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By Curtis Greve and Jerry Davis, Commissioned by UPSRecovering Lost Profits by I mproving

Table of Contents About this Report 3 Executive Summary 4 Impacting the Bottom Line 5 The Reverse Logistics Spectrum 6 Impacts and Risks for High Tech Companies 8 Reselling in the Secondary Market 8 Rare Materials Reclamation 9 Avoiding the Risks of Regulation 9 A Balanced Return Policy can Grow Revenue 10 Exchanges and Repairs in the Reverse Logistics Pipeline 11 Developing a Reverse Logistics Program 12 Getting Started with the Essentials 12 Tapping into 3rd Party Logistics Benefits 13 Key Recommendations 14 Reverse Logistics: A Self Analysis for Your Company 15 Appendix 17

About This Report By Carla Huang, UPS Director of Corporate Marketing for the High-Tech Industry As a global leader in supply chain logistics, UPS has a long history of working with high-tech companies, from small component suppliers to global finished-goods powerhouses With so much visibility into this market, we ve noticed that companies have varying degrees of success managing reverse logistics as well as varying degrees of missed opportunities when not paying attention to this part of the to tal supply chain In our experiences, reverse logistics is one of the most often overlooked elemen ts of the complete operations cycle These experiences and observations are precisely w hy we commissioned this paper: we want to highlight how high-tech companies can realize near- and long-term benefits by taking control of their reverse logistic s supply chain and making improvements no matter how small We realize the perception that returns are a necessary evil to be avoided at all costs Yet they present vast opportunity Companies adept at reverse logistics treat ret urns as another form of inbound shipping, with processes and plans that allow them to dr ive top-line sales and bottom-line profits from savings In other words, they underst and that returns are always going to be a part of their business and look for every possible way to leverage reverse logistics to extract the hidden value Because high-tech companies have multiple opportunities for reverse logistics to impact the supply chain, they do not have to re-engineer their entire process to achieve tangible results We ve helped customers achieve greater sales through resa le, and we ve seen customers realize savings by reclaiming parts for their operations While a greater investment in reverse logistics will yield more benefits, we re confident that many companies can experience significant improvements if they ta ke just a few of the steps outlined in this paper If you are still skeptical about the role reverse logistics can play, think abou t your own experiences as a consumer and a customer Would you prefer to do business with a company that has an efficient returns process with established policies? Would y ou rather buy from vendors that give you flexibility to return products without pen alties and provide a quick replacement or refund? If you recognize that your organizati on could improve in these areas, we encourage you to review the reverse logistics s elfanalysis featured in this paper Determining the current state of your reverse lo gistics

capabilities is the first step on your way to creating better business processes . more satisfied customers and future success .

Reverse logistics is defined as the processes of receiving returned components or products for the purpose of recapturing value or proper disposal. The science of reverse logistics includes return policy administration.the average manufacturer will spend 9% to 15% of total revenue on returns Recovering Lost Profits by Improving Reverse Logistics Curtis Greve and Jerry Da vis Executive Summary It is no surprise that almost every company is looking for ways to increase sale s. Reverse logistics is defined as the processes of receiving returned components or products for the purpose of recapturing value or proper disposal. improve customer satisfaction and minimize liabilities. critical reverse logistics functions can cost companies millions in lost profits due to damaged customer relationships and external liabilities that could have an enormous impact on their business. decrease costs and reduce risks. maximizing liquidation values and much more. product recall protocols. reverse logistics can enable organizations to find hidden profits. making it an inbound shipment process that is less predictable. their resources or their bottom line. Enter reverse logistics. it is much more complex than outbound shipping in that customers and/ or consumers initiate a return. decrease costs and reduce risks. Reverse logistics processes and plans rely heavily on reversing the supply chain so that companies can correctly identify and categorize returned products for disposition. product repackaging. improving reverse logistics can help a company increase revenue up to 5% of total sales. until And yet reverse logistics seldom receive much attention something goes wrong. But in such tough economic times. It is much more than simply counting defective items returned by customers. repairs processing. What many fail to realize is that the average manufacturer will spend 9% to 15% of total revenue on returns.. Effectively managed. Also. Reverse logistics processes and plans rely heavily on .2 If ignored. the easy cuts have bee n made and all of the simple process improvements have been put in place. that is. Many executives go out of their way to avoid dealing with returns because it can be ugly and is thought of as nothing more than a cost of doing business. an often overlooked process that can help companies reduce waste and improve pro fits. But in such tough economic times. the easy cuts have bee n made and all of the simple process improvements have been put in place. In fact. an often overlooked process that can help companies reduce waste and improve pro fits. according to a 2010 Aberdeen Group study.4 Recovering Lost Profits by Improving Reverse Logistics Curtis Greve and Jerry Da vis Executive Summary It is no surprise that almost every company is looking for ways to increase sale s. Enter reverse logistics.4 They are often unaware of the impact returns management can have on their customers. product disposition management. recycling. parts management. . an area that offers many opportunities for additional revenue. however..

