Reverse logistics at critical juncture

The ongoing economic downturn is teaching manufacturers and retailers a great deal about squeezing the margins of inventory and creating a viable and sustainable alternative distribution network, said a prominent reverse logistics expert.

According to Dr. Dale S. Rogers, Professor of Logistics & Supply Chain Management,? and Co-Director of the Center for Supply Chain Management at Rutgers University, logistics managers are under more pressure than ever before.

“Rising transportation costs along with global clinical uncertainty and shifting demand patterns have increased the complexity of their missions,” he said.

One overarching trend Rogers pointed to, was less reliance on China.

“With the wage structure rising there, and added expenses associated with the reverse cycle, we see a gradual move away the massive manufacturing sourcing of the past,” said Rogers.

This will not happen suddenly, cautions Rogers, who said that the first temptation for U.S. shippers might be to simply send aftermarket goods into landfills. But with the growing global focus on sustainability, that tactic will not last long.

“Environmental pressures will be exacerbated by commercial forces as well,” he said. “With the shortage of precious, and rare earth metals, the need for reuse will be enormous. And you can’t return old electronic goods to China. Those days are coming to an end.”

At the same time, Rogers said, Brazil and other emerging nations are drafting laws to require manufacturers to recycle unsold goods. This will further complicate a supply chain based on point-of-sale imperatives.

“The lack of infrastructure in some of the more remote regions of Brazil, make it almost impossible to regain any margin on the reverse cycle,” he said. “It’s very expensive to just get your product to market in the first place.”

The traction that “near-shoring” is gaining will have an impact in the long-term, said Rogers, with more sourcing going to cross-border factories in Mexico.

“It’s not going to happen all at once,” cautioned Rogers, “but it will make local refurbishment less costly eventually. This is especially true of high-tech products that require a high yield rate in the secondary market.”

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