Clear Procedures, Strategic Communication, and Consistent Decision Making Lead to Success in Returns Management Programs

The landscape of business is changing from a micro-managed, proprietary organization to one that is more collaborative, transparent, and relationship oriented.  Some of the changes in the landscape of business management has been to create collaborate work environments and benchmark performance based on the individual contributions and goals achieved rather than measuring those employees against each other.  Businesses are moving towards a more collaborative environment sharing information to improve their profitability and efficiency across the entire supply chain with business partners, customers, distributors, and other key stakeholders.

Sales professionals have been working in an advisory capacity using leveraging relationships to increase revenues.  Companies are developing relationships with their employees, striving to increase productivity in the workplace.  Employers have implemented flexible hours, relaxed the social media police, and have provided opportunities for employees to own their job allowing creativity rather than micro-management.  “In your organization, you’re better off giving employees challenging assignments and standing back than managing them like assembly-line workers” (Ryan, 2010).  In a reverse logistics program, the collaborative environment encouraging creativity and dedication will lead to success.  Employees need to feel trusted and comfortable with coordination and collaboration within their company and be empowered to brainstorm developing creative solutions to achieve objectives.  This will provide organizational confidence that will serve well as those employees collaborate with other supply chain partners.  “Inter-firm coordination and collaboration is almost impossible if not preceded by intra-firm coordination through information sharing” (Olorunniwo, et al, 2010, p.456).  Relationships and information sharing with business partners demonstrate commitment.  The culture of ownership and trust derived from collaboration throughout the reverse logistics program can be nurtured offering mutual benefits for long term business growth.

“A supply chain is a complex network that consists of suppliers, manufacturers, distributors, retailers, and end customers, working together to convert raw materials to work-in-process inventory to final products” (Olorunniwo, et al, 2010, p. 454).  Consider what happens to a return throughout the reverse logistics process and the impact returns may have on each partner across the supply chain.  Products sold to the retailer that are defective will impact the number of returns the retailer must manage.  Furthermore, it is often the retailer that will be negatively impacted by customer dissatisfaction and consumer complaints for selling a faulty product.  The capabilities are available and utilized to share information in a collaborative environment to manage returns or recalls with an eye towards continuous improvements to reduce or eliminate returns.  “Firms must develop reverse logistics related capabilities: handling return operations, managing information technology (IT), sharing information, and collaborating with partners” (Olorunniwo, et al, 2010, p. 454)

Organizations must develop a well-constructed reverse logistics plan, ensuring they prepared to launch the operation integrating it into the corporation by educating staff and establishing expectations with partners in the supply chain.  Best Buy’s “BuyBack” program was pre-maturely launched and lessons can be learned from their failed reverse logistics program.  The program encouraged consumers to pay an up-front fee to return merchandise for credit to upgrade their electronics.  There were several significant issues that led to financial losses that included poor relationships with their vendors, poor communication with customers, a lack of communication and consistency at the point of sale and point of return.

Marketing purchased a multi-million dollar ad during the Super Bowl to launch the program when the information technology was not in place.  The company contracted to a third party, TechForward, who was contracted to finish developing the software for the program.  This was quick fix relationship where Best Buy rescinded on business agreements.  “TechForward sued Best Buy for stealing proprietary software two months into the project where a jury awarded the firm $22 million in damages” (Phelps, 2012).  Media coverage surrounding the lawsuit damaged Best Buy’s reputation in the eyes of the consumer, therefore, the company had very little room for forgiveness as they worked out the details of the buy back program with process improvements.

The price point of the pre-paid plan was not a good value to consumers unless they were returning and buying new electronic products every six months.  Consumer complaints illustrated the program was customer unfriendly as the value of return reduced if it was not returned with all parts or instruction manuals in the box.  The program did not educate consumers on restrictions, terms, or a condition, leaving the impression the program before its termination, was predatory.  “The buyback program is custom designed to squeeze money out of the laziest gadget-obsessed people, and a scam to keep you a customer by giving cash back in the form of Best Buy gift cards” (Van Camp, 2011).

Employees were not educated to advise consumers, and there was no consistency in determining condition of the item to gage the amount the consumer should receive.  One consumer published a report describing how customer service pointed them to the store for problem resolution and the store pointed them back to the customer service number.  “The store and customer service hotline really need to collaborate their information” (Ang, 2010).  Reports mounted from many consumers negatively impacting the retailer.

The lesson learned is to develop a well-constructed plan that is consistent throughout the supply chain to develop ongoing trust and collaboration with internal and external stakeholders.  For a returns program to be successful, service from one location to another must consistent.  A system to automate decision making, especially at a retail level where high employee turnover presents new sets of challenges.  It is extremely difficult to train retail staff to make consistent decisions and communicate the same information throughout their footprint.  Once the returns are handled consistently, it is much easier to effectively manage those returns and meet objectives.  Clear communications both internally and externally within an organization with only serve to strengthen relationships, bring new perspective, and new value to the company.

There are some areas where a company may feel information is proprietary, and others who may wish to release information in stages as the relationship, commitment and trust grows into a mutually beneficial long-term partnership.  “Results show that information sharing leads to greater collaboration in Reverse Logistics and directly [by itself] leads to greater revere logistics performance” (Olorunniwo, et al, 2010, p. 460).

Collaboration and communication throughout the supply chain must be strategized and management must consider how the reverse logistics program will improve the customer experience.  “Whether a company establishing a reverse supply chain will have to work towards educating customers and establishing new points of contact with them, make decisions which activities to outsource or manage internally, while keeping costs to a minimum and discovering innovative ways to recover value” (Guide, et al, 2001, p.25).

References

Ang. (2010, May 26). Best Buy employees not properly trained. Best Buy Unboxed. Retrieved March 15, 2013, from http://forums.bestbuy.com/t5/Mobile-Phones-Broadband/Consumers-Beware-Employees-not-properly-trained/td-p/114210

Carmichael, S. (2011, February 7). The Buy Back Program at Best Buy: Is It Worth it? DailyFinance.com. Retrieved March 15, 2013, from http://www.dailyfinance.com/2011/02/07/best-buy-buy-back-program-is-it-worth-it/

Guide, V. R., & Van Wassenhove, L. N. (2002). The reverse supply chain. Harvard Business Review, 80(2), 25-26. doi: 00178012 EBSCO

Olorunniwo, F. O., & Li, X. (2010). Information sharing and collaboration in reverse logistics. Supply Chain Management: An International Journal, 15(6), 454-462. Retrieved March 15, 2013. EBSCO

Phelps, D. (2012, December 29). For Best Buy, buy back program was a costly dud. For Best Buy, Buyback Program Was a Costly Dud. Retrieved March 15, 2013, from http://www.startribune.com/business/185103761.html?refer=y

Ryan, L. (2010, February 10). Ten management practices to axe. Bloomberg Business Week. Retrieved March 15, 2013, from http://www.businessweek.com/managing/content/feb2010/ca2010024_442061.htm#p2

Van Camp, J. (2011, February 28). Best Buy’s genius gimmick: Buy Back trade-in program is a total ripoff. Digital Trends Best Buys Genius Gimmick Buy Back Tradein Program Is a Total Ripoff Comments. Retrieved March 15, 2013, from http://www.digitaltrends.com/mobile/best-buys-genius-gimmick-buy-back-trade-in-program-is-a-total-ripoff/

Reverse Logistics vs. Green Logistics: Is there a difference?

Understanding the similarities and differences between reverse logistics and green logistics helps identify optimal solutions to achieve a balanced approach developing strategies to maximizing benefits throughout an organization.

Historically, academia began noticing reverse product and material flows as they surfaced in the 1970’s (Peterson, 2005, p. 8).  It was realized that the reverse flow of product was much more complex than forward flows.  “Because of the environmental focus of this era, the topic of reverse channel management was often labeled green logistics or environmental logistics” (Peterson, 2005, p.8).

Today, green logistics is defined as “supply chain management practices and strategies that reduce the environmental and energy footprint of freight distribution” (Rodrigue, et al, u.d., para 2).  Reverse Logistics is defined as “the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal” (Rogers and Tibben-Lembke, 1998, p.2).  Reverse logistics is green by design as it manages returns to resell, refurbish, recondition, remanufacture, cannibalize for parts, or recycle products to minimize landfill waste.

In the aftermath of UPS launching a new ad campaign with the tag line “carbon footprint reduced, bottom line gets a boost, that’s logistics”(Meyer, 2011, para 1) there has been confusion by some that reverse logistics and green logistics is one discipline and interchangeable in an organization (Meyer, 2011, para 5-6).

                     “The process of collecting used products and materials from customers to be reused, recycled, or up-cycled into other products. This process treats these materials as valuable industrial nutrients instead of                                        disposed of as trash. This is the complement to the traditional supply chain, [logistics] and distribution system used to produce and deliver products to customers” (Meyer, 2011, para. 6).

     The reverse flow of product in the supply chain is a complex operation that evolves and changes throughout the product life cycle.  These changes will impact the decision making on how a return should be handled and how much expense should be invested.  To further complicate the reverse flow, there are a multitude of categories surrounding returns that make it difficult to determine how to achieve maximum value recovery requiring flexibility to maximize returns while reducing environmental impacts.  “Reverse logistics is a fairly reactive approach responding to internal and external customers” (Steele and Rodriguez, 2008, para.2).

Manufacturing is often plagued with shorter product life cycles that are marketed through retail stores and web with growing market segment of consumers purchasing products from mobile devices creating a need to manage returns quickly and efficiently not only to capture value and benefit the environment, but to meet customer expectations by providing efficient, socially responsible post-sale service to maintain customer loyalty.  “Consumers are increasingly demanding scorecards for climate change impacts, energy consumption and emissions, the pressure is on to responsibly manage returned assets” (Ryder Exchange, 2013, para. 4).  Post sales service has been recognized by many companies as the differentiator to win customer loyalty and gain repeat business.

 Differences and Similarities in Reverse Logistics and Green Logistics

     The most significant difference is that reverse logistics concentrates on saving money and increasing value by reusing or reselling materials to recover lost profits and reduce operational costs.  Green logistics concentrates on transportation issues, recycling and re-use.  “Green logistics is about using material friendly options for transportation and centered on saving money but places priority on the company’s image” (Nylund, 2012, p. 49).  DeBrito (2003) clarifies that green logistics focuses on the forward flow of the supply chain while reverse logistics is viewed as sustainable development.  “The prominent environmental issues in [green] logistics are consumption of non-renewable natural resources, and both hazardous and non-hazardous waste disposal” (DeBrito, 2003, p. 22).  Green logistics is often known as ecological logistics defined as “understanding and minimizing the ecological impacts of logistics” (Rogers and Tibben-Lembke, 1998, p.102-3).  These activities are designed to measure environmental impacts on transport reducing energy consumption, and reducing the use of materials.

