You already know how your company goes about obtaining Silicon Power Corporation’s memory and storage products and how they, in conjunction with other components from third-party suppliers, are combined to make your signature electronics systems, cellphones and computers. However, something you may have devoted little or no thought to is what happens to the items you make once they reach the end user. This concept, known as reverse logistics, can actually have a huge bearing on your network of suppliers.
REVERSE LOGISTICS EXPLAINED
The life cycle of your products is only just beginning when they leave your warehouse. By employing a reverse logistics strategy, you can monitor the product’s proper use, how it should be disposed of and how it can be reused or recycled to increase value. Probably most important, you can streamline the returns process should there be a problem with the item that requires that it be sent back to you.
Of all the elements of reverse logistics, returned products affect your supply chain the most profoundly. Every returned item goes through the following phases:
• Physical shipping of the product;
• Quality testing of the product to identify or replicate the flaw;
• Documentation of any issues found;
• Determining what to do with the item (restock, recycle, repair or disassemble).
Since each of these steps requires time and other resources, it is easy to see why reverse logistics management should figure into any effective supply chain strategy.
KEY METRICS
Getting a handle on the following factors can help your procurement team in reducing returns as well as in better management of the items that do come back:
• Are the same goods being returned repeatedly? At what volume?
• What percentage of your total sales are you losing to returns? How can you use reverse logistics to minimize these losses?
• Why are the products being returned? Are there any quality control measures that can be taken to reduce returns?
In many respects, a good reverse logistics program represents the silver lining to be found in the cloud of product returns.
THE BENEFITS
When your company implements an effective reverse logistics program, you can reap several benefits. These include:
• Cost reduction. Well-executed returns lead to a lessening of the related costs of transportation, shipping, administration, technical support and more;
• Faster service. A streamlined reverse logistics policy leads to quicker turnaround time and therefore increased customer satisfaction;
• Customer retention. If you make a customer “whole” through savvy reverse logistics, they are more likely to continue to buy your products.
• Increased profits. Reverse logistics enables you to maximize the money you make by repairing and restocking the product, scrapping it or selling it in the secondary market.
Assembling raw materials and components into high-quality products is what your company is famous for, and it is probably where you are focusing most of your attention. Augment your robust supply chain with effective reverse logistics, and you will set yourself up for success throughout the entire life cycle of your products.