according to a 2010 Aberdeen Group study. critical reverse logistics functions can cost companies millions in lost profits due to damaged customer relationships and external liabilities that could have an enormous impact on their business. improving reverse logistics can help a company increase revenue up to 5% of total sales. The science of reverse logistics includes return policy administration. Also.2 If ignored. until something goes wrong. reverse logistics can enable organizations to find hidden profits.. product repackaging. product recall protocols.reversing the supply chain so that companies can correctly identify and categorize returned products for disposition. What many fail to realize is that the average manufacturer will spend 9% to 15% of total revenue on returns. however. Many executives go out of their way to avoid dealing with returns because it can be ugly and is thought of as nothing more than a cost of doing business.the average manufacturer will spend 9% to 15% of total revenue on returns .4 They are often unaware of the impact returns management can have on their customers. It is much more than simply counting defective items returned by customers. parts management. their resources or their bottom line. making it an inbound shipment process that is less predictable. maximizing liquidation values and much more. product disposition management. And yet reverse logistics seldom receive much attention that is. improve customer satisfaction and minimize liabilities. recycling. it is much more complex than outbound shipping in that customers and/ or consumers initiate a return. In fact. Effectively managed. repairs processing. an area that offers many opportunities for additional revenue. ..

in part. the Consumer Product Safety Commission and other state and federal agencies. and managing staff levels. minimizing taxes and insurance. Protecting Profits: Handling returns properly and tracking all activities are critical to help companies avoid fines and penalties from various government regulatory agencies such as the FDA. reverse logistics costs are less than 4% of total supply chain costs for most companies. totaling nearly $500. And while maximizing efficiency is always important.5 This. the largest fine to date was issued by the EPA against one of the largest e-waste handlers in New Jersey.16 Customer Loyalty: According to a nation-wide survey conducted in 2005.4 Disposal Benefits: Knowing what is returned and where it ends up makes it easier for companies to deal with regulatory issues and evaluate returned stock for possible secondary sales channels. from customer service and returns pro cessing to supplier relations and an unexpected revenue source. In reality. In fact. discount market for products continuing to grow. With the secondary. Broadly speaking. 95% of customers will not buy from a company if they have a bad returns experience. there are even more reasons to think about returns as revenue opportunities. explains why companies considered best-in-class in reverse logistics enjoy a 12% advantage in overall customer satisfaction over their competition. reverse logistics can also provide a wide variety of opportunities for improvements. From refurbishing.000. they just focus on trying to reduce the cost of returns processing. repackaging and reselling to parts reclamation and recycling. Therefore. There are also other beneficial byproducts to disposing of products. such as avoiding excess inventory carrying costs. there are several key areas where companies can positively impact revenue with reverse logistics activities: Recovery Value Waste Donate Recycle Liquidate Repair B2C. B2B or As Is Return to OEM/ODM for Full Cost Credit + Handling Fees Repackage & Resell in Primary Market 0% 100% Improve Disposition Returns-to-Revenue: Companies that ensure timely delivery and processing of returns position themselves to save more or earn more from the returned product. returned products are often untapped sources for revenue. Maximize Recovery Rates: Mishandled or completely .Recovering Lost Profits by Improving Reverse Logistics 5 Impacting the Bottom Line Many executives compare the amount of money spent processing returns to other su pply chain activities and conclude that investing resources elsewhere would yield greater r esults.

In fact. repackaging and reselling to parts reclamation and recycling. B2B or As Is Return to OEM/ODM for Full Cost Credit + Handling Fees Repackage & Resell in Primary Market 0% 100% Improve Disposition Returns-to-Revenue: Companies that ensure timely delivery and processing of returns position themselves to save more or earn more from the returned product. reverse logistics can also provide a wide variety of opportunities for improvements. Broadly speaking. Therefore. but also means that products could end up being a total loss for a company instead of an opportunity for resale or a spare parts resource. the Consumer Product Safety Commission and other state and federal agencies. With the secondary.4 Disposal Benefits: Knowing what is returned and where it ends up makes it easier for companies to deal with regulatory issues and evaluate returned stock for possible secondary sales channels. In reality. There are also other beneficial byproducts to disposing of products. 5 Impacting the Bottom Line Many executives compare the amount of money spent processing returns to other su pply chain activities and conclude that investing resources elsewhere would yield greater r esults. And while maximizing efficiency is always important. From refurbishing. explains why companies considered best-in-class in reverse logistics enjoy a 12% advantage in overall customer satisfaction over their competition. they just focus on trying to reduce the cost of returns processing. the largest fine to date was issued by the EPA against one of the largest e-waste handlers in New Jersey.misplaced returns affect the efficiency of any reverse logistics process.16 Customer Loyalty: According to a nation-wide survey conducted in 2005. there are several key areas where companies can positively impact revenue with reverse logistics activities: Recovery Value Waste Donate Recycle Liquidate Repair B2C.5 This. there are even more reasons to think about returns as revenue opportunities. in part. minimizing taxes and . reverse logistics costs are less than 4% of total supply chain costs for most companies.000. from customer service and returns pro cessing to supplier relations and an unexpected revenue source. returned products are often untapped sources for revenue. discount market for products continuing to grow. such as avoiding excess inventory carrying costs. 95% of customers will not buy from a company if they have a bad returns experience. totaling nearly $500. Protecting Profits: Handling returns properly and tracking all activities are critical to help companies avoid fines and penalties from various government regulatory agencies such as the FDA.

insurance. but also means that products could end up being a total loss for a company instead of an opportunity for resale or a spare parts resource. and managing staff levels. Maximize Recovery Rates: Mishandled or completely misplaced returns affect the efficiency of any reverse logistics process. .