      Recycling, remanufacturing and reusable packaging is the area where reverse logistics and green logistics intersect (Peterson, 2005, p. 9).  While reverse logistics will examine how waste is disposed reducing landfill waste, the focus in reverse logistics is the cost and availability of landfill space, rather than conducting specific studies on the organizations environmental impacts.  The drivers for reducing waste in reverse logistics are associated with increased regulation, increased landfill costs, or economic benefits of using fewer raw materials (Rogers and Tibben-Lembke, 1998, p101 – 112).  Figure 1 is a clear illustration of functions and how they relate to reverse and green logistics strategies.

Fig 1:  Source (Rogers and Tibben Lembke, 2001)

Figure 2 identifies the areas of reverse logistics and green logistics that positively impact the total carbon footprint.  The white blocks identify the mindset of functions from a reverse logistics point of view while the green blocks reflect a green logistics perspective.  Although the some of these functions seem identical, positively with an outcome impacting the environment, the mindset can be very different.  This difference in how a decision is made to facilitate reduction of the total carbon footprint is a factor in balancing organizational reverse or green logistics solutions.  Recognize that green logistics is a narrow concentration where certain criteria that is not necessarily reverse logistics.  Redesigning packaging to use less material falls under green logistics rather than reverse logistics unless that packaging is designed to be re-usable.  (Rogers and Tibben-Lembke, 1998, p. 103).  This packaging example could be considered green reverse logistics.

Although reverse logistics concerns itself with product design, the focus is not necessarily on the reduction of material waste, but a design for service.  There should be consideration to achieve a balance.  Every activity in both the forward and reverse product cycle impact reverse logistics strategies and costs in some way.  “Every reverse logistics professional has been frustrated when told to reduce costs but also to expedite handling, repair, and shipping” (Steele and Rodriguez, 2008, para 14).

A reverse logistics process can take many different forms and has many different possible opportunities to manage the product and re-introduce it to the supply chain.  In reverse logistics consideration is given to the collection and transport of returns.  One the return is received, there are many areas where the product may move such as testing, refurbishment re-use of parts, od recycling back to raw material.  A greening process is simplistic in that it begins at the source with supplier conditions and can work its way through manufacturing, packaging, and distribution channels (Nylund, 2012, p.51-52).

Fig 2:  Source: (Steele and Rodrigues, 2008)

Maximizing Reverse and Green Logistics Strategies

      The Aberdeen Group conducted a study (2010) evidencing that reverse logistics focused on improved the bottom line.  In this study the turnaround time for return parts and repair operations when from an average of 17 days to just over 4 days slashing repair costs by 10% while increasing average customer satisfaction from 81% to 93% (Dutton, 2010, para 1-3).  The commonality between companies who achieved the most significant improvement were those who developed standardized returns and repair processes, had the ability to recover costs from suppliers, maintained real time data reporting, had transparency throughout the supply chain (Dutton, 2010, para 3 – 16).

Recycling and reuse is the most significant area where reverse and green logistics coincide and happens to be the most challenging for many companies.  Some companies may choose to hold onto old product lines with the hope there will be a customer seeking obsolete parts and products while others have policies that products not sold within a specific time frame should be sent to a secondary market, or slated for disposal (Steele and Rodriguez, 2008, para. 12-14).  A case study with Estee Lauder reveals a balanced approach to green and reverse logistics by implementing and blending strategies in both reverse and forward flows of product.  The company was plagued with returned and excess product that was finding its way to landfills.  Although the company wanted to reduce landfill waste, they also wanted to reduce the expenses associated with landfill space and sought ways to capitalize with their customer base through green initiatives.  The company invested $1.3 million to inventory management technologies that collected and gathered information.  The company was able to save $500,000 in labor costs associated based on manufacturing strategies designed to limit excess product as well as maintaining open communication channels with customers for valuable feedback.  The information obtained in managing returns, was used to identify an opportunity to develop a new product line $250 million from returned cosmetics (O’Connell, 2007, p. 30-34).

For a company to be successful in green initiatives it should both positively impact the environmental footprint and achieve cost savings.  Phillips produces a wide range of electronic consumer goods.  Many of their product lines such as electric toothbrushes, shavers, and baby bottles must be disposed of with strict environmental guidelines for managing those returns.  Phillips partnered with Ryder hat helped achieve an 80% ratio of refurbishment and re-use of returns (Partridge, 2011, para. 41).  Ryder assesses the product return to determine if the product is resalable or malfunctioning and decide on whether it is cost efficient to repair them for resale or dispose of them.  If the product can not be resold, they disassemble and sort parts reusing what they can, and working with recyclers for responsible disposal in an environmentally friendly way.  Ryder’s focus is to provide the greatest value to Phillips from returned assets while maintaining green logistics initiatives.  Some of the variables used in balancing reverse logistics and green logistics strategies has been making decisions on returns based on the value of the product.  “A product that sells for less than $100 at retail, is not worth refurbishing”(Patridge, 2011, para 44).  The visibility by implementing inventory controls throughout the forward and reverse product life cycles has contributed to Phillips ability to make better decisions on how to maximize returns and reduce environmental impacts.  Transportation was considered with a goal of reducing the number of trips to manage both forward and reverse logistics costs and reduce their card footprint.  By partnering with Ryder, there was one facility to manage returns of all product lines eliminating multiple shipments.  Packaging on all product lines is manufactured from recycled cardboard and paper (Partridge, 2011, para. 38-50).

 Balancing Reverse Logistics and Green Logistics

     With an increasing consumer awareness of greenhouse gasses contributing to climate change, global consumers are demanding socially responsible and sustainable business models that will slow the effects of climate change.  Consumers also want superior service and post –sale support.  These two areas are often conflicting as the demand of one area may impact the demand of another.  Nylund’s case study (2012) comparing the marine manufacturer, Wartsila, and the furniture manufacturer, IKEA, in their green and reverse logistics initiatives.  The most significant factor driving Wartsila was time.  The company provides the customer an option of deliveries based on turnaround time that drives their distribution.  When time is available, the company will consolidate shipments and select green transport when possible.  When consumers need replacement parts quickly; couriers are used to deliver merchandise from a central location as soon as possible.  Although Wartsila makes an effort to use green initiatives, the component in decision making is always turn around time delivering the product as quickly and cheaply as possible.  IKEA, has the luxury of time, therefore, they are selective utilizing haulers that are committed to green transport, will often delay shipments to have full load capacity, and have designed more compact shipping pallets and containers to increase load efficiency (Nylund, 2012, pg 59-66).

       Warsila reported in this study that they kept returns for parts up to thirty years with no consideration on warehousing costs.  The primary focus on customer service relies entirely on the customer writing a note on their form identifying the reason for return.  There is no reverse logistics process to recapture value.  If the customer reports the wrong part was sent, the product immediately returns to the shelf without assessing the product.  Warsila identified themselves as struggling with reverse logistics management (Nylund, 2012, p66).   Ikea has a returns management program to assess damage and decide whether to place the product back on the shelf for resale, in the corner for marked-down clearance, or scrap.  IKEA’s model is designed to move products quickly having them out of the warehouse in under 6 weeks (Nylund, 2012 p.66-70).

Both Warsila and IKEA are committed to improving their green logistics, but both have different constraints, organizational goals, and customer expectations that drive the way they balance green logistics strategies.  Warsila did not have a formal reverse logistics program, but indicated they were struggling to improve this area of business.  IKEA has a formal reverse logistics program that examines organizational and environmental impacts choosing where it is both optimal and cost efficient to concentrate green initiatives (Nylund, 2012, p70-75).

An organization should have a clear understanding of their product lines from end to end throughout the forward and reverse product cycles.  Understanding the differences between reverse logistics management and green logistics management will help an organization visualize how a decision in one area will impact the entire organization, as well as consumers.  Organizations developing sustainable business models can develop a scorecard that will quantify variables that impact the environment and achieve cost savings.  To avoid bad financial decisions, the impact on operations in both reverse and green logistics strategies must be considered from all aspects of the operation.  “Turning green to gold will happen only in organizations who have the management sophistication and experience to develop the new vision, and who can find a way to gather the facts and details needed to launch effective initiatives” (Steele and Rodriguez, 2008, para 21)

 References

DeBrito, M. P. (2003). Introduction. In Managing reverse logistics or reversing logistics management (pp. 17-37). Rotterdam: Erasmus University.

Dutton, G. (2010, July 4). Reverse Logistics: Money Tree or Money Pit? Retrieved May 17, 2013, from http://www.worldtradewt100.com/articles/reverse-logistics-money-tree-or-money-pit

Meyer, D. (2011, October 7). In supply chain logistics management, there’s a reverse gear – and it’s green: Part 1 [Web log post]. Retrieved May 17, 2013, from http://valuestream2009.wordpress.com/2010/10/07/in-supply-chain-logistics-management-there%E2%80%99s-a-reverse-gear-and-its-green-part-1/

Nylund, S. (2012). Reverse logistics and green logistics (Unpublished master’s thesis, 2012). Vaasan Ammattikorkeakoulu Vasa Yrkeshogskola University of Applied Sciences. Retrieved May 16, 2013, from https://publications.theseus.fi/bitstream/handle/10024/46993/Reverse%20Logistics%20and%20green%20logistics.pdf?sequence=1

O’Connell, A. (2007, November). Improve your return on returns [Editorial]. Harvard Business Review, 30-34. Retrieved May 19, 2013.

Peterson, A. J. (2005). An examination of reverse logistics factors impacting the 463-L pallet program. Manuscript submitted for publication, Air Force Institute of Technology, Wright-Patterson Air Force Base. Retrieved May 17, 2013, from http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA437509

Rodrigue, J., Slack, B., & Contois, C. (n.d.). Green Logistics. Green Logistics. Retrieved May 14, 2013, from http://people.hofstra.edu/geotrans/eng/ch8en/appl8en/ch8a4en.html

Rogers, D. S., & Tibben-Lembke, R. S. (1998). Going backwards: Reverse logistics trends and practices. Reno, NV: Reverse Logistics Executive Council.

