Reverse Logistics: Backward Practices that Matter

  • ID: 615396
  • Report
  • 118 Pages
  • American Productivity & Quality Center, APQC
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The purpose of this study was to learn how leading-edge organizations maximize value recovery by implementing responsive, cost-effective, and efficient channels for the backward flow of returns. The focus included investigating how successful enterprises structure their reverse logistics programs and examining how data obtained through well-managed reverse supply chains can be used to improve products, services, and customer interactions. By looking at emerging best-practice organizations, the study aimed to identify ways to design, gain stakeholder support for, and implement reverse logistics strategies that improve profitability and lead to innovative customer retention initiatives.

Supplemented with thought leadership from WERC, Reverse Logistics: Backward Practices That Matter uncovers how best-practice organizations design, establish, enable, and measure service-oriented reverse logistics and disposition strategies that minimize cost and liability while maximizing reverse velocity, profitability, asset value recovery, and customer loyalty.

Key Findings:

- Awareness of the importance of reverse logistics must be raised to a high level in the organization.

- A reverse logistics effort must be championed by senior management and supported by cross-functional teams.

- Reason codes should be used to identify and solve problems that cause returns.

- A disposition strategy should be an integral part of the reverse logistics strategy.

- Understanding cost is the primary prerequisite to effectively assessing a reverse channel.

- Someone must have ultimate accountability for returns and returns policy.

- Education and collaborative practices between supply chain partners work.

- Returns information should be visible and traceable throughout the reverse channel.

- Supply chain partners integrate reverse logistics systems and processes to support collaborative returns management initiatives.

- A focus on process (instead of silo activities) ensures that desired reverse practices are executed successfully.

- Rigorous, targeted, and visible key performance indicators allow for optimized reverse logistics performance.

- The reverse logistics effort must strive for continuous, sustainable improvement.

“A successful physical reverse network minimizes expense and liability while maximizing reverse velocity, profitability, and asset value recovery. Such programs ultimately lead to innovative practices that improve customer satisfaction and customer loyalty.”- -Subject matter expert Cheryl Harrity
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Sponsor and Partner Organizations 4
Executive Summary 7
Study Findings 15

Chapter 1 Reverse Logistics Strategy Design 17
Chapter 2 Establishing a Physical Reverse Channel and Information Flow 29
Chapter 3 Enabling Processes and Operating Systems 39
Chapter 4 Measurement, Results, and Continuous Improvement 47

Partner Organization Case Studies 53
Carolina Logistics Services Inc.
GENCO Distribution System Inc.
McKesson Corporation (Pharmaceutical Distribution—McKesson Supply Solutions)
Raytheon Aircraft Company (RAPID—Raytheon Aircraft Parts Inventory and Distribution)
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Overview of Findings:

The study team identified 12 overarching insights and findings from the best-practice partners. The approaches taken by the best-practice partners provide many insights into how their organizations communicate the importance of reverse logistics throughout their enterprises, ensure senior management support for reverse logistics initiatives, work with internal and external stakeholders to implement their strategies, and continuously improve to achieve sustainable results. Greater detail is available in the report chapters that follow and in the best-practice partner case studies presented at the end of this report.

Chapter 1: Reverse Logistics Strategy Design
1. Awareness of the importance of reverse logistics must be raised to a high level in the organization.
2. A reverse logistics effort must be championed by senior management and supported by cross-functional teams.
3. Reason codes should be used to identify and solve problems that cause returns.
4. A disposition strategy should be an integral part of the reverse logistics strategy.

Chapter 2: Establishing a Physical Reverse Channel and Information Flow
5. Understanding cost is the primary prerequisite to effectively assessing a reverse channel.
6. Someone must have ultimate accountability for returns and returns policy.
7. Education and collaborative practices between supply chain partners work.

Chapter 3: Enabling Processes and Operating Systems
8. Returns information should be visible and traceable throughout the reverse channel.
9. Supply chain partners integrate reverse logistics systems and processes to support collaborative returns management initiatives.
10. A focus on process (instead of silo activities) ensures that desired reverse practices are executed successfully.

Chapter 4: Measurement, Results, and Continuous Improvement
11. Rigorous, targeted, and visible key performance indicators allow for optimized reverse logistics performance.
12. The reverse logistics effort must strive for continuous, sustainable improvement
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- Carolina Logistics Services Inc.*
- GENCO Distribution System Inc.
- McKesson Corporation (Pharmaceutical Distribution—McKesson Supply Solutions)
- Raytheon Aircraft Company (RAPID—Raytheon Aircraft Parts Inventory and Distribution)

* Carolina Logistics Services Inc. (CLS) is the parent company of Carolina Supply Chain Services (CSCS) and CLS MedTurn Healthcare Services. CSCS specializes in supply chain analysis for all markets, whereas CLS MedTurn specializes in returns management for the pharmaceutical and health care markets. Since CLS is the parent company, this report will refer to the organization as Carolina Logistics Services, or CLS, throughout.
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