consumer electronics. In addition to fines and penalties from regulatory agencies. these included recalls for toys. The reasons for the recalls ranged from issues with packaging and warning labels to hazardous conditions created by the products. medical devices and automotive parts. These include recalled products. Common recall issues in the electronics industry range from batteries that pose health risks for consumers to potential fire hazards due to faulty electronics and construction.Recovering Lost Profits by Improving Reverse Logistics The Reverse Logistics Spectrum It may surprise many executives.S.000 different items recalled from the marketplace by various U. can be significantly larger than the number of units returned by custo mers and often has significantly greater potential liability associated with it. it is not a matter of if they will have a product recalled. seasonal returns and parts. The volume of some of these categories. but truly defective returns are often less than 20% of the products processed through a returns center. Minimizing all of these potential risks from recalled products is a major driver behind the need to develop a comprehensive reverse logistics program. each with th eir own unique challenges and opportunities.Recallor P artsProcessInboundReturnsShippedAccountingVisibilityReportsEnd of LifeReturnsRec allsReverse Logistics Pipeline Recalls For manufacturers in today s world. . end-of-lif e products.6 The rest of returns fall into several categories that also must transverse the reverse logistic pipeline. Among others. government regulatory agencies. pharmaceuticals. it is only a matter of when they will have a product recalled. there can be even greater potential liabilities from lawsuits and the impact on company sales from bad press. such as reca lled products. In 2010 there were more than 1. SeasonalReturnsParts andRepairReturn to StockReturn to OEMLiquidate in SecondaryMarketRepair and Reshipto CustomerUse Spare PartsRecycleDestroyDisposit ionand SortationProcessItemReceivedin theReturnsFacilityCompanyRepair.

This is often the case for product categories such as consumer electronics. Some product categories. Unsold items are recalled by either the original manufacturer (OEM/ODM) or the wholesaler as stipulated in the original sales agreement. This category also offers an excellent opportunity for companies to reclaim spare parts or resell in secondary channels. Seasonal Products There are many organizations that depend on a particular season to drive sales. They often provide special packaging to promote their products and plan on repackaging any unsold inventories for sale the following season. such as consumer electronics. End-of-life programs provide a process that will enable the manufacturer to keep the latest products on the market while ensuring older models are removed from the market in a controlled fashion. This helps maintain a company s brand image and provides a measure of control over obsolete goods and their final disposition. household goods.End-of-Life Products End-of-life programs are used to pull older. reverse logistics is much larger and includes a broa d range of assets that. Other products. In all of these categories. security equipment and electronic accessories.4 Reverse logistics programs enable OEMs and ODMs to reduce their overall investment in parts while maintaining the highest level of service. reclaimed. Parts Parts fall into the last category of assets that depends on a company s reverse logistics program. Providing a way to return unused. can have a significant impact on a company s bottom l ine. are sold on the secondary market immediately following the prime selling season. and/or repackaged and quickly sent back out to the field for use.4 Of the parts that are returned. outdated products from the primary sales channel in order to make way for new models. often providing their customers with guaranteed sales options that drive margin to both the buyer and seller. high-tech companies can average a recovery value of 28% on returned asset s and enjoy a 12% competitive advantage in overall customer satisfaction with best-inclass reverse logistics. overstocked or defective parts streamlines the repair process and minimizes the investment by both manufacturers and field service companies. powered equipment and fragrances. are repackaged and sold in the primary target market within days of being returned. repaired. 4 . taken together. Companies with significant field repair operations can expect 16% of all parts to be returned. especially in repair networks that depend on the availability of parts. It is worth repeating that while the cost of processing returns is less than 4% of tot al logistics costs. such as soft lines. OEM s of all sizes rely on seasonal recall programs to maximize sales. studies have found that roughly 25% are inspected. software.

The average retail value per phone is approximately $150.50 per phone. For instance.13 The return rate for mobile phones in 2010 was 8% or 96 million phones that weigh about 16. Every year. only about 13. the manufacturer would recover on average $82. Reselling in the Secondary Market One of the starkest examples of secondary market opportunities lies in the mobile phone industry. This includes both customer returns as well as old.S. When high-tech manufacturers examine the total value of goods returned. the sheer size of the opportunity to tap into hidden profits can be staggering. 15 In addition to missing revenue opportunities. GDP40% Retail Salvage4% Manufacturer Outlet Stores31% Auctions 9% Value Retailers . obsolete goods that the consumer never returned but simply threw away. there are about 1. Combined. 2.2 billion cell phones sold worldwide.13 According to the same source. As noted by Best Buy CMO Barry Judge.000 tons.11 The average secondary market value for refurbished mobile phones ranges between 35% and 75% of the original value. high-tech companies could also face significant fines and penalti es if they do not have a reliable reverse logistics process in place when it comes to regulati ons. 400 million units of e-waste are discarded in the U. If liquidated on the secondary market. If a single manufacturer were able to resell only 250. secondary market electronics sales represent an estimated $15B market in the United States. This lost opportunity could add up to millions for a medium to large company.Recovering Lost Profits by Improving Reverse Logistics 8 Opportunities and Risks for High-Tech Companies For high-tech companies. the electronics industry spends over $14 billion on returns every year.6% of consumer electronics products were recycled. The opportunity to develop reverse logistics programs that take advantage of secondary markets and reclaimed materials is significant. of this amount.28% of U. As a whole. it could equal over $20M in additional revenue.8 High-te ch manufacturers without a well-managed reverse logistics process could be losing o ver 50% of the returned inventory value since the majority of returned products can be s old in secondary channels. reverse logistics offers a wealth of revenue opportunit ies in addition to processes that can help them be more efficient and avoid fines.S. alone every year. increase revenue from new sources and improve customer service at the same time.000 of the phones returned to them. these programs could provide manufacturers with ways to reduce the overall cost of manufacturing their products.