Steele, K., & Rodriguez, E. (2008, July/August). Reverse Logistics – Turning Green to Gold. Reverse Logistics Magazine. Retrieved May 16, 2013, from http://www.rlmagazine.com/edition12p28.php

 

Profits in Reverse Logistics

Why reverse logistics?  Why pursue an area of business management that has often been under-estimated, overlooked, and often not understood?  Businesses face many challenges in the current economy trying to find new and innovative methods to derive additional revenue or profit within their organization.  Returns management and tight inventory control is being explored by industry professionals to improve efficiency and increase profits.  The top questions asked by industry professionals are “What do reverse logistics best practices really mean? How do we measure customer satisfaction?” (Thompson, 2010)

The triple bottom line was the concept of John Elkington, founder of SustainAbility who believed a company should measure their success not only by profit, but by people’s accountability and planet accountability (Economist, 2009).  At the time there was a growing public awareness that forced many companies to consider corporate responsibility and set ethical standards to ensure manufacturers did not take advantage of indigenous people or their environment where there were unregulated markets.

The management of e-waste has evolved and has become a growing problem for companies.  Most consumer electronics were making their way to landfills, or being exported to developing countries. The Environmental Protection Agency (EPA) was concerned about “exports being mismanaged abroad, causing serious public health and environmental hazards, and representing a lost opportunity to recover valuable resources effectively” (EPA, u.d.).  Many electronic manufacturers and retailers have attempted to utilize their existing business footprint to capitalize managing e-waste generating new streams of income.  Companies looking at reverse logistics initiatives should consider relevancy of the return or recycle program to corporate objectives to help determine how to approach an existing customer base to market a reverse logistics program for profit. 

Value Added Services

Consumer demand drives product development, improvements to customer service, as well as many other income producing opportunities.  When considering launching an effective reverse logistics operation an integrative management value proposition should be considered identifying the economic value, market value, and relevancy (Bowersox, et al, 2010, p. 5-6).  An organization determines the strategy they want to employ to collect, refurbish, or recycle goods.  Once the good is received it is evaluated to identify profitability of refurbishing the unit, using viable parts, or sending it to a recycling.

A company should consider how they intend to collect returns.  If a manufacturer decides to control the collection process, the investment is driven by remanufacturing cost savings and quality control of the product.  Indirect collection systems using a third party or shared resource produce an immediate savings. A manufacturer with indirect collection typically has a unique product line that would not impact their competitiveness in the marketplace if competitors were to purchase refurbished parts (Sevaskan and Wassenhove, 2006, p10-11).  The concern is that a third party refurbishing a product or a shared facility could potentially sell remanufactured parts to a competitor in the wholesale market driving down product cost.  In a case study, Kodak’s single use camera is a primary product and benefits from a direct collection process, where Xerox print cartridges would benefit from a third party remanufacturer because the return is not going to significantly impact the price points of their printers should a competitor choose to buy refurbished cartridges in the wholesale market (Sevaskan and Wassenhove, 2006, p13-14).

Gatekeeping parameters should be established to automate the decision-making on whether or not the return is valid.  Without proper gatekeeping, a company might find themselves flooded with products that cannot be processed and inflate costs of managing returns.  “Good gatekeeping is the first critical factor in making the entire reverse flow manageable and profitable” (Third Eye, 2003, para. 13).  Once the item is accepted, determining where the item will be sent for central processing, how the items will be transported, and what will happen to returns after they have been inspected and sorted.  Collection of information about the return through an authorization process is beneficial to planning for workflow to help expedite processing from reconditioning, repair, reutilization, resale, or deconstruction.  A product that should have never been accepted as a return or sent to the wrong destination can become costly.

The conventional returns management model takes into account only those costs related to bringing the returns back into the system, along with the cost of warehousing and returns request management. The costs that impact the total reverse flow of product could impact customer retention efforts, product reworking, redistribution, inventory management, overheads allocated to other departments, and cost of disposal (Kimball, u.d. and Rogers, et al, 2008).

Where are the profits?

Reverse supply chains differ from forward supply chains in information flows, physical flows, and cash flows.  A company should consider what information they are capturing on the forward flows and how that will impact and expedite the process of the reverse flow.  Processing efficiency in returns will work to optimize slow moving inventory, repairs, warranties, and disposition instructions.

The physical flow drives the information flow and the differences between the reverse flow and forward flow of goods need to be considered within the organization.  Forward flows are much more direct, and easily planned to account for sporadic demands or random routing of product.  Reverse flows are more difficult to anticipate, tend to follow both fixed and random routings.  Most of the challenges companies face is a result of an inadequate supportive infrastructure to manage information.  By clearly defining the returns process and flow of goods and the impacts throughout the organization, a company can strategically plan what information should be captured.  Without considering the information and product flows, a company could inadvertently create inconsistencies in process management impacting costs (Kimball, u.d., p. 3-4).

Once a company can decide what information to capture, forecasting returns and customer collaboration with the return become more efficient reducing the costs of managing that return.  It is also beneficial to avoid limited data visibility as it can promulgate unreliable data and information analysis.  By having full visibility with the location, status, and condition of the return a firm could mitigate the effects of poor data including product development, product cycle, repair times, and customer satisfaction (Kimball, u.d., p 9-10).

Integrating information into supply chain improvements on both the forward and reverse flows reduce returns and improve efficiency.  “The general concept of an integrated supply chain links participating firms into a coordinated competitive unit” (Bowersox, et al,year??? p. 6).  Developing critical relationships across the supply chain to work together become a factor driving profits.  Black and Decker integrate information through the returns process to improve product quality and ease of use ultimately reducing the number of returns (Rogers, et al, 2008, p. 169).  Creating a feedback loop to identify areas for improvement will help lower return management costs.

Cash flows in reverse supply chains are seen in terms of credits, discounts, and reduced operating costs.  Developing credit rules and policies will help manage the cash flows.  “General guidelines are established with input from customers and suppliers to determine how returns will be valued and how credits will be issued” (Rogers, et al, 2008, p. 172).  Customer relationship management to include the returns process can have a large impact maintaining and building customer loyalty.

To produce a profitable supply chain (forward or reverse), a stagnated inventory flow will induce added costs and create an opening for shortages whether it be stolen merchandise, damages merchandise, or a paperwork error.  Feng, et al (2012) proves that without inventory controls, policies, procedures, and dedicated staff to ensure inventory transactions are accurately recorded, inaccurate data will ripple through the organization.  The impacts of inaccurate data will negatively and inaccurately impact financial records and cash flow through poor decision making,  Procurement operations is typically the largest expense a company bears.  Poor planning and data management shared with those making buy decisions could create inventory overages or shortages.  Vendor management would become negatively impacted because without accurate inventory data, the performance and quality metrics are skewed.  It would be extremely difficult to project the lost revenue from poor data management as a result of product shortage.  High inventory levels and stock overages as a result of poor buy decisions tie up capital and further reduce cash flow.

Secondary markets, purchasers of refurbished items, parts for re-utilization, or raw material should be identified and managed. It is just as critical to manage these partnerships to identify opportunities to reduce procurement costs of new materials.  Vendor relationships as the refurbished items or raw materials are reintroduced to the marketplace.

Field and Sroufe (2007) conducted research into the use of recycled materials against virgin materials as a sustainable business structure with a concentration in the manufacture of corrugated cardboard.  They explore how that affects and changes the supply chain and the structure of vendor relationships.  One manufacturer decided to implement a mini-mill because raw material suppliers were unable to fulfill orders during busy seasons.  Raw materials were purchased from as far as 500 miles away from the manufacturer (Field and Sroufe, 2007, p. 4452).  The recycled materials and use of a dedicated mini-mill was a strategic move to fill a gap and meet their consumer demand.  After implementing the new mini-mill, transportation costs were slashed.  Once recycled pulp was introduced to create the cardboard products, the company found they were able to procure all needed materials within a 150 mile radius achieving considerable transport savings (Field and Sroufe, 2007, p.4452). . The supply chain is impacted because it changes the balance and dynamics throughout the supply chain.  It broadens the base of suppliers creating more competition and developing alternatives in the event a preferred vendor is unable to fulfill an order.  Recyclers and raw material producers are not necessarily the same.  “Imbalances from market power can result from conditions that give suppliers more bargaining power than their customers” (Field and Sroufe, 2007, p.4444).  A smaller company specializing in one or two products of high quality, may corner the market and be in a position to inflate costs giving that supplier advantages with relation to pricing point.

Carbon Credits:  Should I Invest?

The United National Framework Convention on Climate Change (UNFCC) developed a treaty, the Kyoto Protocol, in a global effort to mitigate greenhouse gas emissions and climate change through an emissions reduction program (Koyoto Protocol, n.d. and Issues in the International, u.d. para 1) .  A business that can easily cut their emissions could wind up with an extra allowance credits are traded similar to commodity cash markets that “offers standardized and cleared futures contracts on emission allowances which can be sold to other companies for an additional stream of income.  Other organizations could invest in other carbon credit programs such as the capture of methane gas from landfills, solar or wind generation or reforestation programs.

The business model for this income was derived from new legislation called “Cap and Trade” that sets a limit on emissions that is lowered over time and allows for carbon credit to be traded between companies to help meet or fall below a firm’s allowable emission threshold (Cap and trade, u.d. para 1-3).  The downside is that the market for carbon credits is volatile.  Reuters reported “Falling carbon offset prices will lead some greenhouse gas-cutting project owners to make fewer but larger requests for CO2 credits from the U.N., while others will be pushed out of the international emissions trading market completely, analysts said, a move that could increase volatility in offset supply” (Roberson, 2013  para 5).  These credits are consumption based and cannot be re-sold.

The carbon market throughout most of the United States is voluntary and left to individual states to manage which contributes to market volatility.  Without a national policy, the investment into a voluntary market would be difficult to justify unless there was a hidden value uncovered.  The state of Louisiana received media attention after hurricane Katrina and the Gulf of Mexico oil spill (Larino, 2012. Para 3).  Local governments in that area are looking to capitalize on carbon credits to offset the costs of redeveloping the coastline and wetland areas to replace trees and foliage that has been destroyed.  In the United States, California, has the strictest environmental emission laws and produces a demand for carbon credits (Larino, 2012. Para. 8-9).  The Louisiana project is being examined for approval to determine what carbon credits will be generated from the project.  “If the California Air Resources Board, the agency overseeing the program, approves the methodology, polluters in California will be able to purchase wetlands credits for Louisiana projects bringing the two groups together” (Jennifer, L. 2012, para 9)

The decision to invest in carbon credit programs should be carefully considered.  The investment should not be made for the sole purpose of producing an additional stream of income but rather to offset the cost of doing business or remediation.

Capabilities

Determining profitability between in-house refurbishments or deconstruction or partnering with a third party capacity to manage the waste stream, considering time, volume and capacity to process and sell the refurbished item, or raw material.  .

