The Hidden Value in Reverse Logistics (page 6)
-- Supply Chain Management Review, 7/1/2005
Page 6 of 6
Counting the Lessons Learned We draw five valuable lessons for supply chain managers from the experiences of the organizations described.
First: Each of the organizations involved in the benchmarking study is now at a point where its managers recognize and measure the financial impact of reverse logistics on company performance. In several cases, companies have also been able to measure the impact on customer service and relationship management. These performance measurements have further substantiated the importance of effectively managing reverse logistics.
Second: Each company now uses its reverse logistics capability to enhance its competitive advantage. While reverse logistics may never be the focal point of a company's overall strategy, managers are increasinlgy recognizing that reverse logistics can fit into a company's strategy to be a cost leader or to better serve customers. Reverse logistics systems still represent uncharted territory for many companies. Those managers who recognize the importance of the process to enhance profitability or develop stronger customer relationships stand to strengthen their companies' competitive positions.
Third: For reverse logistics systems to be successful, top management must guide and support the implementation. Only then will the strategic importance of the process be widely recognized. Each of the companies interviewed acknowledges that its systems work only because it enjoys the full support of its executive team.
Fourth: It is crucial to integrate all the functional areas that affect, or can be affected by, returned products. At several of the organizations surveyed, integration chiefly means creating tighter linkages between the marketing and logistics functions to ensure a smooth return process with prompt and correct credits for customers. Regardless of the scope of the necessary integration, each company recognized that reverse logistics spans several functional areas and cannot be managed in isolation.
Fifth: The most successful companies systematically developed decision rules that consider the cost of return transportation, the cost of reprocessing or remanufacturing, and the resale price. Such guidelines allow companies to focus their return and processing efforts on items that can achieve a return on investment while minimizing the costs incurred by other products that will not generate any return.
Authors' Note: The researchers wish to thank IBM Integrated Supply Chain for its support of this research and the companies and agencies that agreed to be interviewed.
| Author Information |
| Diane A. Mollenkopf is an assistant professor in the Department of Marketing and Supply Chain Management at Michigan State University.David J. Closs is the John H. McConnell Chaired Professor of Business Administration in the Department of Marketing and Supply Chain Management at Michigan State. |
| Footnotes |
| 1M.C. Cooper, D.M. Lambert, and J.D. Pagh, "Supply Chain Management: More Than a New Name for Logistics," The International Journal of Logistics Management, vol. 8, no. 1 (1997): pp. 1–14. |
| 2Dale S. Rogers, Douglas M. Lambert, Keely L. Croxton, and Sebastian J. Garcia-Dastugue, "The Returns Management Process," The International Journal of Logistics Management, vol. 13, no. 2 (2002): pp. 1–18. |
| 3D. S. Rogers and R.S. Tibben-Lembke, Going Backwards: Reverse Logistics Trends and Practices, Reno: Reverse Logistics Executive Council, 1999. Also, Edward W. Repa "SWMA's 2002 Tipping Fee Survey," NSWMA Research Bulletin, September 2002. |
| 4Rogers, 2002. |
| 5Rogers, 1999. |
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