Tuesday, August 16, 2005

Are You Managing Reverse Logistics or Reversing Logistics Management?

If Europe is any harbinger of things to come, U.S. businesses are only on the periphery of properly addressing and reaping the true value of reverse logistics. Europe's ratification of the Waste Electrical and Electronic Equipment Directive, expected to be enforced by year's end, legislates that electronic equipment and appliance manufacturers are accountable for end-of-life disposal of their products -- including refrigerators, computers, TVs, and cell phones.

This will give product lifecycle management a whole new spin and greatly shift the way global manufacturers approach concepts and designs, even to the point of specifically manufacturing products with recycling in mind.

It's no longer simply a matter of pushing product to the consumer, then managing returns; it's a matter of managing a product's entire lifecycle. As such, corporate strategies must support this holistic vision.

This trend is a pivotal watershed in how enterprises embrace reverse logistics. By placing the twin imperatives of reverse logistics and recycling targets together, and it doesn't take much to imagine the challenges involved. This is evident for both manufacturers and retailers, reverse logistics and recycling are outside of what might realistically be considered their core areas of competence. Even if the skills could be recruited or acquired, challenges remain to initiate, manage, and measure success.

Materials handling, just as an example, where supply chains are used to managing brand-new, neatly packaged goods through highly automated distributions centers -- not rusting washing machines or old refrigerators.

Retailers do not have (and will not have) the space to store end-of-life goods. Retail space is expensive, and consequently devoted to goods for sale rather than goods for recycling, but also significant image and safety problems exist in mixing the two flows of goods -- one heading forward to consumers, and one heading to the trash heap.

The unique challenges will be here soon, but companies will continue to focus attention on their core strengths and outsource reverse logistics management to a growing cadre of service companies dedicated to the task. The advantages of rethinking reverse logistics will extend well beyond corporate citizenship and responsibility as retailers and manufacturers build a more dynamic and fluid supply chain.

While fiscal pressures may ultimately compel some to seek cost-cutting measures, paying attention to returns management makes good business sense regardless of the economy.
The reverse logistics business is really not cyclical or based on good or bad economic times. In lean times, companies have a need to take surplus product and convert those assets into cash as quickly as possible. In good times, these same companies will manufacture more product. The rate of returns rises as volume grows, hence the same value applies.

Companies may still be conflicted by the complexity of returns management, but where there is pain there is also opportunity for gain. In the broader scope of global supply chain management, reverse logistics is starting to make more sense. Its just a matter of time before more organizations will take advantage of this opportunity.


Post a Comment

<< Home