If a remanufacturer decides an item is not viable for refurbishment and resale, will they outsource deconstruction or manage the process in-house?  Identifying the price point for profit will drive the decision.  E-waste recycling revenue will be difficult to achieve unless a system is in place to maximize and automate processing.  Ecycling USA created a business model that reflects collection fees for large appliances and general electronics that range from $300 -$1,000 per ton (eRecycling, USA, 2011, p.4).  The e-waste is fully enclosed limiting risk of environmental contamination as well as automated the sorting and processing of waste quickly.  Income is produced from the sale of recaptured precious metals ranging from $60 to $7,000 per ton (eRecycling, USA, 2011, p. 3-4).  Green mining (also known as Urban Mining)  has become profitable in the electronics industry as precious metals are extracted from electronic goods (Green mining 101, u.d, para 1-3).  The metals are then resold for the manufacture of new products.  The recapture of precious metals is not just for the environmental protections associated with mining, or water contamination but from depleted sources.

An engineering student in the United Kingdom developed a method of recycling precious metals that are lost on catalytic converters. (Reusing precious metals from the streets, para 1-2).  The converters shave small particles creating road dust which traditionally has been discarded by street sweepers.  “Almost the same level of metals is present on the streets as there are in the places where they were originally mined” (Reusing precious metals from the streets, Engineering Today, 2008, para. 4).  The escalating cost of metals has justified the cost of developing the processing equipment for street sweepers to capture the metals and prevent them from entering landfill sites.

As the supply chain evolves to a highly collaborative function, vendor management and diversifying suppliers becomes more important.  Manufacturers are noticing the savings they can achieve by purchasing recycled materials ultimately saving on the total procurement costs.  Similarly, throughout the reverse flow new customers of refurbished or recycled products should be identified and pursued offering competitive pricing.  Without identifying who will purchase the recycled or refurbished material, costs are incurred and storage capacity limited.  New York City was forced to discontinue their glass recycling program from 2001 to 2003 because they ran out of space to store post-recycled materials.  The city invested in a contract in 2003 to actively market recycled materials and clear warehouse space (Biocycle, 2003).

Conclusion

Developing a returns management strategy is to fully understand the constraints and capabilities of the company, but also that of the physical supply chain.  An organization considering a reverse logistics operation should develop close relationships with all key stakeholders to understand potential client limitations in managing returns and positioning themselves to fill the void outside those constraints.

To utilize an existing customer pipeline to offer new income producing waste stream management services, an organization must be able to show the financial benefit and added value of the reverse logistics program.  Profit generated through logistics services and leveraging relationships by helping clients manage their waste stream, emissions management, and demonstrating potential savings across the business footprint, rather than creating an income stream from the return itself.

A company seeking to create a new stream of income would provide logistics capabilities and services that offer their clients with real time data demonstrating the cost savings for the investment.  A successful consultant is in a position to examine the supply chain from end to end in the forward logistics cycle to identify where the reverse flow processes impact the forward flow and develop a comprehensive data collection strategy that captures opportunities for improvements, mitigate risk, and roll into relationship management.

References

Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2010). Supply chain logistics management (3rd ed.). Retrieved March 17, 2013.

Cap and trade. (n.d.). EPA. Retrieved April 20, 2013, from http://www.epa.gov/captrade

Cleaning up electronic waste (E-Waste). (n.d.). EPA. Retrieved April 07, 2013, from http://www.epa.gov/international/toxics/ewaste/index.html

Crews, D. E. (2010). Strategies for implementing sustainability: Five leadership challenges. SAM Advanced Management Journal, 75(2), 15-21. doi: 52842580 Business Source Elite

ECycling USA. (n.d.). Business Summary [Brochure]. Author. Retrieved April 7, 2013, from http://emerald-planet.org/6%20-%20eCycling%20USA%20Business%20Plan-%2014%20Oct%2011.pdf

Feng, M., Li, C., McVay, S. E., & Skaife, H. A. (2012). Ineffective internal control over financial reporting and firm operations. Rochester, Rochester: doi:http://dx.doi.org/10.2139/ssrn.2187599

Field, M. J., & Sroufe, R. P. (2007). The use of recycled materials in manufacturing: Implications for supply chain management and operations strategy. International Journal of Production Research, 45(18/19), 4439-4463. doi: 10.1080/00207540701440287  EBSCO

Green Mining 101. (n.d.). GTSO Resources. Retrieved April 15, 2013, from http://www.gtsoresources.com/green-mining-101.html

How efficient is your reverse supply chain? (2003, January). Third Eyesight -Articles and Whitepapers -How Efficient Is Your Reverse Supply Chain? Problems and Barriers. Retrieved April 26, 2013, from http://thirdeyesight.in/articles/reversesupplychain.htm

Issues in the international carbon market, 2008-2012 and beyond -. (n.d.). Ministry for the Environment. Retrieved April 25, 2013, from http://www.mfe.govt.nz/publications/climate/issues-international-carbon-market-oct07/html/page1.html

Larino, J. (2012), Proposal floats carbon credits for restoring Louisiana coast, New Orleans City Business (LA)

Kyoto Protocol. (n.d.). Kyoto Protocol. Retrieved April 30, 2013, from http://unfccc.int/kyoto_protocol/items/2830.php

Kimball, K. (n.d.).  Managing returns art to science (Tech.). Retrieved April 26, 2013, from Returns Management Inc. website: http://www.returnsmanagement.com/whitepapers/Art_to_Science.pdf

Low CER prices to herald supply volatility: Analyst. (2013, January 9). – News. Retrieved April 28, 2013, from http://www.pointcarbon.com/news/1.2130641

A new approach to recycling, materials reclamation and jobs creation. (n.d.). A New Approach to Recycling Materials Reclamation and Jobs Creation. Retrieved April 07, 2013, from http://ecyclingusa.com/

Recycled materials processing, marketing sought [Advertisement]. (2003, October). BioCycle, 20.

Reusing precious metals from the streets. (2008). Professional Engineering, 21(11), 5. Retrieved April 22, 2013.

Roberson, R. (2010). Carbon credits may be option for some Southeast growers. Southeast Farm Press, 37(14). 18

Rogers, D. S., Lambert, D. M., & Knemeyer, M. (2008). The product development and commercialization process. In Supply chain management: Processes, partnerships, performance (pp. 143-178). Supply Chain Management Institute.

Savaskan, R and Van Wassenhove, I.N. (2006) Reverse Channel Design: The Case of Competing Retailers. Management Science, 5(1), 1-14.S

Triple bottom line. (2009, November 17). The Economist. Retrieved March 26, 2013, from http://www.economist.com/node/14301663

Defining Reverse Logistics

Reverse logistics is defined “The flow of surplus or unwanted material, good, or equipment back to the firm through its logistics chain for reuse, recycling, or disposal” (Business Dictionary, 2013, para. 1).  This definition is simplistic in nature and demonstrates that many are struggling to understand exactly how reverse logistics impacts a business.

Reverse Logistics has often been tied to supply chain and logistics activities.  When examining what encompasses reverse logistics and how it impacts an organization, reverse logistics is an extension of operations management.  Reverse logistics planning begins as early in the forward supply chain as possible.

When considering a product life cycle, many aspects are considered such as product quality, servicing, cost, profit, and possibly environmental concerns.  When examining the returns process, these same considerations should be examined from data compiled throughout the return process.  Why is the customer returning the product?  How many times has a similar repair or return been made?  Is there a way to improve the product to limit the cost of returns?  When examining repair of a product, is it sent to a central repair station or scattered locally?  There are many questions and approaches to managing a product.  Developing a plan of action to ask these important questions are often overlooked to capture relevant information to improve operations and streamline the returns process.  Items returned only to be shipped to a third party for handling often lose critical documentation between the customer and product.  Determining where information is gathered in the returns process is just as critical as managing the return logistics.

Consider a product such as an all-in-one printer.  The customer is unable to install the drivers for one of the features to work properly.  A well-organized customer service plan such as customer service, on-line help, or help desk may troubleshoot the driver issue, create customer satisfaction, and prevent that return.  Consider the customer service manager pulling data to identify trends in trouble tickets.  The manager notices a significant number of driver issues, brings it to the attention of appropriate personnel who can identify the root cause of the driver issue determining if the printed instructions are unclear, there is a mechanical failure, or a driver software error.  Once the root cause is identified, corrective action can be taken to improve the product and reduce the number of customer service calls.  In an environment where business partners throughout the supply chain are collaborating and sharing information to improve efficiencies, this is a concept that does not receive adequate consideration.  “Managers are increasingly sharing information to improve both the speed and accuracy of supply chain logistics” (Bowersox, et al, 2010, p.12).  Although one area of the supply chain may not find value in capturing information about the return, in reverse logistics thinking globally to strategically develop vendor and supplier relationships in a symbiotic environment is needed.  If the retailer sold all-in-one printers where there was no support or the product was faulty, how would that impact the retailers’ reputation?

Inventory controls are critical throughout the reverse logistics process.  Depending on the industry, value of the product, and potential liabilities the level of visibility and transparency in the supply chain will fluctuate. How are returns going to be transported?  How will returns be valuated to determine if the product is suitable for secondary market as new, repair, remanufacturing, or final disposition?

IT process management is the heartbeat of the reverse logistics program and capturing accurate data throughout the enterprise is the most difficult, and most critical.  By developing a plan and keeping the methodologies consistent throughout the organization, data can be used to identify and expedite return management.  Mobile markets are developing apps for tablets and iPhones to capture real time inventory data.  “Mobile technology is the next wave of optimizing the supply chain” (Gifford, 2013, p.13).  The applications are limitless and software for mobile devices can be customized to improve warranty management, gatekeeping at the point of return, identifying and alerting all levels of staff to environmental requirements.  Consider excess merchandise that is new, but unsold.  The manufacturer could reduce costs by providing automated instructions to the retailer shipping that product to their secondary market distributor, eliminating the need to repackage and transport those goods at the manufacturers warehousing site.

Definition of reverse logistics is evolving, however, the most complete definition “The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal” (Rogers, et al, 1998, p.2)

References

Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2010). 21st century supply chains. In Supply Chain Logistics Management (3rd ed.)

Gifford, R. (2013, February). The marriage of enterprise and the mobility market. Reverse Logistics Magazine. Retrieved March 8, 2013, from http://rlmagazine.com/RLMagazine_Edition_48.pdf

Reverse logistics. (n.d.). Business Dictionary. Retrieved March 08, 2013, from http://www.businessdictionary.com/definition/reverse-logistics.html

Rogers, D. S., & Tibben-Lembke, R. S. (1998). Going backwards: Reverse logistics trends and practices. Reno, NV: Reverse Logistics Executive Council.

Developing Effective and Defendable Recall Management Plans

Most organizations work diligently across the supply chain with professional associations and government agencies developing policies to prevent recall events.  Regardless the efforts of an organization in the supply chain may implement, there is always the possibility of a recall whether it is a supplier issue, an internal problem, or intentional act of tampering or contamination.

