DC Velocity - December 2016

str at e g ic i ns i gh t REV E R S E LOG I ST I C S

all cases, the goal is to recover any value from the product before it’s tossed in a landfill.

All of these instances present an opportunity for retailers to interact with the customer. Because the customer already has a reason to be displeased with the product, the returns operations’ challenge is to provide superior service to retain that customer’s loyalty. Such quality service often means crediting the customer’s account immediately upon making the return. It also means providing a fast exchange, regardless of the reason for the request.

3PLs TO THE RESCUE

Due to its complexity, returns management is typically not a core competency for retailers and distributors. Companies must have the operational capacity to process the returns quickly and the IT infrastructure to credit the customer and to track the resolution of the claim. That’s why many companies turn to a third-party logistics company (3PL) to handle returns for them.

“A 3PL has the knowledge to handle the mess,” says Norm Brouillette, vice president and general manager of technology and healthcare at Ryder System. Ryder performs returns management services for clients in a number of markets.

Genco’s Kelly concurs. “Companies can
benefit by managing returns with a reliable
3PL because reverse logistics requires ded-
icated resources and expertise to handle.
This holds especially true for companies
within the healthcare, retail, and technol-
ogy industries, as regulatory compliance
and hazardous material disposal require
special consideration,” he says. “An expe-
rienced 3PL can also provide valuable
industry insight and best practices from
across varying industries to develop better
ways to handle logistics challenges.”
Using a 3PL also gives customers the
flexibility to modify their returns process-
es without a major investment in infrastructure and equip-
ment, according to Matt Ennis, vice president of business
development and client solutions at Yusen Logistics, anoth-
er company that provides returns management services.

“As product sourcing patterns change to feed the forward supply chain [such as the selection of new suppliers, new locations, or new channel options], so must the reverse supply chain change to accommodate these shifts,” he says. “If a company relies only on its internal network and associated resources, it limits itself to what it can do alone and how quickly it can react to these changes.” He adds that using a 3PL offers companies a low-risk way to test new ideas and processes for handling their returns.

Many 3PLs specialize in handing returns of specific
categories of products, such as electronics, bulk products,
clothing, or food. One of these is PlanITROI, a Denville,
N.J.-based firm that offers a full range of reverse logistics
management services geared to the higher-value IT, con-
sumer electronics, and small appliance markets. Among
the company’s clients are Acer Computers, healthcare elec-
tronics manufacturer HoMedics, and headphone maker Sol
Republic.

“Our biggest value-add is that we manage from the first user to the next user without a lot of hands in between,” says CEO Paul Baum. “We will also handle all of the ins and outs of the [transaction], including taking over the manufacturer’s warranty,” he adds.

Once a store or manufacturer receives a return, it ships the item to PlanITROI for processing. Baum says that 70 percent of the returns his company receives are a result of buyer’s remorse and arrive in unused or barely used condition. Unopened product is classified as “A-stock” and returned to the retailer or vendor to be placed back into its inventory. (Depending on the arrangement, some retailers will handle these returns internally instead of shipping them to PlanITROI.)

Products that have been opened need to be tested. If they pass muster, they’re sold as recertified goods, or “B-stock.” Baum says there is actually more demand than supply for recertified products, as they typically cost less than new ones and have been checked over at least twice.

Less than 5 percent of what PlanITROI receives requires repairs. About 70 percent of these items simply require reloading or updating their software to function properly. Only about 1 percent of returns have physical damage. In most of these cases, PlanITROI assumes the manufacturer’s original warranty and makes needed repairs. It then sells the items as refurbished goods, often to secondary markets rather than through the original retailer. Such goods are commonly sold on sites like walmart.com, staples.com, Refurbishing is not always an option, however. Some manufacturers and retailers choose not to sell refurbished goods. In this case, and when the products are determined to be BER (beyond economical repair), the components are harvested for use as replacement parts. Parts that cannot be reused are broken down further to their base materials. Plastic, glass, magnets, aluminum, and other metals are sent to recycling operations and refiners. PlanITROI actually has a division that oversees the recycling of these materials so they can be turned into future goods.

WANTED: A LOGISTICS SERVICE PROVIDER

For companies that opt to take the 3PL route, selecting the right partner is key to the arrangement’s success. But how do you find a provider that will handle your returns accu-