Michael F.

Price College of Business

Reverse Logistics
 Why Isn’t Reverse Logistics a
Priority?
Michael F. Price College of Business

 Focus on Outbound Logistics

 Desires to “hide” inventory mistakes

 Lack of awareness of potential benefits

 Survey of Catalog Retailers
(Electronics Firms)
Michael F. Price College of Business

 Respondents:
• Computer/office equipment 58.6%
• Misc. electronics 25.1%
• Communications equipment 7.1%
• Household appliances 4.3%

 Average reverse logistics costs:

• As a percentage of:
– Total logistics costs 9.4%
– Annual dollar sales 10.3%
– Annual unit sales 9.7%
 Most Common Reasons for
Merchandise Returns
Michael F. Price College of Business

Customer return/dissatisfaction 32.16%

Defective merchandise 26.05
Incorrect item received 10.44
Repairs needed 8.27
Damaged 7.10
Unsold units 1.35
Reconditioning 0.80
Recycling 0.67
Product recall 0.64
Other 8.50
 Most Common Methods of
Product Disposition
Michael F. Price College of Business

Returned to manufacturer/supplier 45.35%

Repackaged and sold as new 18.01
Destroyed 11.64
Refurbished 7.82
Resold as is 6.82
Recycled 3.42
Donated 1.32
 Strategic Implications of
Effective Reverse Logistics
Michael F. Price College of Business

 Savings in:
• Inventory carrying costs
• Transportation costs
• Waste disposal costs
 Plus:
• Improved customer service
 How Trading Partners Handle Returns
Influences Buying Decisions
Michael F. Price College of Business

 Allowances or “cap” programs (specifying

maximum return levels)
 Ease of obtaining returns authorization
 Length of time for credit processing
 Use of Internet in processing returns
 Quality of re-work or repair
 Timliness of re-work or repair
 Restrictions on disposition (allow sales to
secondary markets, etc.)