Burger King Corporation suffered one of the most expensive product recalls surrounding a Pokeman ball distributed in kids meals from October through December of 1999 and packaging indicated the toys had been tested and safe for children of all ages.  The balls were a plastic ball shaped container roughly three inches in diameter.  The ball pulled apart revealing one of fifty-seven Pokemon toys inside.  The separated ball was a suffocation hazard to children under the age of three.  A first report on December 11, 1999 of a 13 month old girl was issued reporting half the Pokeman ball covered her nose and mouth suffocating her to death, while an “18 month old nearly suffocated when a ball half got stuck over her face” (CPSC, 2000).  The suction was tight enough that it took the parent two attempts to remove the ball half from the child’s face.

As part of a voluntary recall announced December 27, 1999, Burger King developed a plan to communicate the danger by placing signage in restaurants, television advertisements, targeted websites, and multiple news outlets.  The Consumer Product Safety Commission developed a video in conjunction with Burger King demonstrating the dangers of the toy that was aired on national televised news.

Burger King Corporation was not only sued by parents of children who were killed or injured by the toy, but faced multiple class action lawsuits seeking millions of dollars to pay back consumers induced to buy meals at Burger King as a result of the collectible toy.

Carlino wrote an editorial in National Restaurant News (2000) commenting that common sense is out of the equation and manufacturers should concern themselves with a highly litigious society.  The parents of a 4 month old who suffocated January 25, 2000 claimed a family member left the ball with the unattended child claiming ignorance of the danger.  The family alleged in the lawsuit that they were unaware of the recall despite the national communication strategies implemented.  Burger King conducted due diligence by produced national media coverage of the recall, offered a free order of fries with the return of the toy, yet “60% of the toys entering the market were unaccounted for” (Darlin, 2006).  Burger King Corporation had to assume most customers disposed of the toys independently.  This recall incident is considered the “most expensive recall” of all time based on multiple class action suits and regulatory fines (National Restaurant News, 2000).

Liability for product related injuries have traditionally been based on concepts of strict liability and negligence that was reviewed by the courts on a case by case basis.  “Today, class-action litigation, plaintiff-skewed jurisdictions, ‘big dollar’ contingent-fee counsel, activist attorneys general, and legal actions based on public nuisance and recalls are now commonplace” (Jones Day, n.d.).  Well publicized settlements have led to an extremely litigious consumer base.  What used to be a basic product issue can quickly ensnare a company into a complex legal crisis.  “The best defense is a well-documented and tested recall management plan that focuses on detailing organizational design, demonstrates continual process improvements on existing procedures, as well as annual testing of the recall management plan identifying proving diligence in the identification of new risks and opportunities for improvement” (Protovity, n.d.).

Although every organization is unique, a well-constructed defendable recall plan will include common elements.  By exploring organizational design, documenting early identification procedures, controlling communications, improving inventory controls, and conducting mock recalls, and organization can limit additional financial liabilities resulting from regulatory investigations and law suits.

Organizational Design 

Developing a recall team and identify objectives designed to manage the crisis is needed to identify, organize, and continually monitor operational strategies.  The recall team should include a representation of the organization that will ultimately develop and continuously improve upon recall management plans, test the plan, provide recommendations, and ultimately implement the plan if the organization is faced with a recall event.

Key players on the crisis management team should include a senior staff member from operations who understands how the organization functions overall.  “Senior Operations serves as a team leader reporting to the Chief Executive Officer and Board of Directors” (Food Products Recall Manual, n.d.).  Other members would include specialists in public relations, marketing, logistics, quality assurance, accounting, as well as an attorney.  An organization may need to consider adding a scientific or engineering advisor depending on the product involved in the recall.  A well-constructed recall management team will define ownership of the process as well as clearly defining roles and responsibilities of the recall management team should be clearly outlined.

The organization should work specifically identifying potential recall risks, and understanding what the organization can financially bear and review insurance policies to help absorb that risk.  Most recall insurance coverage will pay for the cost of the recall including outside experts, costs associated with publicizing notifications, repair or destruction costs, as well as transportation costs.  Additional product liability typically compensates expenses associated with a consumer’s injury or illness. “Lost revenue coverage can be found for accidental contamination where the product is distributed with an unknown defect or malicious tampering resulting from criminal acts” (Food Products Recall Manual, n.d.).

Examine organizational design to identify all internal and external stakeholders.  Aside from internal contacts to disseminate information, a list of suppliers, distributors, retailers, and government agencies should be included with contact information.  In the event of a recall incident, a list of critical contacts clearly defining their association and responsibilities will help expedite the implementation of the crisis management plan and ensure all parties are in the communication chain.

Early Identification Procedures

The recall management team should ensure there is a documented system in place for product information.  Consumer complaints, warranty returns, insurance claims, or any other reports indicating a potential risk of product defect.  The recall management plan should identify the process used to evaluate those reports and document findings (Food Products Recall Manual, n.d.).  The recall team should review the report, gather facts, and make decision if the recall is necessary.  While managing complaints, it is critical to gather specific information.  A report should include the product name (brand and generic), all code numbers including lot, unit, UPC, or expiration dates to pinpoint where the product came from.  The investigative team should identify manufacturer information and if applicable suppliers of materials used in the manufacture of the product that may have been contaminated.  Compiling as much information about the defect on each incident is essential including dates, specific descriptions about the injury, illness or malfunction that resulted in the complaint.  Document any lab results to identify, prove or disprove contamination.  If a foreign object was found in a product, describe it fully.  If chemical safety issue is found, Material Data Safety Sheets (MSDS) should be included.  Identify the distribution pattern of the product.  If a recall is not enacted based on the findings, ensure the file is documented to establish why a recall was believed to be unnecessary.  “One person should be held accountable for the oversight of documentation to ensure files maintained are accurate and complete” (Jones Day, n.d.).

The best tool to communicate and defend a recall management plan is to develop a detailed, well-tested plan, that will be carried out by the response team in the event of a crisis.  “While the company whose name appears on the recalled product faces the greatest reputational risk, these companies are now looking to share the recall burden” (Rozembajgier, 2012).  Companies are considering the use of third party organizations to manage the recall process especially the communications and response between key stakeholders, government regulators, and the media.  The recall management plan should provide the information the designated team needs to manage a recall including organizational structures, roles and responsibilities, details about how they will gather facts, recall classifications, regulatory instructions, communication guidelines, and recall termination.

 Controlling Communications

Once a company decides a recall is needed, it is critical to act quickly implementing a plan to develop consistency throughout the entire organization.  Copies of the final recall management plan should be distributed to business partners, suppliers, vendors and any other critical stakeholders in advance of a recall event.  This will help coordinate efforts across the supply chain maintaining transparency of inventory throughout the product life-cycle.

Communication strategies are crucial and can become complex.  Different types of recalls may require different levels of communication.  A decision tree should be documented determining the level of communication required and clearly identifying which regulatory agencies (if any) should be notified.  It is also important to have a plan in place and decide how the organization will reach consumers.  “The public relations specialist on the team should oversee and spearhead all appropriate communications and notifications throughout the recall process” (Food Products Recall Manual, n.d.).

“A Marketing specialist should be designated to spearhead training sales staff, customer service representatives about the recall” (Food Products Recall Manual, n.d.).  A training plan should be documented and headed up by the marketing specialist on the team.  Customer service and sales staff are the liaison between the organization and the customer.  These individuals should be trained to capture critical information to be used in reports and provided information to answer consumer questions pertaining to the recall incident.  “The marketing specialist would also spearhead any changes to marketing collateral as a result of the recall” (Food Products Recall Manual, n.d.).

Inventory Controls 

Transparency throughout the supply chain will not only become beneficial throughout the recall process, but scrutinized closely by regulatory agencies and the courts.  “Logistics specialists will be in position to ensure there is visibility in the supply chain, identify code numbers, and quickly locate where the product is in the distribution chain for quick action” (Food Products Recall Manual, n.d.).  Examining inventory controls throughout the development of a recall plan can identify gaps in visibility and transparency.  An organization should examine policies and procedures including information captured on radio frequency identification tags (RFID) to identify opportunities for tighter controls.  By understanding where a recall is in the supply chain, the team can quickly communicate with business partners and external distributers to have items pulled from warehouse and retail shelves before it reaches the consumer.  By identifying only the production line or batches of defective or contaminated products, a company could significantly reduce the financial impact of a recall incident.

Protoviti (n.d.) proclaims one of the common legal challenges organizations face with inventory control is the implementation of adequate controls surrounding stock keeping units (SKU).  Older SKU’s that have been decommissioned for obsolete products are recycled and reused for new products.  The lack of a formal system managing SKU’s and communicating that information could lead to a recall disaster.  The recycled SKU will cause confusion identifying where the recall product is located in the supply chain.  Companies have faced challenges identifying where these specific items were in the warehouse, distribution center, or retail outlets.  One additional protection a dedicated SKU offers is ability for a national retailer to identify the SKU as a recall unit.  If a customer attempted to purchase a recalled item before it was removed from the shelf, the SKU could automate process and block the purchase at the point of sale.

A recall management plan should identify a process to determine how the product will be collected, how it will be transported and what will happen to the recall product.  “One of the common problems organizations face is the co-mingling of recall returns and non-recall returns” (Protoviti, n.d).  It is important to decide whether the product will be repaired, reutilized, or completely destroyed.  A process should be implemented to ensure that central warehousing to ensure recall items posing a threat are not inadvertently re-introduced to the marketplace.

Testing with Mock Recalls 

Sharing the recall management plan throughout the supply chain will help bring suppliers, distributors and other key stakeholders together in an effort to improve recall procedures, identify gaps, and mitigate risk.  Managing partner and vendor expectations will help validate the capacity and ability to mitigate risk across the supply chain.  Conducting recall drills on an annual basis will help evaluate recall capacity and procedures while ensuring partners, suppliers, and vendors are prepared to act quickly in the event of a crisis.

Understanding that recalls involve multiple processes, running an organization through a simulated recall based on that organizations most likely scenarios will help the response team not only feel confident about their roles and responsibilities, but to evaluate the existing decision trees, processes and procedures throughout a crisis event.

Mock recall testing can help identify issues with data integrity allowing the organization an opportunity to take corrective action before an incident occurs.  Eliminating the use of recycled SKU’s, working with retailers to flag a SKU as a recall item, as well as testing automated processes for capturing critical information will limit delays throughout a live recall event. Testing could include various departments that might handle repairs, deconstruction, or destruction of recall items to ensure efficiency.

