Reverse logistics is the orphaned step-child of many businesses.  The liability and recovery potential are often marginal.  Unit volume is too low for heavy automation.  The process is complex and touches many departments, often requiring “stop and go” judgments.  And, the process works backwards from everything else the firm does.  Nonetheless, it is a necessary business function that can be managed using familiar financial and quality guidelines.

1. Make sure that the returns and testing process captures the essential data for the quality process to reduce the root cause sources of product and fulfillment errors.
2. Integrate returns processing with supplier management programs, holding suppliers responsible for returns rates above agreed upon levels.
3. Don’t throw good money after bad.  Implement a “destroy in field” program for those lower unit cost items which don’t warrant evaluation, testing and recovery efforts.
4. Simplify decisions to the extent possible.  Initial inspections should follow a triage process.  Testing should focus on final “yes/no” parameters.  Repairs should be limited to a few well-defined replacement steps.
5. Pre-define the allowable recovery steps by product or product family.  If unit cost or dollar returns vary by more than a single order of magnitude, a rough cut categorization scheme can be used to define allowable routings and recovery actions.
6. Define a simplified linear process flow.  Allowing too many options leads to wasted handling, scheduling and obsolescence.  Cost-effective product batching is usually not justified due to the low volume of returns. 
7. Treat returns and recovery like any other operations process.  Define objectives and measure results.  Define, follow and improve processes.  Use simple, visual tools to facilitate the flow of product.
8. Invest in people.  Match the skill and experience level to the potential recovery value.  Provide the training, materials and equipment to do the job well.
9. Invest in recovery options.  For higher value products, repair, third-party services, return to manufacturer and parts salvage strategies may be cost-justified.
10. Identify bottlenecks and design the process around them.  Packaging materials, test equipment, limited space, large returns batches, research requests, inventory and parts systems, complex products and resources shared with quality assurance or special projects can all create bottlenecks.  A good process eliminates some and works around the others.

 

The reverse logistics process needs a clean process re-engineering review about every five years and a quick review at least annually.  For businesses with 1-10% net margins, the returns process offers a material opportunity for improvement.