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Reverse Logistics Comes of Age
Calculate Your RL Operations Cost
SOX - Keep Your CEO Out of Prison
Giving Your Management RL Visibility
Bottom Line, and Beyond
By Jim Cochrane, Sharon Daniel & Gailen Vick
Social
Responsibility
Bottom-Line
Contributions
Shareholder
Board of Directors
Customer
Satisfaction
Data Collection
Surveys
Reverse Logistics Trends
Definition/Market Size
Magnitude & Myths
Brand
Protection
Innovations
Entitlements
Hidden
Cost
CORPORATE IDENTITY CHANGE
• Customer Service
• Contact Centers (helpdesk)
• Depot Repair
• Service Logistics
– Field Service
– Transportation/Warehousing
– Spare Parts Management
– RMA Management
– Replacement Management
• End-of-life Manufacturing
• Fulfillment Services
• IT Process Management
• Recycling
• Refurbishment/ Screening
• Warranty Support
•PCB Assembly
•Box Assembly
•Volume
Manufacturing
•Integration
•Configuration
•Final Testing
•Distribution to
Customer
•Customer
Fulfillment
•Transportation
•Vendor Relations
•Planning
•Procurement
Inventory Planning
•Component
Fabrication
•Design
Development
•Technology
Roadmaps
•ASIC Development
•Mechanical Design
•PCB Layout
•Prototyping
•New Product
Introduction
Aftermarket Customer
Services
Manufacturing
& Distribution
Material
Management
New Product
Development
REVERSE LOGISTICS
E
N
D
U
S
E
R
/
C
O
N
S
U
M
E
R
FORWARD LOGISTICS
Supply Chain - After Market Supply Chain
PRODUCT LIFE CYCLE
Reverse Logistics Defined
"In other words, anytime money is taken from a company's Warranty Reserve
or Service Logistics budget, that is a Reverse Logistics operation"
Forward Reverse
Product quality uniform Product quality not uniform
Disposition options clear Disposition not clear
Routing of product unambiguous Routing of product ambiguous
Forward distribution costs more easily
understandable
Reverse costs less understandable
Pricing of product uniform Pricing of product not uniform
Inventory management consistent Inventory management not consistent
Product life cycle manageable Product lifecycle less manageable
Financial Management issues clearer Financial Management issues unclear
Negotiation between parties more
straightforward
Negotiation less straightforward
Type of customer easy to identify and
market to
Type of customer difficult to identify
and market to
Visibility of process more transparent Visibility of process less transparent
Reverse Is Different
Source: Genco
Reverse Logistics Market Size
Source: D.F. Blumberg Associates, Inc
818.7740.7678.4614.9560.7505.3TOTAL U.S. HIGH-TECH SERVICE
18.416.414.412.510.78.8IMAGING & DOCUMENT Mgr.
39.934.630.026.523.420.3PRINTING & PUBLISHING
86.884.682.680.678.676.7TRANSPORTATION EQUIPMENT
16.215.615.014.313.713.2POWER & DISTRIBUTION SYSTEMS
8.47.87.16.65.85.1RETAIL/BANKING EQUIPMENT
29.126.724.522.520.417.9MEDICAL/SCIENTIFIC & SYSTEMS
69.163.160.355.851.848.3BUILDING EQUIPMENT & SYSTEMS
105.699.093.586.379.974.2INDUSTRIAL PLANT & EQUIPMENT
47.142.839.035.732.729.9STAND-ALONE COMMUNICATIONS
69.664.359.354.852.247.6COMMUNICATIONS NETWORKS
264.7224.3192.6167.4146.1124.4ENTERPRISE NETWORKING
63.861.460.151.945.339.0COMPUTER/OFFICE EQUIPMENT
200620052004200320022001
YEAREQUIPMENT & SYSTEMS
CATEGORIES
($ BILLIONS)
Permission by Blumberg Associates
www.RLTinc.com
www.RLTShows.com
Source: Prasad Thrikutam, Sandeep Kuman
Magnitude of Returns
• Managing the reverse supply chain is a very different and much more
complex matter than trying to make an organization’s forward supply
chain more efficient and cost-effective - Dr. Ho Kim (2003)
• Scale: US companies spend roughly $45 Billion annually on returns
logistics
• Impacts Many Customers: According to Consumer Electronics
Industry survey, the average returns rate is 8.46%, but high tech
returns can be as high as 20% in some sectors
• Evolution: Reverse Logistics is shifting from being seen as a
“necessary evil” to being recognized as a strategic asset – reducing
costs, improving customer care and helping to grow the business
Magnitude of Returns
•  “There are up to 12 times the number of transactions involved in the
returns process than in selling the product in the first place.” –
- AMR, Nigel Montgomer
•  Enterprises are struggling with excess inventories, suboptimal
performance levels, diminished customer satisfaction & missed
opportunities for cross-selling and up-selling aftermarket service & parts
- Aberdeen Group
•  “The cost of processing a return can be two to three times that of an
outbound shipment.”
- RLEC
•  “Improperly handled returns erode 30-35% of potential profits.”
- Gartner
.5% of GDP
10% of total US
logistics costs
(est. at $1 trillion)
Dr. James R. Stock, Product Returns/Reverse
Logistics in Warehousing, 2004
$100 billion in goods
returned each year
Magnitude of Returns
Dr. Dale S. Rogers and Dr. Ronald S. Tibben-Lembke
Going Backward: Reverse Logistics Trends and Practices, 2000
“Belief”
•  Returns have little
value and should be
scrapped
•  Our reverse supply
chain is probably
good enough
•  Returns are largely
defective goods
Actions to Fit the Reality
•  Change your company’s default
setting to finding “highest and
best use” for each return
•  Most returns are not defective. Get into
the detail of why consumers return – and
know the true value of each product
stream you’re recovering so that you can
drive a plan and timeline that specifically
fits that product
•  Knowing your reverse logistics operations
inside-out is essential to controlling
environmental and brand risk
– Know the details of your operations
– Know your subcontractors
– Audit!
