Why It’s Time to Pay Attention to Reverse Logistics

January 17, 2017

 

Part of our mission at Argentus is to draw attention to all aspects of the wild and woolly world of Supply Chain – a world whose results we take for granted as consumers, but whose processes go on almost entirely beyond our attention. Supply Chains deliver a massive torrent of products and services to consumers every day, and it’s part of our job to talk about the people and companies who make that happen. This means highlighting the under-noticed tide pools and eddies of Supply Chain just as much as it means profiling its biggest waves – the innovations and developments that transform the way products come to market.

CBC issued an interesting report about one of these under-noticed areas – something that every business in the Retail marketplace is intimately familiar with, but that most people buying products have never heard of:

Reverse Logistics.

You hear “Reverse Logistics” and you might immediately picture trucks driving backwards from stores, pulling backwards into distribution centres, only to have backwards-moving workers unload products onto pallets where they’ll go back in time towards their site of manufacture to be disassembled into raw materials that are then returned, presumably via reverse mining, back into the ground.

Reverse logistics is, of course, not that – although it’s not as far off as you might think. It’s the process by which customer returns re-enter the Supply Chain, and it’s something that doesn’t happen the way you might imagine it. When you return, say, an unopened toaster you received for Christmas, you might have a quaint notion of the product heading to stockroom for inspection, and if it’s in good enough condition, returning to the store floor (or online store). If it’s an item that’s been (very) lightly used, we might imagine the company sending it to be refurbished and/or repackaged before returning to the floor.

But CBC recently did a profile about how only a tiny percentage of customer returns go back into a company’s inventory. In fact, a huge percentage of these returns enter the Reverse Logistics system, sold to massive warehouses owned by companies like U.S.-based Liquidity Services, where they’re sorted, catalogued, and then often resold at massive discounts to Amazon resellers, used clothing stores, and other secondary retailers. Liquidity Services’ GTA warehouse moves between 600,000 and 1.3 million products per year – almost all of them customer returns. Lots of these products arrive in shipping containers lacking manifests. Secondary retailers often aren’t sure what’s in them, meaning they’re often buying these returned-products sight unseen, almost like TV’s Storage Wars – with the difference that most of this stuff has never been used, unlike furniture and heirlooms mouldering in storage lockers for years.

To put it simply, it’s too expensive for most companies to deal with the logistics of returned products. It’s also a logistical headache, because we’re often talking about big ticket items like Televisions and Furniture – and many companies would rather let a company like Liquidity Services take the profit than deal with the logistical headache of customer returns.  The goods often come back in pristine packaging. And where the vast majority of customer returns used to go straight to landfill (seriously), they’re now part of a massive market for reusing goods that were barely used in the first place.

Think about this: Between 6 and 9 percent of goods sold in Canada enter the Reverse Logistics system – approximately $46 billion dollars worth of goods a year. It’s a section of the marketplace we never think about, which is surprising because it’s bigger than the overall retail sales for Furniture, Home Furnishings, Electronics, and Appliances combined. And with the rise of eCommerce and online sales, the reverse logistics market is only growing.

So maybe it’s time we start paying attention to this part of the field. It’s fascinating stuff. Just another example of how the Supply Chain is more vast, complicated, and often unusual than we might realize. 

 

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