Conclusion 

A well-constructed defendable recall plan will include common elements that help defend an organization in the aftermath of a recall limiting exposure to regulatory fines and legal claims. Organizational design, documenting early identification procedures, controlling communications, improving inventory controls, and conducting mock recalls provide a history of conducting due diligence to reduce the likelihood and impact of a recall event.

It is critical to self-audit files, and documentation at regular intervals to ensure complete files are present investigating complaints, warrantee returns, or any other concern posing risk of injury or illness.  Organizations run the risk of incurring fines, consumer settlements, and other financial harm that could present a more significant financial impact than the product recall alone.

An organization must have a well-constructed and documented recall management plan that clearly defines ownership, roles, and responsibilities of key personnel in the event of a crisis. Identifying any gaps in data collection or automated processes will increase recall efficiency.

It is beneficial to develop a contact list within the crisis management plan along with a decision tree to clearly outline who should be contacted at what point to expedite the recall plan while maintaining regulatory requirements.  It is equally beneficial to have plans in place deciding on how a product recall will be collected, transported, and managed.

Tight inventory controls will reduce the financial impact of recall activities by minimizing the quantity of returns to only those products that are affected.   Seeking opportunities to automate areas of the recall process such as with dedicated SKU’s can further close a gap in the recall process.

Testing will bring assist an organization identify weaknesses in the recall plan for possible improvements.  The test is an additional opportunity to train response teams, providing comfort levels and confidence to act in the event of a live event.

Although each recall situation might be unique, preparation and careful planning will reduce the impact to the organization.

References

 Carlino, B. (2000, February 14). BK Pokemon promo debacle is latest in series of lawsuits the public is toying with [Editorial]. Nations Restaurant News, p. 41. Retrieved March 1, 2013.

Proquest

CPSC – In Wake of Second Death, CPSC and Burger King Again Urge Consumers to Destroy and Discard Pokemon Balls. (2000, January 27). CPSC – In Wake of Second Death, CPSC and Burger King Again Urge Consumers to Destroy and Discard Pokemon Balls. Retrieved March 01, 2013, from http://www.cpsc.gov/en/Recalls/2000/In-Wake-of-Second-Death-CPSC-and-Burger-King-Again-Urge-Consumers-to-Destroy-and-Discard-Pokemon-Balls/

Darlin, D. (2006, October 28). Reluctance and silent recalls [Editorial]. New York Times; Business Financial Desk; Your Money, p. Section C; Column 6. Retrieved March 1, 2013.

Lexis Nexus

5 keys to effective recall preparation. (n.d.). Expert Recall. Retrieved March 1, 2013, from http://www.expertrecall.com/wp-content/uploads/5-Keys-to-Effective-Recall-Preparation.pdf

Food Products Recall Manual. (n.d.). Food Products Recall Manual. Retrieved February 4, 2013, from http://www.foodinstitute.com/recall.cfm

Hartlaub, P. (2000, March 3). Parents sue Burger King over Pokemon. SFGate. Retrieved March 01, 2013, from http://www.sfgate.com/news/article/Parents-sue-Burger-King-over-Pokemon-3071522.php

Jones Day. (n.d.). The era of the global product recall overview of issues [Brochure]. Author. Retrieved from http://www.jonesday.com/files/Publication/a01fa894-a80d-49f7-8594-8d07a86a72e5/Presentation/PublicationAttachment/c66b4d65-e817-42f0-8318-0b6b34e8674d/The-Era-of-the-Global-Product-Recall.pdf

Proviti. (n.d.). Product recalls: Do you have an effective and defendable recall process? [Brochure]. New York, NY: Author.

Recall Results. (n.d.). Realtime results contact centers [Brochure]. Author. Retrieved February 20, 2013, from http://recallresults.com/wp-content/uploads/2011/06/product_recall_capabilities.PDF

Rozembajgier, M. (2012, May 7). Manufacturing . net. Contract Manufacturing And Recalls. Retrieved March 01, 2013, from http://www.manufacturing.net/articles/2012/05/contract-manufacturing-and-recalls

Bloomberg News (1999, December 31). Lawsuit Charges Burger King With Negligence. Los Angeles Times. Retrieved March 01, 2013, from http://articles.latimes.com/1999/dec/31/business/fi-49236

**** Article appears in Supply Chain Asia:   May/June 2013 (p 66-68)

Strategic Planning and Communications Decreases Expenses, Increases Profitability and Develops New Markets with Reverse Logistics Strategies

Reverse Logistics is not a new field, but is under-utilized by smaller and mid-size businesses.  Businesses are not prepared to invest in the expertise and planning to establish a policy to reduce, return, and recycle unless the action is mandated by a government agency.  Businesses are missing opportunities to efficiency, productivity, while avoiding costs or reducing expenses.  While reverse logistics costs typically represent 5% of the total logistics expenses, companies are not seeing the benefits or the profitability of the entire organization.  “After companies have downsized, reengineered, TQMed, ratcheted up customer service, and wrung out every conceivable cost efficiency it [reverse logistics] may well be the last frontiers business can conquer” (Meyers, 1999, p.27).

While third party logistics firms can be utilized throughout the supply chain to outsource some of the functions, many opportunities are lost to maximize recaptured value.  Companies can increase the benefits of handling returns by developing a plan early and monitoring progress, while working with vendors to set expectations, performance goals, and open the lines of communication to maximize and expedite efficiencies.

The most significant issue faced across all industries is a lack of communication and information sharing between key stakeholders.  In a manufacturing environment, gathering information from various sources about returns, warrantee repairs, and managing the dissemination of that information could dramatically reduce the number of future service calls and returns.  “To collect service information and relay that to product design and engineering to make better sourcing and design decisions to further reduce costs, basically establishing a reverse logistics network that supports life cycle design” (Supply Chain Management Review, 2011)

Product Recycling and Reuse

The development of a product recycling and reuse plan is becoming more critical as the costs of landfill and disposition of product skyrockets.  Third party transport companies have been making efforts to capitalize in reverse logistics through added value services.  Sales executive Grace Maher, of Nolan Transportation shared that freight forwarding account managers have just started setting themselves apart by offering forward and reverse transportation contracts over the past year.  They are able to haul returns for a fraction of the cost by picking up returns at the point of delivery.  This helps Nolan defray costs on moving empty trucks or cargo containers and provides an added benefit to their customer.  Lerol (2012) recognized that third party logistics providers have recognized the value they can add and business they can develop but they are not taking full advantage of their position because they are providing transport for returns, but not maximizing their ability to maximize end of life activities which include reuse, recycling, and data destruction.

 In the financial services industry, they are struggling to reduce procurement costs and increase profitability.  Dan Collins, CFO of a global financial services company is facing challenges in the disposition of obsolete electronic equipment.  In the financial sector, Blackberry’s and laptop computers are replaced every two years.   A proposed bill called “Electronics Responsible Recycling Act” has been sent committee review in an effort to improve e-waste legislation.  Mr. Collin shared that the although their vendors offer to remove obsolete equipment, they are not recapturing any value.  Additionally, because of regulations pertaining to the safeguarding of electronic data, they are paying significant fees to various third parties who specialize in the sanitization and destruction of hard drives.  Manufacturers and retailers are missing out on this opportunity to bring added value by offering limited destruction services, if any.  Lerhol also discusses this bill and reflects that “e-cycling is being discussed in boardrooms across the United States” (2012).

There will come a time that handling waste responsibly is no longer an option.  “Germany currently holds the producer responsible for end of life destruction of products and the United States and Europe have proposed similar legislation” (Rogers, Tibben-Lembke, 1998, p.1002).  It is critical to be prepared for these changes in the way we handle end of life products by developing strategies to manage returns.  Many companies are voluntarily entering into a Zero Waste policy which eliminates landfill waste.  The Department of Environmental Protection publishes “the zero waste philosophy aims to minimize waste and resource consumption in order to conserve energy, mitigate climate change, reduce water usage, prevent toxins creation, and minimize ecosystem destruction.”  General Motors demonstrates voluntary action by making changes in both materials and production in their paint shop.  These changes allowed for the reuse of recycled wastewater treatment sludge that had been previously sent to landfills.  Other initiatives GM took on was reutilizing cardboard from packaging as padding for acoustics in a vehicle, selling of scrap metal, and increasing the use of landfill gas to power their plants.  Innovative thinking and commitment to seeking new ways to reduce waste throughout an organization is quickly becoming the standard across all industries.

The Impact of European Directives

The European Directive focuses on sustainability throughout the European Union with waste management.  One of the challenges the United States faces exporting goods specifically deals with packaging laws.  The European Packaging and Packaging Waste Directive require a manufacturer that sells products in Europe to recover any secondary packaging.

 Secondary packaging is rather complex and includes any packing materials other than the actual container holding the primary product.  Secondary packaging includes any foam or cardboard packaging materials used to protect the goods, plastic bags containing small parts or directions, any wrapping used to package products on shipping pallets. A manufacturer looking to do business in Europe can either create and internal returns program themselves or they can pay a licensing fee to enter the Green Dot program to accept the return of these items.  One of the most significant problems businesses face in exporting goods as reported by the United States International Trade Commission, is the cost and lack of financing available to comply with foreign laws and regulations.  One of the most cost effective solutions is to develop a relationship with a partner to conduct and coordinate export activities and managing the mandated returns program.

Another export challenge is managing the return of reusable shipping containers.  Smaller businesses are crippled limiting their exports because of transportation costs that could be avoided if a well-constructed reverse logistics plan could be implemented for the proper return of shipping containers.  “Subject matter experts noted that containers are often bottlenecked on the East Coast, and must be repositioned to West Coast ports for use in exports” (US International Trade Commission, 2010, P. 17).  An exporter can either invest in purchasing shipping containers which would beneficial for consistent point to point shipments, or they can lease cargo containers for one-way use.

What causes the trade imbalance in the return of containers?  Le Dam Hahn (2003) concluded that shippers are often placed in a position to accept returned containers by contractual obligation whether they are filled or not.  “It is evident that carriers’ interests have given more strategic consideration to the logistics of forward-flow (loaded containers) than to the reverse movement of empty containers” (Le Dam Hahn, 2003, p.12).  The imbalance in transport containers at shipping ports is based on the costs associated with the return of empty shipping containers.  The best solution presented in this study is for the manufacturer to create ongoing relationships with local shippers in the country they are exporting to.  By planning the movement of goods and services, freight forwarders could coordinate more cost effective solutions for managing the containers.  It may be in the freight forwarders best interest to absorb some of the cost the manufacturer may bear to transport the goods from their facility to the shipper if there are empty containers in another nearby port.  Carriers are willing to interchange or lease equipment to other parties, often at no cost, if the delivery destination is a place with a shortage.  Shippers are hesitant to enter into agreements of use of shipping containers for fear of opening up liability risks on the goods transported as well as a fear that the shipping containers will not available for their customers causing them to lose the business.  The savings achieved by avoiding the movement of empty containers are minimal compared to the lost revenue.  The factors not considered by Le Dam Hahn’s research are the intangible savings and opportunities to create new business development.