Source: Cisco Systems
Dispelling RL Myths
Myths – Cheap Labor
Source: Ozark & New Age
Expenses Average Printer
27" Color
CRT TV
32" Color
LCD TV
Landed Cost - 150.00$ 180.00$ 2,000.00$
Labor Time - Hours - 0.35 1 1.5
Labor $ Delta 10.00$ 3.50$ 10.00$ 15.00$
Insurance Per Month - 0.12$ 0.15$ 1.66$
Freight To Mexico 1,600.00$ 1.28$ 10.26$ 15.38$
Freight From Mexico 1,600.00$ 1.28$ 10.26$ 15.38$
Market Devaluation 75% Recovery - 6.19$ 7.43$ 105.00$
Additional Cost Mexico Solution - 5.38$ 18.09$ 122.43$
Cost Comparison Examples - USA vs. Mexico
Expenses Average Printer
27" Color
CRT TV
32" Color
LCD TV
Landed Cost - 150.00$ 180.00$ 2,000.00$
Labor Time - Hours - 0.35 1 1.5
Labor $ Delta 12.50$ 4.38$ 12.50$ 18.75$
Insurance Per Month - 0.75$ 0.90$ 9.96$
Freight To China 3,700.00$ 2.96$ 23.72$ 35.58$
Freight From China 5,000.00$ 4.01$ 32.05$ 48.08$
Market Devaluation 75% Recovery - 37.13$ 7.43$ 105.00$
Additional Cost China Solution - 40.47$ 51.59$ 179.86$
Cost Comparison Examples - USA vs. China
Bottom-Line Contributions
Business Drivers of RL
Internal
External
Operational Strategic
Legislation
•  EC distance selling directive
•  WEEE EU directive
•  Potential EU legislation on re-use
of packaging material
•  RoHS directive
•  Sarbanes-Oxley
Business Strategy
•  Customer Retention/Loyalty
•  Corporate citizenship
•  Market/customer behavior analysis
•  Reduce risk for forward channel
•  Drive sales
•  Feedback to new product development/IT
•  Recover assets
•  Recapture value
•  Control gray market
•  Global Labor Cost
Economic BenefitsCustomer Service Initiatives
•  Return of defective products
•  Product disposal after end-of-life
•  Product upgrades
•  Product recall
•  Warranty returns
•  Product defect analysis
Source: Infosys & Cisco Systems
Is Not
•  Just cost arbitrage
•  Just low-level back office
work
•  Creation of organizational
inflexibility
•  Just the “India” or the
“China” thing
•  Addition of hidden costs
•  Centralized/Decentralized
decisions
Is
• Cost Savings
• Quality, Performance
Improvement
• Highly skilled motivated labor
pools (cultural factors)
• Capital Cost Avoidance &
Variable Cost Structure
• Speed & Flexibility
• Revenue Generation
• New Products and Services
• Resolve Skills Shortage
• capacity expansion
Globalization
Source: HP
•  Sarbanes-Oxley –
Officially – “The Public Company Accounting Reform and
Investor Protection Act” – July 30, 2002
To protect investors by improving the accuracy and reliability of
corporate disclosures made pursuant to the securities laws and for other
purposes“
-  Section 302
The CEO and CFO shall each certify:The appropriateness of the
financial statements and disclosures contained in the periodic report, and
that those financial statements and disclosures fairly present, in all
material respects, the operations and financial conditions of the issuer.”
•  WEEE Directive
•  RoHS Directive
•  People's Republic of China - Rules for repair, exchange, and return
responsibilities
Legislation
Source: Rapid Results
Legislation / Sarbanes-Oxley
•  C-Level Executives: It’s your freedom
–  Need to establish downstream equivalent ownership and
accountability
–  Need to maintain control system integrity in a dynamic, fast
changing environment
–  Reverse Logistics-Related
•  Who affects the accuracy of your income statements and
balance sheets?
•  Who has your inventory/credits and affects what is received or
issued and when
•  Who controls your IT systems
Source: Rapid Results
Business Strategy
•  3rd Party Service Providers
–  How do I provide solutions to my clients in a SOX world?
–  How do I provide the assurances needed to maintain my clients’
SOX integrity?
–  How do I partner with my clients to provide the access to the
information /data / personnel they require without impeding my
operations?
–  What can I do proactively to head off issues before they become
problems?
Source: Rapid Results
Business Strategy
The fewer trips a returned product
makes, the more value there is in
the unit
–  A centrally located reverse
logistics depot is an important
element of maintaining value
–  Excessive freight costs can be
abated
–  The opportunity for damage
decreases
–  Market devaluation costs can
be diminished
RL Movement is Costly
Source: Ozark & Newage
Transportation Warehousing 1) Repair Planning Procurement Inventory
Ownership
Percentage share of companies which outsource this function today
Percentage share of companies which believe that this function could be outsourced in the future
100
67 69
23
38
56
64
13 13
0
60
100
Source : DHL
RL Outsourcing
Aging Awareness
As the price of a product declines over time, decisions surrounding warranty
service must change to ensure prudent cost management.
Source: Motorola
Time
ValueOfReturnedProduct($)
Product
returned
Minimal loss of return
product value
Substantial loss of return product value;
exact value depends on sophistication of
process
Returned product has lost any real value and should be scrapped
Optimized Evaluation and
Re-distribution Process
Baseline Evaluation and
Re-distribution Process
No Evaluation/
Re-distribution Process
Source: "Reverse Supply Chains for Commercial Returns". Joseph D. Blackburn, V. Daniel R.
Guide, Jr., Gilvan Souza, Luk N. Van Wassenhove. California Management Review, Winter 2004.
Bottom-Line Contributions
Brand Protection
Brand Management
•  Strong brands
- Are built through an interrelated system of aspirations,
conveyors and customer perception
- Contribute directly to the bottom line
- Need to be continuously managed
The Gray Market Affects your Brand
•  Diminishes value
- Poor Quality
- Reduced price point erodes margins
•  Interferes with customer’s business
- Increases cost of service
- Liability
•  Erodes customer loyalty
- Reduces confidence in reseller
-Less reason to buy your brand
25Source: Cisco Systems
Brand Protection
3/12/18X – Source: Harris Interactive Poll, 2004
0%
20%
40%
60%
80%
100%
120%
85% of customers
WILL NOT shop
again if the return
process is not
convenient
0%
0%
0%
1%
1%
1%
1%
95% of customers
WILL shop again if
the return process
is convenient
Impact of a negative returns
experience.
Impact of a positive returns
experience.
Return Experience on Brand
Source : Newgistics
94%
14%
0%
20%
40%
60%
80%
100%
%ofUShouseholds
Post Office Private Mailing
Center
» 94% visit a post office each
month
» 46% have 3+ visits
» 14% visit a private mail
center (eg., UPS Store,
PakMail)
» Returns Marketing Services
» Returns Operation Services
Most American households Look for Convenience for Returns
Brand Convenience
Source : Newgistics
A tangible benefit of deploying a convenient
returns process is that it eliminates “trunk
time” - the days between order receipt and
return mailing. Lower trunk time helps retailers
get the product back in stock, improve order fill
rates and increase asset recovery.
