Take Control of Your Asset Funnel Through Reverse Logistics
It has become apparent that a new cost-effective approach to controlling the flow of materials is needed within the reverse logistics supply chain. The adoption of complex Enterprise Resource Planning (ERP) systems, such as SAP and Oracle, within the last decade has shown great improvements to the issue at hand, however, companies still face the issue of not utilizing the reverse logistics supply chain due to the continued lack of sophistication in the process. The need for a new system with incongruent data has made recovered assets, de-commissioned technology, moved assets, spares returns, and project excess difficult and frustrating for many companies that support the reverse logistics supply chain.
The article “Reverse Supply Chains for Commercial Returns” from the California Management Review detailed percentage losses from their research based on companies focused in technologies. From this article, is was determined that for every $1,000 of product that was available for return, 43% of that was leaked out of the supply chain. Though some of the loss was attributed to changes in technological standards, time delays, and lack of making timely decisions; the need for a new system was the leading cause of the loss. The overall result - an unmanaged reverse logistics supply chain causing much of the asset value to be lost and a minimized return on investment.
Enter in reverse logistics; the process of planning, implementing, and controlling the efficient and cost effective flow of many company processes. These include the flow of materials, in-process inventory, finished goods, and related information from the point of consumption and origin for the purpose of recapturing value or proper disposal. When managing the returns, the process should be as follows: re-use them, re-sell them, reclaim raw material through recycling, leave them to a third party, or destroy them. This process is important in reverse logistics because it exemplifies the order to maximize capital recovery.
It has become common practice for companies to work with outside organizations that specialize in reverse logistics disciplines. With the constant movement of technology and the expensive nature of these capital investments, a market has been created with tremendous opportunity for significant capex and expense savings. A common issue faced with this new system is that vendors originally supporting this market were interesting in selling or buying assets, not helping clients re-use, trade-in, and recycle them. Companies will benefit greatly from quantifying the information that comes back with the returned merchandise and using that information to drive their reverse logistics programs.