Financial and Marketing Advantages

Forward logistics keeps the economy moving with the production and distribution of goods and services.  Very few companies have begun to tap the true potentials in creating a substantial return on their investment by maximizing opportunities and benefits through transparency.

With the downturn of the economy, many families are increasing use of secondary markets.  By negotiating sales price and identifying preferred methods of disposition, a manufacturer is afforded the opportunity to select the most profitable options.  Third party liquidators can often broker deals for fee typically recovering between 20-25% of the estimated values.  If a retailer owns and operates their own secondary market through a discount store, that value increases typically up to 50%.

New charitable giving programs are becoming popular because the tax write offs are significant, and the additional benefits associated with developing good will campaigns are significant through cross marketing initiatives.  By donating surplus merchandise to a non-profit, 100% disposition, shipping, and manufacture costs in addition to 50% of the estimated retail value is a deductible.  There are some limitations to the tax rule as there are caps on the limits that can be claimed based on the manufacturers total revenue.  This is just one tool to maximize recaptured value.

Communications and transparency across an organization by coordinating marketing efforts is critical to the success of developing customer loyal, new business opportunity, and brand recognition through cross-venture advertising.

In countless discussions with Kerry Brietbart, co-founder of North American Power, he firmly believes the success of his company is the transparency of the organization, consistent branding message, and by actively engaging customers in the charitable giving program.  The company sells renewable energy and natural gas in retail markets.  When dealing with an intangible product such as a utility service, it is more important to strategically plan processes and communications to capitalize on a green marketing campaign.  Many consumers did not see the value in saving a few pennies off their utility bill.  Sales representatives had common roadblocks with residential consumers who did not care about saving a few dollars on their bill, reducing dependencies on oil, creating jobs, nor doing the right thing for the environment.  These consumers were looking for that “gotcha” and seemed to be exhausted from “green marketing”.  The challenge was overcoming that exhaustion because the target audience and had already tuned out the message before it began.  A corporate giving program launched in April 2011 partnering with well-known global charitable organizations that are now cross-marketing North American Power, as well as actively engaging customers in making a difference through the customer referral program.  When a customer decides to switch utility service to clean energy, they are actively engaged in making a difference in the world around them sending a very clear message of social responsibility.  The customer is walked through an automated process and asked to select a charity where $1 of that bill will be donated.  A customer can also add their own favorite charity such as a church, local animal shelter or food bank to the giving program. Each customer is encouraged to share the giving with their friends and family to help raise money for the charity of their choice and company provides free websites and tools to help them spread the word.  Additionally, the company designed this referral program to give back to their customers a thank you check each and every month for their referrals providing they remain a customer.  The consistent message of giving is attracting positive recognition, competitive advertising on a global scale and overcoming consumer exhaustion.

To create a successful green marketing plan and maximize the value to develop new business opportunities and customer loyalty, indirect marketing strategies are necessary.  Telling a story of how the company has made a difference and finding unique ways to actively engage and solicit customer loyalty through the program is more powerful.  “This is empowerment and it lies at the heart of green marketing” (Ottoman, 2011, P. 110).  If the communication and actions of the company does not make the consumer feel as if they are making a difference by purchasing a green product, they would not buy it in the first place.

Consumers are tired of seeing “green marketing” because it has been misused.  Good will and charitable contributions in advertising solely designed to create a sense of social responsibility with bare minimal impact will no longer work.  Too many lawsuits have arisen and consumers are wise about package labeling that make specific claims.  The most impactful marketing campaigns are indirect and through cooperative effort showing the outcomes, rather than the intents.  “Consumers want to see green themes in marketing messages in addition to traditional promises associated with a better life” (Ottoman, 2011, P. 108).

Conclusion

 The practice and implementation of reverse logistics goes far beyond a manufacturer’s responsibility.  This is a new way to create a more efficient, less costly, and socially responsible organization.  Manufacturers can not be expected to comply with every law governing every industry, such as data protection within the financial sector, but they can work with industry leaders to develop a plan to meet the customer’s needs.  This is why we must strive to constantly improve communications throughout the supply chain both forward and reverse as a holistic approach to business.

There are countless areas where a business can implement strategies to reduce waste, while increasing efficiencies and it should be an ever-evolving process improvement to be continually measured and analyzed.  As we improve and implement strategies to reduce waste, reuse or recycle goods, we can develop critical relationships to unearth new opportunities for cost saving measures, improved efficiencies, and potentially developing new business opportunities or sharing risk.

References

Breitbart, Kerry. “Mr. Kerry Brietbart.” Personal interview. 5 Feb. 2012.

“Chewonki Zero Waste Poster | Imagine A World Without Garbage.” The Chewonki Foundation. Web. 21 Feb. 2012. <http://www.chewonki.org/zerowaste/default.asp?gclid=CKH-rtO0r64CFUbc4AodgkZ4Pg&gt;.

Collins, Dan. “Dan Collins.” Personal interview. 27 Jan. 2012.

De Brito, Marisa. “Managing Reverse Logistics or Reversing Logistics Management?” Thesis. Erasmus Research Institute of Management (ERIM), 2003. Web. 10 Feb. 2012. <http://repub.eur.nl/res/pub/1132/EPS2004035LIS_9058920585_DEBRITO.pdf&gt;.

Dowlatshahi, S. “Selection of a Reverse Logistics Project for End-of-life Computers: ANP and Goal Programing Approach.” Business Source Elite. EBSCO. Web. 22 Jan. 2012. <http://web.ebscohost.com.ezproxy2.apus.edu/ehost/detail?sid=b45645ce-8466-40fc-b4f0-8e904cdd332c%40sessionmgr104&vid=1&hid=110&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bsh&AN=33263342&gt;.

“Environmental Leader.” GM Achieves Zero-Waste Status at 1st US Factory · Environmental Management & Energy News ·. Environmental Leader, 30 Nov. 2011. Web. 22 Feb. 2012. <http://www.environmentalleader.com/2011/11/30/gm-achieves-zero-waste-status-at-1st-us-factory/&gt;.

“European Commission.” - Environment. Web. 22 Feb. 2012. <http://ec.europa.eu/environment/waste/packaging_index.htm&gt;.

Geve, Curtis. “Secondary Markets.” Message to the author. 2 Feb. 2012. E-mail.

“Green Dot & Packaging Waste Directive Compliance in Europe.” Global Medical Device Regulatory and QA Consulting. Web. 22 Feb. 2012. <http://www.emergogroup.com/resources/articles/packaging-waste-directive-compliance-europe&gt;.

Jurič, B., L. Hanžič, R. Ilić, and N. Samec. “Utilization of Municipal Solid Waste Bottom Ash and Recycled Aggregate in Concrete.” Waste Management 26.12 (2006): 1436-442. Web. 22 Feb. 2012. <http://www.sciencedirect.com.ezproxy1.apus.edu/science/article/pii/S0956053X05003119&gt;.

Le Dam Hanh, P.I. “The Logistics of Empty Cargo Containers in the Southern California Region.” Metarans. Mar. 2003. Web. 23 Feb. 2012. <http://www.metrans.org/research/final/01-05_Final.pdf&gt;.

Lerohl, John. “Ethical Electronics Recycling – a Key Piece of the Reverse Logistics Industry.” Reverse Logistics Magazine Jan. 2012: 12-14. Web. 18 Feb. 2012. <http://viewer.zmags.com/publication/4eb9daec#/4eb9daec/14&gt;.

Maher, Grace. “Grace Maher.” Personal interview. 27 Jan. 2012.

Meyer, Harvey. “Many Happy Returns.” Journal of Business Strategy 20.4 (1999): 27-31. Web. 15 Feb. 2012. <http://search.proquest.com/docview/202721948?accountid=8289&gt;.

“New White Paper Examines Reverse Logistics Cost Benefits.” - Article from Supply Chain Management Review. Supply Chain Management Review, 31 Jan. 2011. Web. 23 Feb. 2012. <http://www.scmr.com/article/new_white_paper_examines_reverse_logistics_cost_benefits/&gt;.

“New White Paper Examines Reverse Logistics Cost Benefits.” - Article from Supply Chain Management Review. Supply Chain Management Review, 31 Jan. 2011. Web. 23 Feb. 2012. <http://www.scmr.com/article/new_white_paper_examines_reverse_logistics_cost_benefits/&gt;.

“New White Paper Examines Reverse Logistics Cost Benefits.” - Article from Supply Chain Management Review. Supply Chain Management Review, 31 Jan. 2011. Web. 23 Feb. 2012. <http://www.scmr.com/article/new_white_paper_examines_reverse_logistics_cost_benefits/&gt;.

Ottoman, J. Amazon Books. San Francisco: Berret-Koehler, 2011. The New Rules of Green Marketing Book: Strategies, Tools, and Inspiration for Sustainable Branding. Web. 23 Feb. 2012. <http://www.greenmarketing.com/our-book/&gt;.

Rogers, Dale S., and Ronald S. Tibben-Lembke. Going Backwards: Reverse Logistics Trends and Practices. [Reno]: University of Nevada, Reno, Center for Logistics Management, 1999. Print.

Tuttle, Brad. “Why Shoppers and Shopping Centers Alike Now Embrace the Dollar Store.” TIME.com. Time Magazine, 27 Jan. 2012. Web. 23 Feb. 2012. <http://moneyland.time.com/2012/01/27/why-shoppers-and-shopping-centers-alike-now-embrace-the-dollar-store/&gt;.

United States. International Trade Commission. By Deanne T. Okun, Charlotte R. Lane, Daniel R. Pearson, Shara L. Aranoff, Irving A. Williamson, and Dean A. Pinkert. July 2010. Web. 22 Feb. 2012. <http://www.usitc.gov/publications/332/pub4169.pdf&gt;.

Developing Technology Strategies for Reverse Logistics

          Reverse logistics management focuses on the movement of a returned product to recapture value by quickly making decisions on how the product will be managed and re-enter the supply stream.  Strategic planning to implement technology that will tightly control inventory, manage returns, develop a competitive advantage, while minimizing operational costs is the challenge.  “Today’s Enterprise Resource Planning (ERP) systems have outpaced organizational readiness for product recalls” (Persaud, 2012). 