4
4
24
31
Days
0 4 8 12 16 20 23 26 31 37
29 days (avg)
5
5
“Trunk Time”
A convenient returns process
36 days (avg)
Typical returns processes
Order
Shipped
Order
Received
Return
Mailed
Return
Delivered
Source: Monthly return analysis of SmartLabel retailer data
Retailers Never Get Their Returns
•  Single Source Solution
–  They want someone to handle it all
•  Lower Costs
–  Minimize Places you need to send products
•  Better Controls
–  Complete accountability through
infrastructure software
•  Faster Disposition
–  Provide more services under one roof
•  Fewer Vendors
–  Develop Partners
•  Better Reporting
–  Global Visual Consolidation and
consistency
Source: Motorola
OEM/Retailers Look for Support
•  Protect the brand promise by focusing on
customer satisfaction
•  Audit your internal processes, third party
vendors, and all subcontractors to ensure
you know where and how every product is
being dispositioned
•  Ensure your returns disposition strategy
does not “fuel” the gray market
•  Take a zero tolerance approach
Source: Cisco Systems
Brand Protection Actions
Hidden Cost
RL Costs are Hidden
•  A complex and costly problem to manage
–  Mostly manual
–  Touches the entire company with no
recognized business owner
–  No single budget to capture &
track costs
–  Traditionally no designated corporate
“watchdog” ensuring customer satisfaction
while protecting company margins
–  Hard to accelerate asset recovery – each area does
“the best they can”
Why Costs are Hidden
•  Urgent needs driven by quality, relationship
and market issues
–  manual processes often create “knee-jerk”
responses that may create additional
problems
–  changes may not be well-communicated
throughout the company
•  causing confusion, duplicate effort and
needless expense
•  negative impact on an already unhappy
customer
Customer
Asset
Mngment
Customer
Service
Finance Sales Traffic
Rcvng
Whsing
Repair
• Warranty
policies
• Service
contracts
• Product
rules
• Credit
rules
• Advance
replace
• Special
customer
needs
• Record of
RMA
• Financial
impact
• Process,
approval
rules
• Debits
• Problems
found in
Receiving
• Ability to
reconcile
• Write-offs
• Account
management
• Ineligible
returns
• Revenue
recognition
• Margin
protection
• Special
programs
• Quality
impact
• Return rate
forecasts
• Carrier
control
• Non-
contract
rates
• Transit
damage –
claim
recovery
• One-off
shipment
issues
• Inability to
track, route
effectively
• Facility
and labor
planning
• Priority
conflict
• Very
manual
effort
• Owner-
ship
issues
• Product
std cost
• Internal
visibility
• Repair –
ship back
• Replace
• Credit
• Invoice
• Float
stock
• Resale
• Scrap and
reclaim
value
• “Green”
needs
• Return
policies
• Customer-
specific
issues
• Product
eligibility
• Credit
timing
issues
• Warranty
support
• Perception
Hidden Cost Impact
RL Adds to Bottom Line
Products
After tax Profits
Are
They
Measured
Right?
Returns
Take
Away
From Bottom Line
Profits
Product
Production Cost
Reverse
Logistics
Management
Your Company
Manufacturers 1 Million Units Per Year
Revenue per Unit is $1 or $1,000,000
Profit per unit is 5% After Tax or $50,000
Return Rate Average is 10% or 100,000 units
Returns Represents $100,000 of Sales or
$50,000 negative to bottom line
Reverse Logistics Recovers 80% of the
Returns or $80,000 to company bottom line
Company’s After Tax Profit is $30,000
So who is most important: the VP of Marketing/Sales that took $50K from
your Company or the Reverse Logistics Professional that gave you $30K of
After Tax Profit?
•  “Forward-looking business and
operations executives who recognize
the strategic advantage of proper
returns handling will gain a significant
competitive market advantage.”
•  “Those willing to invest resources in
implementing these ….solutions will
bring millions of dollars in cost savings
to their companies, while improving
customer service and retention.”
Source: CLM/SF Newsletter 3/02
Strategic Advantages of RL
Data Collection & Surveys
Define Your RL Process
Collection/Inspection/
Selection/Testing
Repair/Refurbish/
Remanufacture/Reuse/
Recycle/Disposal/
Asset Recovery
Redistribution
Product
Recovery
Disposal
Input to RL Process
§ End-of-Life
§ End-of-Use
§ Commercial Returns
§ Production Waste
§ Process By-Product
§ Damaged
§ Service Parts
§ Leased/Rented
§ New Market Trials
Original Use/
Other Use
Data Collection & Process
Remarketing Disassembly Recycling
Environmental
Disposal
Call Center
(Outsourced)
Reverse
Logistics
Returns
Management
Repair /
Refurbishment
Sustaining
Engineering
Design Prototype
& NPI
PCB
Assembly
Final Box
Assembly
BTO / CTO Distribution
Services
Serviceability
& FA Feedback
Source: Jabil Global Services
Data Collection & RL Process
•  Over 75% admitted product was
“not defective”
•  Primary factory was
“misinformation at time of
purchase”
–  Sales staff knowledge
–  Point of sale clarity
•  Secondary factor was product
not meeting expectations
–  Difficult to hook-up
–  Difficult to use/operate
Source: Philips/retailer private returns survey
Consumer Returns Surveys
Product Category % Product Category %
Computers and peripherals 19.85 Health and drugs 3.05
Cellular phones and mobile 9.16 Magazine and book
publishing
3.05
Audio Video Systems 8.40 Medical equipment 3.05
Office products and supplies 7.63 Food 2.29
Semiconductor 7.63 Building and garden supplies 2.29
Household appliances 5.34 Apparel and accessories 2.29
Automotive 4.58 Catalogue merchandise 2.29
Hardware and materials 3.52 Plastic products 2.29
General merchandise 3.05 Other 9.92
Survey data by RLA and San Jose State University
Using Surveys
Reasons Given by Customers for Product Returns
22.95%
16.39%
13.93%
9.02% 9.02% 9.02% 8.20%
4.92% 4.10%
2.46%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Not
functioning
Damaged
Other
Notsatisfied
withthe
performance
Differentthan
Expected
Noreason
Didn'twant
theproduct
Missing
parts
Foundbetter
competitive
product
Latedelivery
Reasons for Return
Respondents
Survey data by RLA and San Jose State University
Data Collection & Surveys
“No Defect Found” rates
Juvenile
Furniture
40%
Consumer
Electronics
70%
Computers
85-90%
Small
Appliances
90+%
Source: Philips/retailer private returns survey
Data Collection & Surveys
Source: Frontline Today
50
30
25
20
15
0
5
10
15
20
25
30
35
40
45
50
% Rate of
Return
Magazine
Publishing
Book Publishing CD-ROMS PC
Manufacturers
Mass
Merchandisers
Industry
Reverse Logistics Industry
Yearly Return Rates by Industry
Data Collection & Surveys
Innovations & Entitlements
•  Asset Recovery/Price
•  Returns 50-200% higher than in-person, physical auctions
- Bill Angrick , CEO, Liquidity Services
•  “Overall, we have found the private marketplace is advantageous
to Motorola. We’re getting full value for the product and we can
better understand buyer’s preferences”
- Pam Arrigo, Motorola
•  Participation
•  Fortunately, online markets have developed over the past 5 years
which facilitate the remarketing process.
