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January 22, 2019
Today, there are many companies offering reverse logistic services. Not all these organizations are adept at truly providing the value needed to be effective. It appears to be more of an add on to a core competency or the company is subcontracting parts of the reverse logistic work out to a separate entity, diluting the ability to qualify them as a good potential match for the services needed. The purpose of this article is to give you the reader some insight and help avoid some of the dangerous pitfalls that could prove to be costly in choosing a reverse logistic partner.
The term reverse logistics wasn’t really known in the beginning of my career however there were companies out there offering services closely related. I attended the 1st RLA show back in 2002 and to see how the industry has evolved today is enlightening. The addition of recycling and the go green initiatives have certainly been a major change for the better. Seeing the inception and development of web-based auction sites underscored changes in how excess inventory was being dispositioned. The web in general created a completely different sales and information platform adding tremendous velocity. The internet greatly increased inventory visibility and created misinformation as well. During the 1980s and 1990s the barrier for business entry was considerably less complicated. I call this time period the “wild west”, the back end of a products life cycle did not command a high level of visibility with OEM executives. Mid-level managers at this time appeared to be making most of the decisions. The recovery rates and the market impact didn’t receive as much scrutiny as today.
The reverse logistic business function today is viewed much differently. Reverse Logistic providers now must abide by a number of qualifications such as R2, E-steward and ISO14001 certifications in most cases to win business. This has helped businesses add improved processes and quality control, however at a cost.
I highly encourage companies that are looking for a qualified reverse logistics provider to look beyond a shiny looking website. It is imperative to know and understand the executive team directing the operations of the R/L provider. Unfortunately, there are a number of unscrupulous people and businesses conducting bad practices. I suggest looking up the names of the managing executives on google and industry websites such as http://www.erai.com/. A few key issues that exist today are counterfeit products, used inventory being sold as new and cooking the books. It is imperative to understand and gain as much knowledge as possible to make the best educated decision.
The future of reverse logistic I believe will encompass the use of technology disruptors such as highly advanced sensors to help speed up work flow and make better decisions. We can see innovators start to incorporate this. The use of sensors will help plan and schedule freight more efficiently. Time to market is imperative when it comes extracting the desired financial results from consumer returns. One of the biggest mistakes I see from manufactures trying to obtain the best solution is failing to capture and understand the solution providers plan to incorporate improved technology. Process automation in many cases will benefit both the vendor and manufacturer. Reverse Logistics is not a cookie cutter business. It involves multiple nuances and differences that require in-depth analysis.
Transportation centric reverse logistics companies are typically closer related to a third-party logistics provider with some value-added services however they are usually missing some core strengths that may or may not be needed. If your needs are more transportation centered, this could be your best choice. It is critical to be able to decipher the core discipline of the provider.
We can also see that recycling centric organizations are now offering reverse logistic services as well. I advise people to be cautious, as many of these services are not the core competencies of the recycling company. I always encourage people to do as much homework as possible and gain a solid understanding of the experience related to the services desired. It all comes down to the people navigating the operations.
Re-marketing centric reverse logistic companies are typically focused on monetizing the returned assets and brand protection which is critical for many of the OEM’s in need of a provider. The financial returns on selling returned assets is directly tied to the quality of the distribution channels set in place. This is not easy and takes a considerable amount of expertise to develop, cultivate and manage. I encourage people to dig in deep and gain a thorough understanding of the people managing the sales process. To be successful in the re-marketing side of the reverse logistics business, it is imperative to have a developed portfolio of sales channels ranging from the end user such as Amazon to international wholesalers. This gives a client much more channel flexibility.
We are now seeing repair centric company’s offer additional reverse logistic services. If repair is the primary need for your organization this could be a fit. I highly suggest taking a thorough look at the competencies outside the repair operations and ensure they are a match for the entire process. Many company’s over promise and can’t be a solution for everything.
Software is a huge differentiator in the reverse logistics industry. Unfortunately, many in the industry have not adopted process automation software. Please take note I am using the word adopt. Software is only as good as the company decides to use it. The use of technology such as software can greatly collapse time and help reverse logistic providers make informed decisions. I encourage people to look at the software in place to keep operations running smoothly.
The labor and human resources side of the reverse logistics equation is critical. The experience of the technicians, staff and the ability to retain top tier talent are all paramount. It is important to gain a fundamental perspective relating to the quality of the staff on board. I highly encourage people to obtain a top down organizational chart of the team that will be involved with processing inventory and take some time to interview them.
Another key area to consider are the locations of the provider. Do the geographic locations or location make viable financial sense? If the reverse logistics provider has multiple locations it may help save on shipping costs however it will indeed have an impact on the overall overhead, raising costs. There are multiple perspectives to consider with this.
I also encourage people to look for reverse logistic service providers that have a road map to incorporate new technology such as hydrogen engine trucks coming from Nikola Motors. This is some amazing technology that will truly be a game changer related to transportation costs. https://nikolamotor.com/
There is a considerable amount of data to process when trying to identify a good match for your requirements. Using an RFP format is good however it can in many cases leave out the ability to decipher the unique differentiators of a provider. I really think extensive live conversations are critical to the decision-making process. To keep it as simple as possible I suggest creating a basic RFP, prioritize the best choices, interview each provider and ask open ended questions to better help understand the unique differentiators. Each matched vital requirement needs to be verified. A good example of verification would be to obtain copies of the certifications needed such as R2 or ISO 14001. These types of certifications only show that a defined process has been documented, not verification of competency. To verify company competencies, I suggest obtaining references. Another key factor to consider is the longevity of the company, which shows consistency, however it could also be an organization with outdated technology. A company that stays ahead of the technology curve should also be more efficient, that is if the technology is being adopted properly. The last action item I recommend is researching the prospective company to see if the reverse logistics provider has been involved in any lawsuits. I hope this article helps you in your search for a reverse logistics provider. Thank you for taking the time to read this information.