obsolete goods that the consumer never returned but simply threw away.11 The average secondary market value for refurbished mobile phones ranges between 35% and 75% of the original value. of this amount. the sheer size of the opportunity to tap into hidden profits can be staggering. the manufacturer would recover on average $82. When high-tech manufacturers examine the total value of goods returned. these programs could provide manufacturers with ways to reduce the overall cost of manufacturing their products. reverse logistics offers a wealth of revenue opportunit ies in addition to processes that can help them be more efficient and avoid fines. 2.50 per phone. The opportunity to develop reverse logistics programs that take advantage of secondary markets and reclaimed materials is significant. high-tech companies could also face significant fines and penalti es if they do not have a reliable reverse logistics process in place when it comes to regulati ons. secondary market electronics sales represent an estimated $15B market in the United States.8 High-te ch manufacturers without a well-managed reverse logistics process could be losing o ver 50% of the returned inventory value since the majority of returned products can be s old in secondary channels. alone every year.10% Flea Markets 6% Dollar StoresThe Secondary Market 8 Opportunities and Risks for High-Tech Companies For high-tech companies. If a single manufacturer were able to resell only 250. The average retail value per phone is approximately $150. there are about 1.6% of consumer electronics products were recycled. For instance.2 billion cell phones sold worldwide.S. 15 In addition to missing revenue opportunities. As noted by Best Buy CMO Barry Judge.S. Combined.13 According to the same source. Reselling in the Secondary Market One of the starkest examples of secondary market opportunities lies in the mobile phone industry.000 of the phones returned to them. If liquidated on the secondary market. GDP40% Retail Salvage4% Manufacturer Outlet Stores31% Auctions .000 tons. As a whole.28% of U. it could equal over $20M in additional revenue. only about 13. increase revenue from new sources and improve customer service at the same time. This includes both customer returns as well as old. 400 million units of e-waste are discarded in the U. Every year. This lost opportunity could add up to millions for a medium to large company. the electronics industry spends over $14 billion on returns every year.13 The return rate for mobile phones in 2010 was 8% or 96 million phones that weigh about 16.

9% Value Retailers 10% Flea Markets 6% Dollar StoresThe Secondary Market .

for every million cell phones we recycle. the reclaimed metals alone would be worth over $2.2 In addition. palladium and copper from discarded units. components and metals from the millions of units discarded every year cou ld have a distinct advantage in the market. mobile phone manufacturers could extract and reclaim the gold. Manufacturers who develop processes to harvest parts. state and federal legislation that impacts returns processing has grown significantly. For manufacturers and retailers alike. subcomponents. the reclaimed metals alone would be worth over $2. if their products are identified in landfills. even if it was without the manufacturer s knowledge.Recovering Lost Profits by Improving Reverse Logistics 9 Rare Materials Reclamation One of the fasting growing costs of manufacturing electronics is the cost of rar e earth metals.8 million at 2011 metal prices. For example.8 million 9 Rare Materials Reclamation One of the fasting growing costs of manufacturing electronics is the cost of rar e earth metals. monitoring capabilities and potential financial risks. a Fortune 500 company saw the value of their stock drop by over 13% due to government action taken in reaction to their poor reverse logistics processes. For example. For the past number of years. silver. so the potential risks to smaller businesses could threaten their very survival. 75 pounds of gold. protecting profits can be just as critical for growth. In one example. These increased risks. And all of these materials can be reused or resold to other companies in the manufacturing of other products. Manufacturers who develop processes to harvest parts. the growing financial threat of fines and other penalties is significantly greater than the cost of proper returns processing or even the value of all returned inventory. mobile phone manufacturers could extract and reclaim the gold. For these one million cell phones.14 For these one million cell phones. and 33 pounds of palladium can be recovered. along with evergrowing processing costs and the rising value of returns. there are eleven states that have banned disposal of laptop and desktop computers in their landfills. this kind of legislation increases government control. and parts. Avoiding the Risks of Regulation While increasing revenue is always welcomed. silver. subcomponents. According . Taken in its entirety. Many of these states have forced manufacturers. and parts. palladium and copper from discarded units. According to the Environmental Protection Agency. to pay hefty fines to clean up product that was thrown away by their customers. reporting requirements. components and metals from the millions of units discarded every year cou ld have a distinct advantage in the market. More than 35 states have legislation on the books that impacts returns management and disposition. 35. 772 pounds of silver. require that manufacturers and retailers examine their existing reverse logistics processes to ensure that they have full control over the process and the subsequent product disposition.274 pounds of copper.