A reverse logistics information system must be flexible. Unlike forward logistics, reverse logistics will touch upon more areas throughout the supply chain.  When developing automated technology to capture information, it is critical to consider how that information will be used and how it will benefit or impact different organizations.  Early efforts in tracking returns were simplified, often to the cost and capabilities of technology.  At one point of sale there may have been a sticker system in place identifying returns to go to the vendor, returns for salvage, or returns for disposition.  With the lower cost of technology and increased capacity to manage data, an organization can truly reap benefits to reduce costs associated with returns.

Companies often overlook returns management in developing a technological and communication plan.  By examining the organization’s existing return program, a strategic plan can be implemented achieving their specific goals to manage, improve upon, and reduce cost of managing returns, excess or obsolete goods.  If a recall were to occur, how would an organization identify where the product is?  If a retailer was receiving and inordinate amount of returns, how could they reduce those returns?  If a repair facility wanted to improve customer service, how could they plan their operations to reduce response time?

Recall Management

Tight controls over inventory, developing a tracking system to identify where a product has been throughout the supply chain most sensitive when a recall is initiated as a result of public safety or health concerns.  A company must effectively identify defective products to limit the financial impacts and liabilities that may be associated in the return process.  Integrating return or recall activities into a business strategy is the most effective way to create a plan that captures the data required that can quickly identity where a product is at any given time.  Developing strategic commitment by sharing responsibility throughout the supply chain is the most effective supply chain management.  The components in a product can be handles by multiple people throughout the supply chain from procurement of raw material, manufacture, and distribution.  This number increases when handling import or export goods.

Developing cooperation throughout the supply chain, data gathered could identify procurement, distribution, or collection strategies that could limit the impact of recall.  By capturing data that could ultimately identify low quality, or potential risks in the distribution of product. 

Service providers are beginning to look at recall management tools, to reign in active customers.  In a case study (Stone, u.d.) discussed a dental office managing patient files, educating patients on the necessity of the annual screening, as well as carefully recording inventory used in the event of a manufacturer recall to notify patients quickly who came in contact with the product.  The recall system for health service providers is designed to reduces lost revenue, increases quality of care, and limit liability in the event of a product recall.  The commitment to capturing data into the system was critical to developing and managing patient relationships.  The study determined that many patients do not return for the annual recall visits because it is commonly referred to as a cleaning that offered no value as patients considered they clean their teeth daily and do not require the service.  By capturing detailed data and using an automation system to generate consistent messages in the patient billing, reminder notices, phone calls, and any other communication system to include a specific reason for the visit increased response and quality of care.  The data captured can help the patient realize that the “cleaning”  will entail checking on specific fillings, evaluate the amount of bleeding, perform oral cancer screenings, or other specific care issues captured by the database.  As patient retention increases, management is able to determine hiring needs.  Often the hiring practices have been based on scheduling during the busiest times leaving periods throughout the year where staff is paid and little revenue is generated.  “Many offices do not know how much hygiene time they need” (Stone, u.d.).  The database system can help the office determine when hiring additional staff, is appropriate as the patient base grows.

Returns Management

The options to handle a return are limitless and can include liquidation, donation, resell auctions, private resale, and destruction.  Each option presents its own unique set of circumstances that an organization will need to examine to establish parameters to automate technology to expedite returns re-entering the supply chain.  Risks to consider might be quality control of repairs to protect the brand and perceived values of the branch.  Donations can be costly depending on an organizations tax strategies and could potentially increase operating costs. 

Setting up decision trees to maximize recovery and identify trends that can be mitigated.  “Making the right choices requires the ability to define the expected outcome, use the correct technique or combinations of the techniques for each situation, then deliver the results” (Returns Management Inc., n.d.).  By capturing data consistently that identifies who is returning the product and the reason for return, a company can easily identify opportunities for improvement. 

Is the return valid?  Nintendo faced a return rate that appeared to be higher than normal.  Nintendo had concern that some of the returns were outside the warrantee period and that consumers were registering products when there was a malfunction.  Nintendo responded to challenge of gaining better control of returns by encouraged retailers to register the merchandise at the point of sale by developing a bar code.  The process was facilitated by easily scanning a barcode on outside of the box at the point of sale.  The retailer was enticed to train staff to comply by offering a $.50 rebate for each registration they completed.  The new data supplied let retailers know whether or not the product was still in warrantee at the time of the return. “After implementing this system, Nintendo experienced an eighty percent drop in return rates” (Rogers & Tibben-Lembke, 1999)

Keeping control over inventory, managing assets, and developing communication and technology plans to manage inventory will reduce the financial impacts of returns management.  It is just as important to identify the reason for the return as well as analyzing how to handle the return.  In planning automated systems to capture information, the return should be taken one step back in the supply chain to re-introduce the produce to the supply chain recapturing value.  “A key to successful returns management is an asset recovery program that reduces losses or even generates revenue” (Biederman, 2006). 

LL Bean is an industry example of controlling returns, managing customer relationships, as well as protecting the LL Bean brand through vendor management because the organization has a consistent process in place to capturing the reason for return.   By capturing return reasons data could potentially identity the need to re-design a product, packaging, or include a simpler way to disassemble a product for easy replacement of parts that are known to wear out.  If there are a significant number of returns as a result of poor quality, a trend could be identified indicating the manufacturer is not meeting the organizational standards. 

Consider the quickest path to re-introducing a return to the supply chain.  An organization may want to implement a support desk to identify the concern.  If a consumer bought an all-in-one printer, scanner, fax, and copier and the scanner was not working, how could data is captured to eliminate that return?  A customer support center identifying the problem and capturing data would benefit reducing the number of support calls or returns.  As customer service troubleshoots the problem, data could be captured identifying the solutions which work.  Once the problem is identified, management can examine the data determining the need for call and may uncover confusion in the instruction manual which would require clarification, or possibly a need to improve the drivers for the unit to be updated. 

Repair Facilities

“A number of decisions including return collection center locations, mode of transportation to be used, control systems, and just-in-time policies, will not only influence the forward logistics network, but also the reverse logistics network” (Madaan & Wadhwa, 2007).

To reduce repair time, tight control and adherence to processes and maintenance of an inventory system should be consistent.  Maintain tight control, inventory samplings and mini-audits conducted at regular intervals will ensure control over inventory is maintained ultimately reducing costs associated with excess stock as well as increasing the quality and efficiency of the facility.  In a case study, the military identified exposure to counterfeit parts that infiltrated the supply chain which has “threatened National security, the safety of our troops, and American jobs” (Shaughnessy, 2012).  The problem America faced could not solely be blamed on the Chinese for the manufacture of substandard parts, but could be traced to a continued lack of consistency with inventory control and accountability.  Different organizations within the military have different levels of commitment surrounding inventory maintenance and control.  Property accountability managers often spend a significant amount of time trying to obtain accurate paperwork, records, and facilitating reconciliations.  Without commitment and support from the top levels encouraging compliance with the process and clearly communicating the goals for tight inventory control, frustration and resistance could work against the effort leading to gaps filled with low inventory, excess inventory, error, damage, theft, loss or the opportunity for counterfeit parts and substandard quality of the repair.  Although the military manages a database for tracking and accountability of equipment that is consistent, the processes in managing and capturing data as well as identifying location of the equipment are not.  Some military units may have bar code scanners while others will manage inventory manually with pen/paper and checking items off from a master report.  An organization overseeing a repair facilities across many different business divisions, must think about planning operations to eliminate inconsistencies and implement automation that will focus on decreasing the time a product is not operational. 

By establishing organizational objectives and an acceptable wait time for a repair, data can be used to identify customer clusters to optimize location and warehouse of repair personnel.  Data can also help anticipate and plan for common repairs, coordinating physical parts and labor to expedite the process and increase customer service.  Amini, Retzkaff-Roberts, and Bienstock (2005) conducted a study involving the planning, design, and implementation of medical laboratory devices.  The company identified parameters for repair to minimize risk to the laboratory guaranteeing a six hour turn around on repairs for most customers with exceptions being those in remote areas making compliance with the standard economically unsound or impossible. The company designed a self-diagnostic tool in the equipment that would expedite the process.  The tool would determine the cause for the repair reducing down-time. 

Controlling inventory data as well as dispatch data were the two challenging parts to coordinate to meet the six hour repair window.  By identifying common repairs, managing inventory and storage of parts decisions were made as to what parts could be stored at a customer site, warehouse, or repair technician’s vehicle.  The data was taken apart and examined using many “what if” scenarios valuating costs and identifying an optimal path to gain the most value for the least expense. 

Conclusion

Strategically planning what information to capture can enable an organization to more effectively manage operations.  In a reverse logistics process, drilling down data will help identify key challenges to improve efficiencies in the organization.  The ability to reorganize data, take it apart, and look at it from a different perspective can also prove effective in increasing operational effectiveness.

Good data management and the commitment to follow the processes in collecting data will identify opportunities in any organization to increase revenue, manage returns, and determine how a return can be managed to maximize recaptured values.

References

Amini, M., Retzlaffroberts, D., & Bienstock, C. (2005). Designing a reverse logistics operation for short cycle time repair services. International Journal of Production Economics, 96(3), 367-380. doi: 10.1016/j.ijpe.2004.05.010

Beiderman, D. (2006). Planning for happy returns. Traffic World, 18-21. doi: 195733704

Proquest

Bewster, P. (2011). Johnson & Johnson and the “phantom” recall: Practical advice to prevent risk management and quality systems from failing to identify and address sentinel events. The Heath Lawyer, 23(6), 1-12. doi: 887099742

Proquest

DeBrito, M. P. (2003). Managing reverse logistics or reverse logistics management? (Master’s thesis, Erasmus Research Institute of Management). Erasmus Research Institute.

Madaan, J., & Wadhwa, S. (2007). Flexible process planning approaches for sustainable decisions in the reverse logistics system. Global Journal of Flexible Systems Management, 8(4), 1-8. Retrieved December 23, 2012.

EBSCO

Persaud, D. (2012). Your system is ready for reverse logistics. Reverse Logistics Magazine. Retrieved December 09, 2012, from http://viewer.zmags.com/publication/b00db76a#/b00db76a/24

Digital Issue 45

Rogers, D. S., & Tibben-Lembke, R. S. (1999). Going backwards: Reverse logistics trends and practices. Reno, NV: Reverse Logistics Executive Council.

Shaughnessy, L. (2012, May 22). Probe finds ‘flood’ of fake military parts from China in U.S. equipment. CNN Security Clearance RSS. Retrieved December 26, 2012, from http://security.blogs.cnn.com/2012/05/22/probe-finds-flood-of-fake-military-parts-from-china-in-u-s-equipment/

Stone, A. (n.d.). Recall, recare, who really cares? Hylife. Retrieved December 21, 2012, from http://www.wcdental.org/wcd_professionals/2010_annual_meeting/pdf/RecallRecareWhoReallyCaresHandouts.pdf