Last Thursday capped off the final day of our first-ever Supply Chain Sustainability Virtual Summit, a three-day-long series of discussions on the future of sustainability and environmental stewardship within the global supply chain, and the largest of its kind in the industry.
Over the course of the Summit, we brought together 10 of the preeminent industry thought leaders and professionals to talk about sustainability in the global supply chain. On Day 1, we talked about the fundamentals of supply chain sustainability and the changing consumer landscape around the world. On Day 2, we talked about how companies can adopt technology to successfully collaborate and achieve their sustainability goals.
On the final day of the Summit, I joined Mike Turner, formerly of UPS and with 30+ years of industry leadership experience, and Rick Blasgen, President and CEO of the Council for Supply Chain Management Professionals (CSCMP). We had gathered to discuss the topic of reverse logistics – formally 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.
Really, it all boils down to getting goods back from where you sent them, and it cuts across a wide variety of different industries and verticals. Over the course of our hour-long talk, we discussed many of the ins and outs of this important topic, both at a conceptual level and from an on-the-ground perspective into how today’s business leaders can begin to bring greater reverse logistics implementation into their own supply chain operations.
There are many different models to follow when establishing a successful reverse logistics strategy. In the retail industry, it might make sense to build a lower entry point into your reverse logistics strategy, as in the case of Nordstrom Rack. In this case, the reverse logistics channel partially consists of repurposing goods at a lower price after their initial release date, thereby making them available to a different segment of the potential consumer base and extending their potential to create revenue while reducing waste from obsolescence.
In the healthcare industry, this can manifest as large pieces of equipment being delivered to the customer, then returned to the original facility after they’ve been used (or the safe disposal of biohazard materials after their use has been fulfilled). In the food and beverage space, meanwhile, opening up strong reverse logistics channels is especially important, as nothing diminishes customer loyalty like a customer eating a spoiled piece of food.
Over the course of our hour-long conversation, we discussed numerous tips and tricks that companies can employ in either rolling out or improving their own reverse logistics apparatus.
Executing Your Reverse Logistics Strategy
In certain industries, like food and beverage, reverse logistics has been well-established for quite some time. Similar to the retail use case discussed above, a good portion of any reverse logistics strategy within F&B consists of figuring out what to do with the products that don’t get consumed before their sell-by date. As Rick pointed out during the webinar, many companies will open up channels to make sure that food that isn’t consumed at its primary location (i.e., the grocery store) makes its way to secondary avenues for consumption, like food banks. Obviously this has positive tax implications for your business, but it also reduces your overall environmental footprint and just makes the world a better place. What’s not to love?
As Mike pointed out, reverse logistics usually starts out as a cost center. You likely won’t see ROI right off the bat. Especially early on, reverse logistics is often a cost center, consisting of return transportation costs, handling costs, planning and evaluation costs, and more. In many cases, it may be more costly to take back and process an item or material than to start from scratch.
Like your sustainability mindset itself, however, a well-conceived reverse logistics strategy will grow organically and become a part of your overall business and corporate brand.
A few general tips for reverse logistics success:
- Draw clear lines between your outbound logistics and reverse logistics operations.
- Reverse logistics strategy should be planned from the start. Incorporate reverse logistics planning with all other channels.
- Consider the costs and environmental impact of additional miles from Reverse Logistics so you can factor it into your carbon footprint and offset calculations.
Closing the Loop
As FourKites’ CMO Steve Rotter mentioned at the beginning of the webinar, sustainability is a critical discussion to be having, even now as we deal with the continued fallout from a global pandemic. This current crisis has shown us the fragility of our supply chains, as well as our planet. And as businesses and consumers adapt to the new normal of social distancing, we’re seeing potential for efficient reverse logistics more clearly than ever.
Of course, user-friendly, easily-understandable returns processing is extremely valuable for competitive differentiation, as well. As more and more business moves online, efficient reverse logistics practices will only become more important. The e-commerce boom has repositioned inventory closer to consumers, allowing for reverse logistics channels to become more efficient. With over 40% of retail already in the e-commerce sector and that number growing every day, it’s only a matter of time before reverse logistics channels are reimagined and retooled to meet this new market reality and keep consumers satisfied. Companies that don’t do so risk losing business to those others that can.
If there was one key theme that came up time and time again throughout the entire Sustainability Summit, it was the idea that sustainability breeds customer loyalty across all industries. As Rick pointed out, however, lots of players are also really starting to put their money where their mouths are. He’s seen numerous companies requiring potential partners to go through more vigorous sustainability audits and go over their sustainability strategy ahead of executing a new RFP.
One more thing that I wanted to touch on here is the idea of shared capacity. Obviously, FourKites has already made several big plays to get companies to share their available transportation capacity to reduce their carbon footprint and improve operational efficiency across the board. Even beyond the transportation sector, though, the potential for capacity sharing and cross-company collaboration in streaming operational efficiency is huge. As Rick weighed in during the webinar, competitive supply chains need to come together in order to create more sustainable, efficient operations.
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If you weren’t able to join us for session 3 from last week’s summit, check out the recording here!