•  Explore incremental channels and understand how they can drive
corporate value
- Jim Magnanini, ChannelAdvisor Corporation
Innovations of Online Auctions
B2B
Exchange
Store
Resale
Placement
Category
Salvage
Online
Fixed Price
Offer
Bulk
Salvage
Online
Bid
Auctions
Merchandise Return to
Vendor
Alternative Asset Optimization Model
•  Quantity
•  Time
•  Restrictions
•  Channel Demand
Reporting
Settlement
Dynamic
Optimization
Optimized Recovery
Source: Genco
Innovations & Cost Recovery
Ineffective entitlement can lead to unhappy customers
•  Brand loyalty
•  Retail returns
–  Often refund, lost margin
–  Less often, exchange for
like
•  Manufacturer returns
–  CE manufacturers allow
return for credit
Source: Philips/retailer private returns survey
Innovations & Entitlements
Steps to Effective Entitlement
•  Create and use intelligent serial numbers
•  Provide end-to-end entitlement system infrastructure
•  Assure supporting point of sale practices
•  Enable robust point of return practices
•  Sustain effective contact center procedures
Source: Philips
Innovations & Entitlements
•  Collaborate for proactive returns
management
–  Sales Quota Management
•  Establish inspection programs
•  Evaluate alternatives to return
•  Establish returns policies
Source: Philips
Initiatives to Reduce Entitlements
Social Responsibility
Photos courtesy of BAN. Copyright: Basel Action Network.
Social Responsibility
The Scope of the Problem
•  20-50 million tons of electrical/electronic equipment waste
are generated worldwide annually
•  500 Containers of used electrical equipment enter the
country of Nigeria each month. Each container contains
about 800 computers
•  50-80% of electronic waste collected for recycling in the US
was being disassembled and recycled under unregulated,
unhealthy conditions in China, India, Pakistan and other
developing countries
•  As much as 75% of imported used computer equipment is
“junk” and not economically repairable or resalable
•  E-Waste/e-recycling will represent $30 Billion market
opportunity by the year 2008
Source: Basel Action Network & D.F. Blumberg Associates
Social Environmental Issues
Customer
Landfill
LandfillUncontrolled
Scrapping
Subcontractor
Counterfeit Product
Assemblers
Gray Market
Citiraya Secure
Destruction
Facility
Case Study of Citiraya:
How Did It Happen?
“Belief”: What Citiraya’s Customers Thought They Were Buying
Reality of Citiraya’s Operations
Citiraya
Logistics
Depot
Citiraya Secure
Destruction
Facility
Customer
Certificate of
Destruction
Citiraya
Logistics
Depot
Broker
Broker
Source: Cisco Systems
•  Include final disposition in your product life cycle
planning, all the way back to your product development
cycles
•  Develop easy to use Trade-in and Take Back programs
for your customers – these will proactively help recover
older products
•  Leverage your channels of distribution to help manage
your reverse logistics
•  Actively audit your corporate compliance to local, regional
and international laws and regulations – down to the
subcontractor level!
Source: Cisco Systems
Social Responsibility Actions
Customer Satisfaction
The Consumer View
Typical Consumer Electronics industry return rate:
Source: Newgistics, Inc., conducted by Harris Interactive.
Distributors 10-12 % Computer OEMs 10-20 %
Retailers 6% Online CE Products 20 %
Consumers factor return policies into their shopping
decisions -- convenience is key for many shoppers:
•  88% state that a convenient return policy and process is somewhat important,
important or very important to purchase decisions.
•  92% of online/catalog shoppers are somewhat or very likely to shop again if the
return process is convenient.
•  85% are not very or not at all likely to shop again with a direct retailer if the return
process is inconvenient.
•  75% indicate that a convenient return policy is an important or very important factor
when purchasing a gift for someone else.
Customer Satisfaction
What Value Can Reverse Logistics Deliver?
Function Key Objective How Reverse Logistics Can Help
Finance Maximize profitability
•  Control costs with efficient operations
•  Recover value from returns
Sales Grow the business
•  Make returns process painless, to
increase customer satisfaction
•  Support growth by making product
available to surgically resell
Marketing Build the brand •  Control the gray market
Quality Improve customer experience
•  Feed returns data back upstream to drive
process and product design improvements
CEO
All of the above,
+ Corporate Social
Responsibility
•  Ensure environmental protection
•  Leverage returns to accelerate giving
back to the community
Source: Cisco Systems
Customer Satisfaction
Summary
Strategic Value Of Reverse Logistics
It’s Not Just Cost Control
Expense Control Revenue
Product Re-use (Reduce new buys) X
Quality Improvement X
Product Life Cycle Mgmt (Dev Time) X
Customer Intimacy/Information mining X X
Customer Loyalty/Customer Service X
Marketing: Service Sales X
Sales Programs, Channel Policies X
Brand Protection X
Disposition to “Highest and Best Use” X
Source: Cisco Systems
Summary
Drive Reverse Logistics Cost Out
Simple Model
Proactive Model Spares/Repairs
Secondary Market
Internal Reuse
Philanthropy
SCRAP
Product Return
Sort, inspect,
and determine
highest & best
opportunity
Product Return SCRAP
•  Accelerate recovery of product returns
•  Enhance customer satisfaction
•  Optimize value of products – understand paths to
Secondary Markets, Internal Reuse, Spares and
Philanthropy before sending to recycling
Source: Cisco Systems
Summary
Forward Logistics cost vs. Reverse Logistics cost
11.08%
8.98%
11.20%
8.86%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Forward Logistics cost as % of
annual sales
Reverse Logistics cost as % of
annual sales
Costin%ofannualsales
RL Cost Compared to Forward
Survey data by RLA and San Jose State University
Summary
•  Less handling, shipping, and touches means more value.
