Reverse Logistics: A New Core Competency

This is an excerpt of the original article. It was written for the May-June 2013 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2013

While supply chain planning based on end-user demand has been applied in the B2B arena for decades, it is only now becoming practical in retail channels. But as distribution resource planning tools and techniques emerge, trading partners can now coordinate their supply chain as if only one company were managing it—effectively connecting the consumer to the factory.

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Managing product that does not sell, is entering the end of its life, or has been returned due to buyer’s remorse is now generally understood to be a critical part of product life cycle management. Yet this has not always been the case. Historically, most of the attention paid to product management has focused on the introductory phase or on the volume-shipping portion of the product life cycle. The leaders have greatly broadened this perspective. They know that the difference between a product’s success (and profitability) and failure often depends on how the end of life is managed.

The leaders understand, too, the business importance of taking good care of consumers. They know that customer satisfaction holds the key to long-term success and that enabling them to return products without penalty is a big part of the equation. The practice of customer returns isn’t really new (see accompanying sidebar “Sears and JC Penney—Pioneers of Customer Returns,”on page 42), but it has become much more cost-efficient in the top-performing companies.

This article strives to make the case for building an effective reverse logistics program in your organization. It describes the importance of this key component of supply chain management and outlines how reverse logistics differs from forward logistics. We then describe some of the key considerations in building a reverse logistics competency and then list key metrics that need to be put in place. Finally, the article offers some practical steps that readers can take to build momentum for a successful reverse logistics program in their organization.

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