the reclaimed metals alone would be worth over $2.8 million at 2011 metal prices. state and federal legislation that impacts returns processing has grown significantly. along with evergrowing processing costs and the rising value of returns. require that manufacturers and retailers examine their existing reverse logistics processes to ensure that they have full control over the process and the subsequent product disposition. 772 pounds of silver. and 33 pounds of palladium can be recovered. 75 pounds of gold. monitoring capabilities and potential financial risks. reporting requirements. For manufacturers and retailers alike.to the Environmental Protection Agency. this kind of legislation increases government control.274 pounds of copper. a Fortune 500 company saw the value of their stock drop by over 13% due to government action taken in reaction to their poor reverse logistics processes. the growing financial threat of fines and other penalties is significantly greater than the cost of proper returns processing or even the value of all returned inventory.2 In addition. there are eleven states that have banned disposal of laptop and desktop computers in their landfills. if their products are identified in landfills.14 For these one million cell phones. even if it was without the manufacturer s knowledge. These increased risks. In one example. For these one million cell phones. for every million cell phones we recycle. the reclaimed metals alone would be worth over $2. Avoiding the Risks of Regulation While increasing revenue is always welcomed. so the potential risks to smaller businesses could threaten their very survival. protecting profits can be just as critical for growth. More than 35 states have legislation on the books that impacts returns management and disposition. Taken in its entirety. 35. Many of these states have forced manufacturers.8 million . For the past number of years. And all of these materials can be reused or resold to other companies in the manufacturing of other products. to pay hefty fines to clean up product that was thrown away by their customers.

which will in turn dri ve sales and customer loyalty. Because of this.Recovering Lost Profits by Improving Reverse Logistics 10 A Balanced Returns Policy Can Grow Revenue Companies often view returns as a cost of doing business and ignore the potentia l revenue opportunity. In the electronics industry. such as the high-tech industry. companies in highly competitive markets. High-tech companies need to develop t heir warranty and return policies in an effort to strike a balance between providing an acceptable level of customer service and protecting the company.2 . many companies in less competitive environments main tain stricter returns policies that place more of the burden on their customer.. the average return rate on sales is 8% but the return rate within subcategories can range from 4% to 15%. and many of these products are not defective.11 This equates to $14 billion in annual returns. Howev er. return policies reduce the customer s risk when purc hasing the goods. In the electronics industry. Returns policies establish guidelines that govern when a product is to be return ed and under what conditions it will be accepted.the average return rate on sales is 8% but the return rate within subcategories can range from 4% to 15% 10 A Balanced Returns Policy Can Grow Revenue Companies often view returns as a cost of doing business and ignore the potentia l revenue opportunity. .. On the other hand. The policy prov ides some basis for protecting the maker of the product from fraudulent claims and un ethical customers. meaning only 35% are actually defecti ve.11 This equates to $14 billion in annual returns. the average return rate on sales is 8% but the return rate within subcategories can range from 4% to 15%. have mu ch more liberal return policies that reduce their customer s risks.8 Years of testi ng returned consumer electronics have established that the non-defective rate for consumer e lectronics hovers around 65% of total goods returned.8 Years of testi ng returned consumer electronics have established that the non-defective rate for consumer e lectronics hovers around 65% of total goods returned. and many of these products are not defective.2 The non-defective product may be in perfect working order or damaged by the cust omer but still repairable. meaning only 35% are actually defecti ve.

Because of this.. have mu ch more liberal return policies that reduce their customer s risks. such as the high-tech industry. Howev er.The non-defective product may be in perfect working order or damaged by the cust omer but still repairable. . companies in highly competitive markets. which will in turn dri ve sales and customer loyalty.the average return rate on sales is 8% but the return rate within subcategories can range from 4% to 15% .. Returns policies establish guidelines that govern when a product is to be return ed and under what conditions it will be accepted. High-tech companies need to develop t heir warranty and return policies in an effort to strike a balance between providing an acceptable level of customer service and protecting the company. return policies reduce the customer s risk when purc hasing the goods. many companies in less competitive environments main tain stricter returns policies that place more of the burden on their customer. On the other hand. The policy prov ides some basis for protecting the maker of the product from fraudulent claims and un ethical customers.

how well a company receives. Repairs often go into a completely separate workflow. medical equipment.Recovering Lost Profits by Improving Reverse Logistics 11 Exchanges and Repairs in the Reverse Logistics Pipeline Other reverse logistics areas that impact the high-tech industry are warranties and repairs. but the most competitive implement robust aftermarket services that rely heavily on reverse logistics excellence. prior to receiving the original defective item. but more likely end up back wi th the manufacturer. the customer can call their manufacturer for service parts or item replacement and the returns provider will send them the replacement overnight. Visibility and tracking are also key for sending repaired product back to customers to ensure efficiency and customer satisfaction. Advanced exchange programs are extremely valuable for manufacturers of high-tech products. there is an opportunity to provide a quality cus tomer experience that may lead to customer loyalty and positive word-of-mouth exposure . and industrial equipment.and time-efficie ncies in their operations. tracks. Products returned for repairs are often treated as inbound shipments. These companies are another cog in the reverse logistics wheel and represent about $19 billion in annual revenue according to Hoovers. In each case. requiring parts. personnel and processes that differ from new products 11 Exchanges and Repairs in the Reverse Logistics Pipeline Other reverse logistics areas that impact the high-tech industry are warranties and . to handle the number of repairs created by the high-tech market.17 Progressive manufacturers who want to gain market share will also adopt advanced exchange programs. Many electronics companies address these types of returns on some level. customers expect repairs and warranty claims to be addressed quickly and accurately. processes. This minimizes downtime for the customer and gives the manufacturer a way to provide shipping containers and instructions that can help minimize additional damage to the product during the return. Repairs often go into a completely separate workflow. requiring parts. On the consumer front. Therefore. but they are not the same as receiving raw materials or components. companies lack visibility into the volume and the nature of returns. These items may go back to the retailer. which extend the returns policy one step further. addresses the repair or warranty claim and then delivers the product back to the customer has value even if money does not change hands. There is also an opportunity for the manufacturer to gain cost. Without a reverse logistics process and plans in place to manage returns. and companies with significant field service programs that provide on-site customer support. personnel and processes that differ from new products. which are often an unpredictable inbound shipment. an entirely new sub-industry of third-party repair companies has emerged. The defective item will be returned after the customer receives the replacement item. With an advanced exchange program. This can result in excessive spending on repair parts and staffing levels. In fact.