•  A centrally located repair depot reduces freight and time.
•  Service capabilities of your returns depot must be diverse,
skilled, integrated, and quality driven.
•  Non Domestic “Cheap Labor” does not reflect the true
cost of re manufacturing returned units.
•  A quality outsourced reverse logistics corporation can
reduce costs, add flexibility, and control headcount.
Source: Ozark & New Age
Thank You for Your Attention

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Reverse Logistics Comes of Age

  • 1. Reverse Logistics Comes of Age Calculate Your RL Operations Cost SOX - Keep Your CEO Out of Prison Giving Your Management RL Visibility Bottom Line, and Beyond By Jim Cochrane, Sharon Daniel & Gailen Vick
  • 2. Social Responsibility Bottom-Line Contributions Shareholder Board of Directors Customer Satisfaction Data Collection Surveys Reverse Logistics Trends Definition/Market Size Magnitude & Myths Brand Protection Innovations Entitlements Hidden Cost
  • 3. CORPORATE IDENTITY CHANGE • Customer Service • Contact Centers (helpdesk) • Depot Repair • Service Logistics – Field Service – Transportation/Warehousing – Spare Parts Management – RMA Management – Replacement Management • End-of-life Manufacturing • Fulfillment Services • IT Process Management • Recycling • Refurbishment/ Screening • Warranty Support •PCB Assembly •Box Assembly •Volume Manufacturing •Integration •Configuration •Final Testing •Distribution to Customer •Customer Fulfillment •Transportation •Vendor Relations •Planning •Procurement Inventory Planning •Component Fabrication •Design Development •Technology Roadmaps •ASIC Development •Mechanical Design •PCB Layout •Prototyping •New Product Introduction Aftermarket Customer Services Manufacturing & Distribution Material Management New Product Development REVERSE LOGISTICS E N D U S E R / C O N S U M E R FORWARD LOGISTICS Supply Chain - After Market Supply Chain PRODUCT LIFE CYCLE Reverse Logistics Defined "In other words, anytime money is taken from a company's Warranty Reserve or Service Logistics budget, that is a Reverse Logistics operation"
  • 4. Forward Reverse Product quality uniform Product quality not uniform Disposition options clear Disposition not clear Routing of product unambiguous Routing of product ambiguous Forward distribution costs more easily understandable Reverse costs less understandable Pricing of product uniform Pricing of product not uniform Inventory management consistent Inventory management not consistent Product life cycle manageable Product lifecycle less manageable Financial Management issues clearer Financial Management issues unclear Negotiation between parties more straightforward Negotiation less straightforward Type of customer easy to identify and market to Type of customer difficult to identify and market to Visibility of process more transparent Visibility of process less transparent Reverse Is Different Source: Genco
  • 5. Reverse Logistics Market Size Source: D.F. Blumberg Associates, Inc 818.7740.7678.4614.9560.7505.3TOTAL U.S. HIGH-TECH SERVICE 18.416.414.412.510.78.8IMAGING & DOCUMENT Mgr. 39.934.630.026.523.420.3PRINTING & PUBLISHING 86.884.682.680.678.676.7TRANSPORTATION EQUIPMENT 16.215.615.014.313.713.2POWER & DISTRIBUTION SYSTEMS 8.47.87.16.65.85.1RETAIL/BANKING EQUIPMENT 29.126.724.522.520.417.9MEDICAL/SCIENTIFIC & SYSTEMS 69.163.160.355.851.848.3BUILDING EQUIPMENT & SYSTEMS 105.699.093.586.379.974.2INDUSTRIAL PLANT & EQUIPMENT 47.142.839.035.732.729.9STAND-ALONE COMMUNICATIONS 69.664.359.354.852.247.6COMMUNICATIONS NETWORKS 264.7224.3192.6167.4146.1124.4ENTERPRISE NETWORKING 63.861.460.151.945.339.0COMPUTER/OFFICE EQUIPMENT 200620052004200320022001 YEAREQUIPMENT & SYSTEMS CATEGORIES ($ BILLIONS) Permission by Blumberg Associates
  • 8. Source: Prasad Thrikutam, Sandeep Kuman Magnitude of Returns • Managing the reverse supply chain is a very different and much more complex matter than trying to make an organization’s forward supply chain more efficient and cost-effective - Dr. Ho Kim (2003) • Scale: US companies spend roughly $45 Billion annually on returns logistics • Impacts Many Customers: According to Consumer Electronics Industry survey, the average returns rate is 8.46%, but high tech returns can be as high as 20% in some sectors • Evolution: Reverse Logistics is shifting from being seen as a “necessary evil” to being recognized as a strategic asset – reducing costs, improving customer care and helping to grow the business
  • 9. Magnitude of Returns •  “There are up to 12 times the number of transactions involved in the returns process than in selling the product in the first place.” – - AMR, Nigel Montgomer •  Enterprises are struggling with excess inventories, suboptimal performance levels, diminished customer satisfaction & missed opportunities for cross-selling and up-selling aftermarket service & parts - Aberdeen Group •  “The cost of processing a return can be two to three times that of an outbound shipment.” - RLEC •  “Improperly handled returns erode 30-35% of potential profits.” - Gartner
  • 10. .5% of GDP 10% of total US logistics costs (est. at $1 trillion) Dr. James R. Stock, Product Returns/Reverse Logistics in Warehousing, 2004 $100 billion in goods returned each year Magnitude of Returns Dr. Dale S. Rogers and Dr. Ronald S. Tibben-Lembke Going Backward: Reverse Logistics Trends and Practices, 2000
  • 11. “Belief” •  Returns have little value and should be scrapped •  Our reverse supply chain is probably good enough •  Returns are largely defective goods Actions to Fit the Reality •  Change your company’s default setting to finding “highest and best use” for each return •  Most returns are not defective. Get into the detail of why consumers return – and know the true value of each product stream you’re recovering so that you can drive a plan and timeline that specifically fits that product •  Knowing your reverse logistics operations inside-out is essential to controlling environmental and brand risk – Know the details of your operations – Know your subcontractors – Audit! Source: Cisco Systems Dispelling RL Myths
