary market and liquidation.  According to Dr. Dale Rogers, the secondary market accounts for over 2.25% of GDP.  The secondary market is much bigger than most think and a great opportunity for many companies looking to develop additional sources of revenue and working to reduce their carbon footprint.

With imports growing, economic pressures increasing, and shareholder demands for more sustainable business practices continuing to build, developing liquidation capabilities is an effort that is well worth any executive’s time and attention.

The Reverse Logistics Podcast

Your host is Curtis Greve.

Today I am launching my new web site under the new company name of Greve Consulting, formerly known as Metreks.  The focus of my practice is to help companies develop their returns management, aka reverse logistics capabilities.  Viewers will find a lot of useful information on returns including the Reverse Logistics Podcast, which will feature industry leaders from the world of reverse logistics, and my blog which is packed with articles and information to help service providers, manufacturers, retailers, and liquidators make more money.

Register to get the blogs sent to your desktop automatically or save www.GreveConsulting.com as a favorite on your browser.  Your comments, questions, suggestions and feedback are encouraged.  I will use your feedback to improve the value delivered from the site.

Check in from time to time to see what is new.  For example, you might want to check out The Cost of Doing Nothing.  This is a form you can fill out to find out how much opportunity you and your company have in developing your reverse logistics capabilities.

Whether you call it returns management or reverse logistics, it’s all about improving returns and maximizing profits.  I hope you enjoy the new site and get a lot of value out of GreveConsulting.com.

As the first quarter of 2010 comes to a close, it is time to review where your reverse logistics program stands.  By now, the “Christmas Season” for returns should be finished and whether your returns operation is going to make budget this year has been determined.  For the vast majority of reverse logistics operations, over half volume and processing expenses hit the books in the first three months of the calendar year.  If an operation didn’t perform well during that time, it will be next to impossible to make up for it over the remaining nine months of the year.  However, steps can be taken to make the most of the rest of the year and document learnings to help make next year a success.

Over the next two weeks, organizations should conduct a reverse logistics first quarter review.  This review should take a look back at the first quarter results, record lessons learned, make note of where the operation is at the moment, and plan for the next three months activities.  A best practice approach to this would to complete an SF-SWOT analysis.  The following outlines the basic steps to a good analysis and first quarter review:

• Gather data for the following, the best you can.  Do not wait until you have absolutely everything and estimates are acceptable. It’s like the old saying goes “If you wait until you are 100% ready you’ll never be ready.”  Close is good enough but get all the details you can.
• Pull together a team to help gather and review components.
• Conduct the SF-SWOT analysis as follows:
  • S – Successes:  For the previous 90 – 120 days, document what went well, what you got right, what you want to make sure you repeat next year
  • F – Failures: For the previous 90-120 days, document what went badly, what problems occured that you want to avoid next year, what actions do you NOT want to replicate next year
  • S – Strengths: Looking at your current state, document where are you in great shape, what are the best things about your operations, what can you leverage going forward to build on to achieve your goals the rest of the year
  • W – Weaknesses: Looking at your current state, record what gaps exist in your programs, what short falls should be corrected in order to avoid catastrophe the rest of the year
  • O – Opportunities: Looking at the rest of year, note what is happening internally and externally that you can leverage to improve results and what actions you will take to ensure you make the most of the opportunity
  • T – Threats: Looking at the rest of the year, analyze major events that will take place must prepared for, what internal threats to performance and results do you see, what external threats are out there that you need to act to avoid over the next few weeks
• Once the SF-SWOT analysis is complete, publish the results and conduct strategic planning meetings with the purpose of developing action plans to address the findings outlined in the analysis.

While the first quarter is the critical season for the majority of reverse logistics programs, taking time to review what happened, document lessons learned, and plan the rest of the year are critical disciplines that every reveres logistics executive must follow to ensure asset values and bottom line contributions are maximized.  A goal without a plan is nothing more than a wish and hope is not a strategy.  There are many things that are unknown when planning for returns but there are many opportunities that can be leveraged, threats that can be avoided, and lessons that can be learned if you take the time and put the effort into it.

In a recent survey completed by McKinsey & Company titled “How Companies Manage Sustainability”,  more than 50% of the executives surveyed thought sustainability was “very or extremely important in a wide range of areas, including new-product development, reputation building, and overall corporate strategy.”  However, only 30% of the executives surveyed say that they actively seek ways to invest in sustainable practices or take any action to embed sustainability into their corporate practices.

The response to “sustainability” framed questions, programs, and practices certainly confirms this.  However, I believe the problem is that the majority of executives see sustainability as an environmental tax on their operations, not as a way to save money and improve processes.  Often, companies want to take steps toward improving their carbon foot print or embed some sustainability program but the high level analysis results in extra costs and expenses.

Many companies would find they actually do have a significant investment in sustainable practices today but it is called their returns process, aka reverse logistics.  Once an organization has developed a pipeline to remove returned and obsolete assets from their primary market, they have the processes and infrastructure needed to support and facilitate a number of sustainable initiatives.  Leveraging the reverse supply chain can often turn a sustainable effort into a very profitable process improvement.

For example, a department stores tend to build a big backlog in plastic hangers.  Setting up a process to collect, sort and ship those hangers back to the manufacturer for reuse would be costly and very inefficient. However, if that department store has a returns center, they could set up a hanger recycling process within the facility and have the store ship hangers back with their returns. This is a very efficient use of a returns facility that turns a sustainable initiative into a profitable process.

For many sustainable processes, the cash register rings in the return center. Many programs become viable when they are incorporated into the reverse logistics process. If you are one of those CEO’s who would like to develop sustainable practices within your organization but can’t seem to get the economics right to make it viable, look to see how you can leverage your reverse logistics pipeline.