The Reverse Logistics Industry has evolved so much in
this last decade. Back in the early 2000s, Reverse Logistics (RL)
was considered to be a “new frontier” of opportunity. Although there was a general recognition that Reverse
Logistics was an important part of the supply chain, much of the focus of
attention was on defining what activities and functions comprised the Reverse
Logistics Supply Chain (RLSC). Basically, the emphasis was on understanding the
basics of the RLSC: 1) how it worked, 3) key touch points and stake-holders,
and 4) critical challenges and pitfalls. Many RL professionals refer to this level of
knowledge as “RL 1.0”.
By the mid part of this decade, the knowledge of RLSCs expanded.
The focus of RL 2.0 was on making RLSCs work better and more efficiently. This meant understanding the true costs of the
RL value chain and finding ways to improve it by either streamlining or
re-engineering processes, implementing new systems to automate functions and
track key data about the supply chain, or outsource/out-tasks critical
functions to more efficient vendors. Prior
to 2.0, the conventional wisdom was that the RLSC was characterized with uncertainty.
As RLSCs evolved, we learned that there
was indeed some predictability and certainty to events. In RL 2.0 we learned not only how to track and
control the receipt of these incoming products but we also learned that there were also
multiple options for the back end processing of these items ranging from
replenishment of the returned good into the forward supply chain, to repair
first then replenish, to liquidate as is, to destroy and recycle, to any other
flavor in between.
I believe the industry has now entered the realm of RL
3.0. Here the focus is on managing disparate RL functions on an integrated
basis and adopting a more customer centric view of the RLSC. The
fact that there are so many different inbound and outbound RL processes means
that even more focus is needed to ensure maximum productivity and quality while minimizing
cost and time associated with these activities. The fact that products in the
RLSC may be purchased for consumption by other types of buyers down the line also
means that we have to focus on meeting customer requirement and achieving high
levels of customer satisfaction while earning a profit. 3.0 is about managing multiple and often
conflicting business objectives of the RLSC.
In other words, RL 3.0 is about optimization. In contrast, 2.0 was focused on cost control
and cost reduction.
Optimization in the true sense involves real-time,
dynamic planning. Today, most attempts at optimization are manual based and simply
involve business rules which prioritize the flow of goods in to various
back-end channels (e.g., liquidation, replenish, etc.). Unfortunately, most companies lack the proper
tools and technology to attain real optimization. This first requires an investment
in the proper systemic infrastructure to capture the information necessary for
real-time data management. Unfortunately, many companies have not been able to
build a business case for even this type of investment.
All too often, RL professionals talk about improvements
from a cost saving perspective making comments like “these improvements won’t
increase profits but they will reduce costs and offset losses”. This seems to meet the definition of a
“profit increase”. All too often,
executives and managers responsible for RL often ask question “why doesn’t my company
get it?” It is difficult to expect the
C-Suite to get excited about RL when improvements are described as isolated events
affecting the operating budget of a single department. C-level executives will look at each incremental
cost saving as nothing more than round off errors on the company’s income
statement. Instead, RL professionals
need to speak about these improvements as an integrated set of activities that impact
the company’s bottom line in and multiple stake holders in a significant way. This
will get the C-suite to take notice. These
conversations will all part of the RL 3.0 programming language and just like the older versions of RL, the
development, roll-out, and adoption of 3.0 will depend on the efforts of RL
professionals like you. Are you ready
for RL 3.0?