  • 12. Myths – Cheap Labor Source: Ozark & New Age Expenses Average Printer 27" Color CRT TV 32" Color LCD TV Landed Cost - 150.00$ 180.00$ 2,000.00$ Labor Time - Hours - 0.35 1 1.5 Labor $ Delta 10.00$ 3.50$ 10.00$ 15.00$ Insurance Per Month - 0.12$ 0.15$ 1.66$ Freight To Mexico 1,600.00$ 1.28$ 10.26$ 15.38$ Freight From Mexico 1,600.00$ 1.28$ 10.26$ 15.38$ Market Devaluation 75% Recovery - 6.19$ 7.43$ 105.00$ Additional Cost Mexico Solution - 5.38$ 18.09$ 122.43$ Cost Comparison Examples - USA vs. Mexico Expenses Average Printer 27" Color CRT TV 32" Color LCD TV Landed Cost - 150.00$ 180.00$ 2,000.00$ Labor Time - Hours - 0.35 1 1.5 Labor $ Delta 12.50$ 4.38$ 12.50$ 18.75$ Insurance Per Month - 0.75$ 0.90$ 9.96$ Freight To China 3,700.00$ 2.96$ 23.72$ 35.58$ Freight From China 5,000.00$ 4.01$ 32.05$ 48.08$ Market Devaluation 75% Recovery - 37.13$ 7.43$ 105.00$ Additional Cost China Solution - 40.47$ 51.59$ 179.86$ Cost Comparison Examples - USA vs. China
  • 14. Business Drivers of RL Internal External Operational Strategic Legislation •  EC distance selling directive •  WEEE EU directive •  Potential EU legislation on re-use of packaging material •  RoHS directive •  Sarbanes-Oxley Business Strategy •  Customer Retention/Loyalty •  Corporate citizenship •  Market/customer behavior analysis •  Reduce risk for forward channel •  Drive sales •  Feedback to new product development/IT •  Recover assets •  Recapture value •  Control gray market •  Global Labor Cost Economic BenefitsCustomer Service Initiatives •  Return of defective products •  Product disposal after end-of-life •  Product upgrades •  Product recall •  Warranty returns •  Product defect analysis Source: Infosys & Cisco Systems
  • 15. Is Not •  Just cost arbitrage •  Just low-level back office work •  Creation of organizational inflexibility •  Just the “India” or the “China” thing •  Addition of hidden costs •  Centralized/Decentralized decisions Is • Cost Savings • Quality, Performance Improvement • Highly skilled motivated labor pools (cultural factors) • Capital Cost Avoidance & Variable Cost Structure • Speed & Flexibility • Revenue Generation • New Products and Services • Resolve Skills Shortage • capacity expansion Globalization Source: HP
  • 16. •  Sarbanes-Oxley – Officially – “The Public Company Accounting Reform and Investor Protection Act” – July 30, 2002 To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws and for other purposes“ -  Section 302 The CEO and CFO shall each certify:The appropriateness of the financial statements and disclosures contained in the periodic report, and that those financial statements and disclosures fairly present, in all material respects, the operations and financial conditions of the issuer.” •  WEEE Directive •  RoHS Directive •  People's Republic of China - Rules for repair, exchange, and return responsibilities Legislation Source: Rapid Results
  • 18. •  C-Level Executives: It’s your freedom –  Need to establish downstream equivalent ownership and accountability –  Need to maintain control system integrity in a dynamic, fast changing environment –  Reverse Logistics-Related •  Who affects the accuracy of your income statements and balance sheets? •  Who has your inventory/credits and affects what is received or issued and when •  Who controls your IT systems Source: Rapid Results Business Strategy
  • 19. •  3rd Party Service Providers –  How do I provide solutions to my clients in a SOX world? –  How do I provide the assurances needed to maintain my clients’ SOX integrity? –  How do I partner with my clients to provide the access to the information /data / personnel they require without impeding my operations? –  What can I do proactively to head off issues before they become problems? Source: Rapid Results Business Strategy
  • 20. The fewer trips a returned product makes, the more value there is in the unit –  A centrally located reverse logistics depot is an important element of maintaining value –  Excessive freight costs can be abated –  The opportunity for damage decreases –  Market devaluation costs can be diminished RL Movement is Costly Source: Ozark & Newage
  • 21. Transportation Warehousing 1) Repair Planning Procurement Inventory Ownership Percentage share of companies which outsource this function today Percentage share of companies which believe that this function could be outsourced in the future 100 67 69 23 38 56 64 13 13 0 60 100 Source : DHL RL Outsourcing
  • 22. Aging Awareness As the price of a product declines over time, decisions surrounding warranty service must change to ensure prudent cost management. Source: Motorola
  • 23. Time ValueOfReturnedProduct($) Product returned Minimal loss of return product value Substantial loss of return product value; exact value depends on sophistication of process Returned product has lost any real value and should be scrapped Optimized Evaluation and Re-distribution Process Baseline Evaluation and Re-distribution Process No Evaluation/ Re-distribution Process Source: "Reverse Supply Chains for Commercial Returns". Joseph D. Blackburn, V. Daniel R. Guide, Jr., Gilvan Souza, Luk N. Van Wassenhove. California Management Review, Winter 2004. Bottom-Line Contributions
  • 25. Brand Management •  Strong brands - Are built through an interrelated system of aspirations, conveyors and customer perception - Contribute directly to the bottom line - Need to be continuously managed The Gray Market Affects your Brand •  Diminishes value - Poor Quality - Reduced price point erodes margins •  Interferes with customer’s business - Increases cost of service - Liability •  Erodes customer loyalty - Reduces confidence in reseller -Less reason to buy your brand 25Source: Cisco Systems Brand Protection
  • 26. 3/12/18X – Source: Harris Interactive Poll, 2004 0% 20% 40% 60% 80% 100% 120% 85% of customers WILL NOT shop again if the return process is not convenient 0% 0% 0% 1% 1% 1% 1% 95% of customers WILL shop again if the return process is convenient Impact of a negative returns experience. Impact of a positive returns experience. Return Experience on Brand Source : Newgistics
  • 27. 94% 14% 0% 20% 40% 60% 80% 100% %ofUShouseholds Post Office Private Mailing Center » 94% visit a post office each month » 46% have 3+ visits » 14% visit a private mail center (eg., UPS Store, PakMail) » Returns Marketing Services » Returns Operation Services Most American households Look for Convenience for Returns Brand Convenience Source : Newgistics
  • 28. A tangible benefit of deploying a convenient returns process is that it eliminates “trunk time” - the days between order receipt and return mailing. Lower trunk time helps retailers get the product back in stock, improve order fill rates and increase asset recovery. 4 4 24 31 Days 0 4 8 12 16 20 23 26 31 37 29 days (avg) 5 5 “Trunk Time” A convenient returns process 36 days (avg) Typical returns processes Order Shipped Order Received Return Mailed Return Delivered Source: Monthly return analysis of SmartLabel retailer data Retailers Never Get Their Returns