Visibility and tracking are also key for sending repaired product back to customers to ensure efficiency and customer satisfaction. In fact. addresses the repair or warranty claim and then delivers the product back to the customer has value even if money does not change hands. requiring parts. the customer can call their manufacturer for service parts or item replacement and the returns provider will send them the replacement overnight. medical equipment. Products returned for repairs are often treated as inbound shipments. These companies are another cog in the reverse logistics wheel and represent about $19 billion in annual revenue according to Hoovers.repairs. On the consumer front. There is also an opportunity for the manufacturer to gain cost. Advanced exchange programs are extremely valuable for manufacturers of high-tech products. how well a company receives. Repairs often go into a completely separate workflow. prior to receiving the original defective item.17 Progressive manufacturers who want to gain market share will also adopt advanced exchange programs. requiring parts. In each case. This minimizes downtime for the customer and gives the manufacturer a way to provide shipping containers and instructions that can help minimize additional damage to the product during the return. and companies with significant field service programs that provide on-site customer support. there is an opportunity to provide a quality cus tomer experience that may lead to customer loyalty and positive word-of-mouth exposure . but more likely end up back wi th the manufacturer. an entirely new sub-industry of third-party repair companies has emerged. These items may go back to the retailer. personnel and processes that differ from new products . but the most competitive implement robust aftermarket services that rely heavily on reverse logistics excellence. Repairs often go into a completely separate workflow. tracks. companies lack visibility into the volume and the nature of returns. This can result in excessive spending on repair parts and staffing levels. Many electronics companies address these types of returns on some level. and industrial equipment. Therefore. to handle the number of repairs created by the high-tech market. Without a reverse logistics process and plans in place to manage returns. The defective item will be returned after the customer receives the replacement item. but they are not the same as receiving raw materials or components. which are often an unpredictable inbound shipment. processes. personnel and processes that differ from new products.and time-efficie ncies in their operations. which extend the returns policy one step further. With an advanced exchange program. customers expect repairs and warranty claims to be addressed quickly and accurately.

12 This dedicated autonomy will help ensure reverse logistics gets the attention that is required while empowering an executive to oversee the process to ensure success.12 This dedicated autonomy will help ensure reverse logistics gets the attention that is required while empowering an executive to oversee the process to ensure success. Today. Product processing. Repair and refurbishment 3. Most companies outsource one or more of these: 1. Today. Th ere are four distinct parts that make up a comprehensive reverse logistics process... which includes transportation 2.. Th ere are four distinct parts that make up a comprehensive reverse logistics process. Product processing. Liquidation 4. Most companies outsource one or more of these: 1. Repair and refurbishment 3.. with dedicated executive oversight. with dedicated executive oversight. a critical best practice is to setup reverse logistics operations separate from forward distribution activities.a critical best practice . How much of their reverse logistics process t o outsource depends on the experience and capabilities of their internal management team. a majority of retailers and manufacturers outsource some o r all of their reverse logistics processes. the question becomes whether reverse logistics should be developed internally or outsourced. Returns management systems Regardless of whether a company is going to outsource all or part of their reverse logistics program.Recovering Lost Profits by Improving Reverse Logistics 12 Developing a Reverse Logistics Program Getting Started with the Essentials Once an organization has determined that it is worth investing in its reverse lo gistics capabilities. Returns management systems Regardless of whether a company is going to outsource all or part of their reverse logistics program. How much of their reverse logistics process t o outsource depends on the experience and capabilities of their internal management team. a critical best practice is to setup reverse logistics operations separate from forward distribution activities. . which includes transportation 2. the question becomes whether reverse logistics should be developed internally or outsourced.a critical best practice is to set up reverse logistics operations separate from forward distribution activities 12 Developing a Reverse Logistics Program Getting Started with the Essentials Once an organization has determined that it is worth investing in its reverse lo gistics capabilities. Liquidation 4. a majority of retailers and manufacturers outsource some o r all of their reverse logistics processes. .

is to set up reverse logistics operations separate from forward distribution activities .

