Reverse Logistics Project

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Reverse Logistics Project

• Dr. Dale S. Rogers
• Jessica Palmer
• Kasia Banasiak
• Michael White
• Center for Logistics Management
• University of Nevada
• Reverse Logistics Executive Council
• April 2002

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U.S. Reverse Logistics Costs

• Total U.S. Logistics Costs 1,006,000,000
• Approximate RL cost 4.00
• Estimated U.S. RL Costs 40,240,000
• Source for U.S. total costs Bob Delaney, 12th
  Annual State of Logistics Report.

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Outsourced Services2001 vs 2000

• Service 2001 2000
• Warehousing 73.7 63.3
• Outbound Transportation 68.4 60.7
• Freight Bill Auditing/Payment 61.4 59.8
• Inbound Transportation 56.1 44.6
• Freight Consolidation/Distribution 40.4 32.1
• Cross-Docking 38.6 25.0
• Product Marking/Labeling/Packaging 33.3 19.6
• Manufacturing Activities 29.8 39.3
• Product Returns Repair 22.8 17.9
• Inventory Management 21.0 10.7
• Traffic Management/Fleet Operations 19.3 21.4
• Information Technology 17.5 8.9
• Product Assembly/Installation 17.5 8.9
• Order Fulfillment 15.8 10.7
• Order Entry/Order Processing 5.3 2.7
• Customer Service 3.5 4.5

Source Langley, Allen Tyndall, (2001) Third
Party Logistics Study Results and Findings of
the Sixth Annual Study. Cap Gemini Ernst Young.
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Market Trends

• Historic projected growth
• Are programs similar to PG's SLOW program the
  wave of the future?

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Total 3PL Market

• For 2000, the total U.S. 3PL market was 56
  billion.
• For the last several years the 3PL market in the
  U.S. has grown at a 5 compounded growth rate.
• Source Dick Armstrong Bob Delaney

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Closed-Loop Supply Chains

• The disposition choice is determined by the most
  profitable alternative
• Reconditioning when a product is cleaned and
  repaired to return it to a like new state.
• Recycle when a product is reduced to its basic
  elements, which are reused.
• Refurbishing similar to reconditioning, except
  with perhaps more work involved in repairing the
  product.
• Remanufacturing similar to refurbishing, but
  requiring more extensive work often requires
  completely disassembling the product.
• Resell when a returned product may be sold
  again as new.

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Closed-Loop Supply Chains

• Scope of Remanufacturing
• Estimated to be in excess of 73,000
  remanufacturing firms in the United States
• Direct employment 350,000
• Total annual sales 53 billion
• Source Robert T. Lund, The Remanufacturing
  Industry Hidden Giant, Boston University

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Zero Returns

• Manufacturer or distributor does not allow any
  returns to come back all of the way through the
  channel.
• Give the retailer or other downstream entity a
  return allowance and develop an agreement with
  the retailer as to what acceptable disposition of
  the product can be.
• A typical return allowance is 3.5-4 of sales to
  retailer.

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Zero Returns

• Reduces the variability of returns costs.
• Retailer has to take responsibility for
  minimizing returns.
• Enables the firm to avoid the problem of
  physically dealing with returns altogether.
• Does not reduce much of the physical burden
  placed on downstream channel participants.
• Cannibalization of A channel concerns.
• 2/6 Problem

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Zero Returns

• For the most part, zero returns programs have not
  been successful.
• Loss of control.
• Potentially dangerous.

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Competitive Landscape Analysis

• Number of companies within the market space
• Detailed information by company

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Project

• Identified 136 U.S. 3PL firms that said they were
  involved in reverse logistics.
• Called all of these firms and interviewed 58
  firms (42.6 response rate).

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Survey Questions

• What reverse logistics services does your company
  provide?
• Which industries does your company serve in the
  reverse logistics arena?
• Does your firm have reverse logistics IT system
  capabilities?
• What type of system?
• Percentage of firm revenue derived from IT
  system?
• Reverse logistics revenues as a percentage of
  total revenue?
• Do you expect reverse logistics activities to
  increase?

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What reverse logistics services does your company
provide?

• Transportation 47
• Reman, refurb, recycling 17
• Full line 16
• Warehousing 9
• Software 7
• Recalls 5

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Which industries does your company serve in the
reverse logistics arena?

• Electronics 22
• Consumer Goods 17
• All industries 16
• Automotive 14
• Food 14
• Pharmaceutical 3
• Forest products 3
• Software 2

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Does your firm have reverse logistics IT system
capabilities?
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What type of systems?

• Return tracking, RMA 33
• Dispositioning 9
• WMS 24
• Retail 3
• Manufacturing 2

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Percentage of firm revenue derived from IT system?

• 4 software firms included in study
• Other than software companies IT revenues
  unimportant

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Reverse logistics as percentage of total revenues

• Only two firms said RL revenues were greater
  than 10
• RL revenues for all other firms were less than
  10
• Mode 5

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Do you expect reverse logistics activities to
increase?