  • 29. •  Single Source Solution –  They want someone to handle it all •  Lower Costs –  Minimize Places you need to send products •  Better Controls –  Complete accountability through infrastructure software •  Faster Disposition –  Provide more services under one roof •  Fewer Vendors –  Develop Partners •  Better Reporting –  Global Visual Consolidation and consistency Source: Motorola OEM/Retailers Look for Support
  • 30. •  Protect the brand promise by focusing on customer satisfaction •  Audit your internal processes, third party vendors, and all subcontractors to ensure you know where and how every product is being dispositioned •  Ensure your returns disposition strategy does not “fuel” the gray market •  Take a zero tolerance approach Source: Cisco Systems Brand Protection Actions
  • 32. RL Costs are Hidden •  A complex and costly problem to manage –  Mostly manual –  Touches the entire company with no recognized business owner –  No single budget to capture & track costs –  Traditionally no designated corporate “watchdog” ensuring customer satisfaction while protecting company margins –  Hard to accelerate asset recovery – each area does “the best they can”
  • 33. Why Costs are Hidden •  Urgent needs driven by quality, relationship and market issues –  manual processes often create “knee-jerk” responses that may create additional problems –  changes may not be well-communicated throughout the company •  causing confusion, duplicate effort and needless expense •  negative impact on an already unhappy customer
  • 34. Customer Asset Mngment Customer Service Finance Sales Traffic Rcvng Whsing Repair • Warranty policies • Service contracts • Product rules • Credit rules • Advance replace • Special customer needs • Record of RMA • Financial impact • Process, approval rules • Debits • Problems found in Receiving • Ability to reconcile • Write-offs • Account management • Ineligible returns • Revenue recognition • Margin protection • Special programs • Quality impact • Return rate forecasts • Carrier control • Non- contract rates • Transit damage – claim recovery • One-off shipment issues • Inability to track, route effectively • Facility and labor planning • Priority conflict • Very manual effort • Owner- ship issues • Product std cost • Internal visibility • Repair – ship back • Replace • Credit • Invoice • Float stock • Resale • Scrap and reclaim value • “Green” needs • Return policies • Customer- specific issues • Product eligibility • Credit timing issues • Warranty support • Perception Hidden Cost Impact
  • 35. RL Adds to Bottom Line Products After tax Profits Are They Measured Right? Returns Take Away From Bottom Line Profits Product Production Cost Reverse Logistics Management Your Company Manufacturers 1 Million Units Per Year Revenue per Unit is $1 or $1,000,000 Profit per unit is 5% After Tax or $50,000 Return Rate Average is 10% or 100,000 units Returns Represents $100,000 of Sales or $50,000 negative to bottom line Reverse Logistics Recovers 80% of the Returns or $80,000 to company bottom line Company’s After Tax Profit is $30,000 So who is most important: the VP of Marketing/Sales that took $50K from your Company or the Reverse Logistics Professional that gave you $30K of After Tax Profit?
  • 36. •  “Forward-looking business and operations executives who recognize the strategic advantage of proper returns handling will gain a significant competitive market advantage.” •  “Those willing to invest resources in implementing these ….solutions will bring millions of dollars in cost savings to their companies, while improving customer service and retention.” Source: CLM/SF Newsletter 3/02 Strategic Advantages of RL
  • 37. Data Collection & Surveys
  • 38. Define Your RL Process Collection/Inspection/ Selection/Testing Repair/Refurbish/ Remanufacture/Reuse/ Recycle/Disposal/ Asset Recovery Redistribution Product Recovery Disposal Input to RL Process § End-of-Life § End-of-Use § Commercial Returns § Production Waste § Process By-Product § Damaged § Service Parts § Leased/Rented § New Market Trials Original Use/ Other Use Data Collection & Process
  • 39. Remarketing Disassembly Recycling Environmental Disposal Call Center (Outsourced) Reverse Logistics Returns Management Repair / Refurbishment Sustaining Engineering Design Prototype & NPI PCB Assembly Final Box Assembly BTO / CTO Distribution Services Serviceability & FA Feedback Source: Jabil Global Services Data Collection & RL Process
  • 40. •  Over 75% admitted product was “not defective” •  Primary factory was “misinformation at time of purchase” –  Sales staff knowledge –  Point of sale clarity •  Secondary factor was product not meeting expectations –  Difficult to hook-up –  Difficult to use/operate Source: Philips/retailer private returns survey Consumer Returns Surveys
  • 41. Product Category % Product Category % Computers and peripherals 19.85 Health and drugs 3.05 Cellular phones and mobile 9.16 Magazine and book publishing 3.05 Audio Video Systems 8.40 Medical equipment 3.05 Office products and supplies 7.63 Food 2.29 Semiconductor 7.63 Building and garden supplies 2.29 Household appliances 5.34 Apparel and accessories 2.29 Automotive 4.58 Catalogue merchandise 2.29 Hardware and materials 3.52 Plastic products 2.29 General merchandise 3.05 Other 9.92 Survey data by RLA and San Jose State University Using Surveys
  • 42. Reasons Given by Customers for Product Returns 22.95% 16.39% 13.93% 9.02% 9.02% 9.02% 8.20% 4.92% 4.10% 2.46% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% Not functioning Damaged Other Notsatisfied withthe performance Differentthan Expected Noreason Didn'twant theproduct Missing parts Foundbetter competitive product Latedelivery Reasons for Return Respondents Survey data by RLA and San Jose State University Data Collection & Surveys
  • 43. “No Defect Found” rates Juvenile Furniture 40% Consumer Electronics 70% Computers 85-90% Small Appliances 90+% Source: Philips/retailer private returns survey Data Collection & Surveys
  • 44. Source: Frontline Today 50 30 25 20 15 0 5 10 15 20 25 30 35 40 45 50 % Rate of Return Magazine Publishing Book Publishing CD-ROMS PC Manufacturers Mass Merchandisers Industry Reverse Logistics Industry Yearly Return Rates by Industry Data Collection & Surveys
  • 46.