stores. medical benefit costs and other non-controllable expenses. motiv ation. existing technology. With a 3PL provider. Companies protect themselves by either negotiating a fixedfee arrangement for multiple years or with some form of variable pricing. working with customers or managing imports not focusing on returns. returns management systems and liquidation par tners while sharing best practices that will minimize processing costs. Manufacturers often dedicate their top talent to running manufacturing plants. Companies also outsource to cap and control other risks and liabilities such as inventory shrinkage. and creating a protect ive barrier against outside forces to limit potential liabilities. This enables companies to limit risks by negotiating cost caps as a part of their outsourcing agreement. Dotheyhaveanetworkoffacilitiesthatcanbeleveragedtooptimizetransportation expense s while improving customer response times? Cantheyprovideinboundandoutboundtransportationsupport? Cantheyhelpimprovetheproductflowupstreamsocompaniescanprocess more efficiently a nd maximize the value of the returned assets downstream? Dotheyunderstandtheimpactofreturnsoncustomers. distribution centers (DCs) and the financials of the company? Dotheyhaveexistingoperationsrepairingproductthatissimilartoreturned items? Dotheyprovideotherservicesthatcanbeleveragedtoreduceoveralloperations costs? A qualified 3PL can have an immediate . experience. The core reasons for this outsourcing are: obtaining reverse logistics expertise quickly. A quality 3PL will be able to implement new reverse logistics operations within six months. or they would rather put their re sources toward manufacturing or customer service. it is important that companies do their homework and select a provider that has real experience providing reverse logistics services in their market. workers compensation expenses. Many companies outsource reverse logistics because they do not have the expertis e within their management ranks to run the area. When selecting a 3PL.suppliers. A qualified 3PL can have an immediate and significant positive impact on the out sourcing company simply because of its experience in developing returns operations and st art-up processes. achieving greater flexibility and faster speed to market. even by companies that have best-in-class supply chain functions and complex global netw orks. These service providers can also help leapfrog the competition by lev eraging their existing facility networks. while m ost internally-implemented programs will take at least twice that long.Recovering Lost Profits by Improving Reverse Logistics 13 Tapping into 3rd Party Logistics Benefits Reverse logistics is often outsourced to third party logistics providers (3PLs). capital resources and staff to hit the ground r unning. manufacturers receive the focus.

achieving greater flexibility and faster speed to market. capital resources and staff to hit the ground r unning.. returns management systems and liquidation par tners while sharing best practices that will minimize processing costs.. and creating a protect ive barrier against outside forces to limit potential liabilities. This enables companies to limit risks by negotiating cost caps as a part of their outsourcing agreement. workers compensation expenses. The core reasons for this outsourcing are: obtaining reverse logistics expertise quickly.and significant positive impact. stores. while m ost internally-implemented programs will take at least twice that long. Manufacturers often dedicate their top talent to running manufacturing plants. or they would rather put their re sources toward manufacturing or customer service. medical benefit costs and other non-controllable expenses. Dotheyhaveanetworkoffacilitiesthatcanbeleveragedtooptimizetransportation expense s while improving customer response times? Cantheyprovideinboundandoutboundtransportationsupport? Cantheyhelpimprovetheproductflowupstreamsocompaniescanprocess more efficiently a nd maximize the value of the returned assets downstream? Dotheyunderstandtheimpactofreturnsoncustomers. distribution centers (DCs) and the financials of the company? Dotheyhaveexistingoperationsrepairingproductthatissimilartoreturned items? Dotheyprovideotherservicesthatcanbeleveragedtoreduceoveralloperations costs? A qualified 3PL can have an immediate . even by companies that have best-in-class supply chain functions and complex global netw orks. it is important that companies do their homework and select a provider that has real experience providing reverse logistics services in their market. experience. existing technology. These service providers can also help leapfrog the competition by lev eraging their existing facility networks. 13 Tapping into 3rd Party Logistics Benefits Reverse logistics is often outsourced to third party logistics providers (3PLs). working with customers or managing imports not focusing on returns. Companies also outsource to cap and control other risks and liabilities such as inventory shrinkage.suppliers. With a 3PL provider. A qualified 3PL can have an immediate and significant positive impact on the out sourcing company simply because of its experience in developing returns operations and st art-up processes. Many companies outsource reverse logistics because they do not have the expertis e within their management ranks to run the area. When selecting a 3PL. A quality 3PL will be able to implement new reverse logistics operations within six months. manufacturers receive the focus. motiv ation. Companies protect themselves by either negotiating a fixedfee arrangement for multiple years or with some form of variable pricing.

.and significant positive impact. ..

there are few processes left that have as much potential to positively impact earnings as reverse logistics. a successful reverse logisti cs program may lead to increased revenue that you can measure. Transportation costs. Conversely.Key Recommendations Reverse logistics can increase profits and customer satisfaction.the bottom line impact could be . Also. set a goal that helps you recognize success. All of these considerations can lead to direct financial benefits. Some key reco mmendations for those considering improving reverse logistics processes should be: Know Your Returns Discuss what kind of returns your company commonly receives an d discover what typically happens to each item in the returns process.. comp anies must realize that reverse logistics is an ongoing process that requires vigilanc e. . Assess Your Infrastructure From the location of your returns processing center a nd necessary transportation support to the staff you have assigned to execute your reverse lo gistics plan. Identify Success Depending on the value opportunities that exist for returned pr oduct. consider what strengths and weaknesses might exist. a weak reverse logistics program can drive customers away and increase costs and liabilities. discuss how an impro ved logistics process for repairs can boost customer satisfaction in your business. How much i s one loyal customer worth to your business? And finally. Getting value out of any rev erse logistics program relies on being efficient and taking advantage of every opportunity to s queeze more revenue from all returned products. After all.2 Though often overlooked. staffing needs and company culture changes may seem c ostly until weighed against the long-term financial benefits that can result from a comprehe nsive reverse logistics plan. Place a Value on Returns Learn what potential materials can be reclaimed or how the returned product can be resold in secondary channels. Commit to Success Whether employing a 3PL or developing internal processes. do not ignore recycling or final d isposition issues. R everse logistics is a critical part of the supply chain that is worth developing. and the bottom-lin e impact could be worth as much as 5% of sales. or success may be protecting rev enue from potential risks.. returns processing.

worth as much as 5% of sales .