  • 47. •  Asset Recovery/Price •  Returns 50-200% higher than in-person, physical auctions - Bill Angrick , CEO, Liquidity Services •  “Overall, we have found the private marketplace is advantageous to Motorola. We’re getting full value for the product and we can better understand buyer’s preferences” - Pam Arrigo, Motorola •  Participation •  Fortunately, online markets have developed over the past 5 years which facilitate the remarketing process. •  Explore incremental channels and understand how they can drive corporate value - Jim Magnanini, ChannelAdvisor Corporation Innovations of Online Auctions
  • 48. B2B Exchange Store Resale Placement Category Salvage Online Fixed Price Offer Bulk Salvage Online Bid Auctions Merchandise Return to Vendor Alternative Asset Optimization Model •  Quantity •  Time •  Restrictions •  Channel Demand Reporting Settlement Dynamic Optimization Optimized Recovery Source: Genco Innovations & Cost Recovery
  • 49. Ineffective entitlement can lead to unhappy customers •  Brand loyalty •  Retail returns –  Often refund, lost margin –  Less often, exchange for like •  Manufacturer returns –  CE manufacturers allow return for credit Source: Philips/retailer private returns survey Innovations & Entitlements
  • 50. Steps to Effective Entitlement •  Create and use intelligent serial numbers •  Provide end-to-end entitlement system infrastructure •  Assure supporting point of sale practices •  Enable robust point of return practices •  Sustain effective contact center procedures Source: Philips Innovations & Entitlements
  • 51. •  Collaborate for proactive returns management –  Sales Quota Management •  Establish inspection programs •  Evaluate alternatives to return •  Establish returns policies Source: Philips Initiatives to Reduce Entitlements
  • 53. Photos courtesy of BAN. Copyright: Basel Action Network. Social Responsibility
  • 54. The Scope of the Problem •  20-50 million tons of electrical/electronic equipment waste are generated worldwide annually •  500 Containers of used electrical equipment enter the country of Nigeria each month. Each container contains about 800 computers •  50-80% of electronic waste collected for recycling in the US was being disassembled and recycled under unregulated, unhealthy conditions in China, India, Pakistan and other developing countries •  As much as 75% of imported used computer equipment is “junk” and not economically repairable or resalable •  E-Waste/e-recycling will represent $30 Billion market opportunity by the year 2008 Source: Basel Action Network & D.F. Blumberg Associates Social Environmental Issues
  • 55.
  • 56. Customer Landfill LandfillUncontrolled Scrapping Subcontractor Counterfeit Product Assemblers Gray Market Citiraya Secure Destruction Facility Case Study of Citiraya: How Did It Happen? “Belief”: What Citiraya’s Customers Thought They Were Buying Reality of Citiraya’s Operations Citiraya Logistics Depot Citiraya Secure Destruction Facility Customer Certificate of Destruction Citiraya Logistics Depot Broker Broker Source: Cisco Systems
  • 57. •  Include final disposition in your product life cycle planning, all the way back to your product development cycles •  Develop easy to use Trade-in and Take Back programs for your customers – these will proactively help recover older products •  Leverage your channels of distribution to help manage your reverse logistics •  Actively audit your corporate compliance to local, regional and international laws and regulations – down to the subcontractor level! Source: Cisco Systems Social Responsibility Actions
  • 59. The Consumer View Typical Consumer Electronics industry return rate: Source: Newgistics, Inc., conducted by Harris Interactive. Distributors 10-12 % Computer OEMs 10-20 % Retailers 6% Online CE Products 20 % Consumers factor return policies into their shopping decisions -- convenience is key for many shoppers: •  88% state that a convenient return policy and process is somewhat important, important or very important to purchase decisions. •  92% of online/catalog shoppers are somewhat or very likely to shop again if the return process is convenient. •  85% are not very or not at all likely to shop again with a direct retailer if the return process is inconvenient. •  75% indicate that a convenient return policy is an important or very important factor when purchasing a gift for someone else. Customer Satisfaction
  • 60. What Value Can Reverse Logistics Deliver? Function Key Objective How Reverse Logistics Can Help Finance Maximize profitability •  Control costs with efficient operations •  Recover value from returns Sales Grow the business •  Make returns process painless, to increase customer satisfaction •  Support growth by making product available to surgically resell Marketing Build the brand •  Control the gray market Quality Improve customer experience •  Feed returns data back upstream to drive process and product design improvements CEO All of the above, + Corporate Social Responsibility •  Ensure environmental protection •  Leverage returns to accelerate giving back to the community Source: Cisco Systems Customer Satisfaction
  • 62. Strategic Value Of Reverse Logistics It’s Not Just Cost Control Expense Control Revenue Product Re-use (Reduce new buys) X Quality Improvement X Product Life Cycle Mgmt (Dev Time) X Customer Intimacy/Information mining X X Customer Loyalty/Customer Service X Marketing: Service Sales X Sales Programs, Channel Policies X Brand Protection X Disposition to “Highest and Best Use” X Source: Cisco Systems Summary
  • 63. Drive Reverse Logistics Cost Out Simple Model Proactive Model Spares/Repairs Secondary Market Internal Reuse Philanthropy SCRAP Product Return Sort, inspect, and determine highest & best opportunity Product Return SCRAP •  Accelerate recovery of product returns •  Enhance customer satisfaction •  Optimize value of products – understand paths to Secondary Markets, Internal Reuse, Spares and Philanthropy before sending to recycling Source: Cisco Systems Summary
  • 64. Forward Logistics cost vs. Reverse Logistics cost 11.08% 8.98% 11.20% 8.86% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% Forward Logistics cost as % of annual sales Reverse Logistics cost as % of annual sales Costin%ofannualsales RL Cost Compared to Forward Survey data by RLA and San Jose State University
  • 65. Summary •  Less handling, shipping, and touches means more value. •  A centrally located repair depot reduces freight and time. •  Service capabilities of your returns depot must be diverse, skilled, integrated, and quality driven. •  Non Domestic “Cheap Labor” does not reflect the true cost of re manufacturing returned units. •  A quality outsourced reverse logistics corporation can reduce costs, add flexibility, and control headcount. Source: Ozark & New Age
  • 66. Thank You for Your Attention