End-of-life e. There are a number of questions that should be addressed w hen determining the current state of an organization s reverse logistics capabilities. Some of tho se questions include: 1 How many units/devices do customers return every year? 2 What are the causes of the product returns and what percent fits into the following categories? a. in what facility are they processed.Recovering Lost Profits by Improving Reverse Logistics Reverse Logistics: A Self Analysis for Your Company The first step to improving a company s reverse logistics process is to examine th e current state of the process in place. Parts 3 Are there certain seasons when you have a spike in returns? 4 What physically happens to the product when it is returned (who handles it . etc . Recalls (internally or regulation driven) c. Seasonal returns d. what systems and reporting are in place.)? 5 What percentage of products is covered under warranty? 6 What are the terms and conditions for both customer returns and recalls? 7 What was the overall recovery value on customer returns and recalls for the previous year? Repairing 8 What percentage of product is repaired? 9 What is the product yield rate on products that are repaired? 10 What is the scrap rate of repairs? . Defective b.

then your company is e logistics on the table. then you have an opportunity to evaluate every area for hidden profits and process improvements. if you cannot ly and with confidence. you can examine the percent of initial value that you are recoverin g from returned products and parts. This self-analysis can be 3PL solutions and identifying process improvements answer the majority of these questions accurate definitely leaving untapped profits from revers your guide to discussing next steps. on average. Aberdeen Group estimated that high-tech companies recaptured . For example. 28% of initial value. .3 On the other hand.Recovering Lost Profits by Improving Reverse Logistics Recycling11 What percentage of returned product is recycled? 12 What percentage of product is disposed of in a landfill? OEM and Parts13 What percentage of product was returned to the original OEM/ODM? 14 What was the average recovery rate for product sent to the OEM/ODM? 15 What percentage of parts is processed and returned to the field? 16 What percent of materials or parts from returned products can be reclaimed for manufacturing new products? Liquidating17 What percentage of returned product is liquidated on the secondary market? 18 What was the average recovery rate for liquidated products? If your company can answer these questions accurately and conclusively. evaluating that can grow your profits. so this can serve as a starting benchmark to measure again st your company s performance.

29 July 2010. Going Backwards: Reverse Log istics Trends and Practices. Tibben-Lembke. Reverse Logistics Executive Council ©. 4. Returns Management . Dale S. January 2007. Kumar. Savannah. Greve. 2010. Mulki.com/w p-content/ uploads/Facts_and_Figures_on_EWaste_and_Recycling.pdf 14. Greve-Davis. Barry Judge. 2. Personal interview with Jerry Davis. Aberdeen Group.Appendix 1. Stock and Dr. Rogers and Dr. Industry Best Practices in Reverse Logistics Benchmarking the Success Strategies of Top Industry Performers . 7.A New Growth Opportunity For Best Buy. 8. Jay P. 29 Ju ly 2010. 51 No.Best Practices and Next Generation Programs Panel Discussion. Journal of B usiness Logistics. Dr. http://barryjudge. 85-89.htm 15. 13. 3 pp.com/2011/02 /03/ manufacturer-returns-risk-or-reward/ (29 July 2011). Reverse Logistics Association. © 2010 Consumer Electronics Associatio n (CEA)®. 11. Wholesalers/Distributors. 2010 Customer Returns in the Retail Industry. February 2010. Manufacturer Returns: Risk or Reward . Curtis. Greve-Davis.gov/epawaste/conserve/materials/ecycling/faq. Andrew Petersen and Dr. 10. Revisiting Reverse Logistics in the Customer-Centric Service Chain Benchmark Report Aberdeen Group September 2006. 5. http://grevedavis. V. 3. The National Retail Federation. James R. Volume 30. MIT Sloan Management Review. Principal. 9. Facts and Figures on E-Waste and Recycling. Can Product Returns Make You Money?. Product Returns Processing: An Examinat ion of Practices of Manufacturers.com/secondary-markets-a-new-growth-opportunity-for-best-b uy 16. Secondary Markets . Principal. and Retailers . Personal interview with Curtis Greve. 6. 12. An e-waste stream grows: Tech recyclers struggle as clients hoard and trash old h . Pittsburgh. EPA eCycling Frequent Questions. J.electronicstakeback. http://www. 2009.epa. 20 11. Reverse Logistics: Driving Improved Returns Directly to the Bottom Line Aberdeen Group. Dr. Ronald S. GA. Dr. Number 1. Benita Barnes. CMO at Bes t Buy. Spring 2010 Vol. PA. http://www. Product Returns and the Economic Landscape. 1998.

Hoovers. http://www. Venuri Siriwardane.com/industry/e lectronicequipmentrepair-services/1846-1.com/business/index. May 2009.ssf/2009/05/an_ewaste_stream_growstech_rec.hoovers.nj. http://www.ardware.html .html 17. Electronic Equipment Repair Services. The Star-Ledger The Star-Ledger.