By Pete Osborne, Managing Director, Innovate Logistics

The combined pressures of increasing expenses and environmental concerns have had a profound impact on supply chain management in recent years. Efficiently coordinating the storage and flow of goods has progressively become more scientific as manufacturers and retailers also demand precision timing at the lowest cost possible. These pressures have been further compounded by the need to comply with new environmental legislation.

However, as the industry has progressed, one link in the chain that has continually been overlooked is reverse logistics. All industrial sectors experience reverse logistics of some form: the return of faulty clothing or electrical goods, surplus barbeque food after a wet summer weekend, industrial by-products or packaging and storage materials used in transportation. In its broadest sense, reverse logistics incorporates the full process surrounding the backward stream, storage and eventual outcome of goods – whether it’s reuse, recycling or disposal. For the purposes of this article we will consider the associated issues surrounding the transportation and storage element of the process, and suggest best practice measures for improving efficiencies.

Whilst reverse logistics is a continuous issue, there are significant peaks in demand – after Christmas being the most notable example in the
UK’s supply chain calendar. Industry needs to take it more seriously. A Department for Transport report, The Efficiency of Reverse Logistics, estimates that its annual cost to the
UK retail sector alone runs into hundreds of millions. But it’s not just the cost to industry that we need to bear in mind. The EU WEEE directive surrounding the environmental impact of waste electrical goods could be an indication that in years to come, reverse logistics in general will be increasingly scrutinised and subjected to emerging legislation. 

Clearly there is a need for more effective management of reverse logistics across the entire supply chain. By taking an holistic view, retailers, manufacturers and logistics providers could implement compatible measures to address the situation and improve efficiencies.

An holistic approach

For reverse logistics to be managed productively, it needs to be considered an integral part of the overall supply chain. Rather than bolting on a separate reverse logistics strategy, forward and reverse logistics should be seen as two sides of the same coin. There are three core stages in the supply chain where measures can be taken to minimise or streamline reverse logistics:

1. the initial ordering of goods from manufacturers/warehouses

    

2. processes during the retail/return phase

    

3. the ultimate transportation and storage of reverse logistics goods as they move onto the next stage of the cycle – whether that be reuse, recycling or waste

    

    

    

Forward logistics strategies naturally strive for better forecast accuracy and more exact management information surrounding demand variability. Good stock management also plays a crucial role in reducing the quantity of unsold goods that need to pass back up the supply chain. Technology is a key driver here, and integrated IT systems help to ensure transparent communication and seamless transactions between manufacturers, logistics providers and retailers. Enhancing the precision of orders and delivery at this early stage of the supply chain process enables better buying and selling, and can significantly reduce the need for a backward flow of goods.

Nevertheless, with the best will in the world there will always be some need for both planned and unplanned reverse logistics. A major problem in reverse logistics is the irregular volumes of goods needing transportation and storage. It’s important to have the flexibility to be able to absorb the unplanned elements with as little disruption and additional cost as possible. To keep costs to a minimum, the process needs to run quickly and smoothly. Storage space is valuable and what’s more, shifting goods to the next stage of their lifecycle more quickly increases the chances of product recovery, seeing items being reused to recapture some of their value, rather than being wasted. Once again, communications play a key role here. Knowing or predicting what goods need to be moved at the earliest stage is paramount. And the more detailed information held on those goods the better, for instance, do they require temperature controlled haulage and storage, do they need careful handling, do they have a shelf-life?

Introducing mechanisms to reduce double handling, save resources and minimise mileage during both inbound and outbound journeys has always been best practice for logistics operators. Exploring synergies between forward and reverse logistics can make certain that these mechanisms benefit the entire supply chain cycle. Simple measures, such as using backhauling or onward journeys to transport goods back up the supply chain can significantly reduce the costs of reverse logistics. The strategic positioning of warehousing centres should look at the whole picture and consider reverse as well as forward logistics operations. In order to introduce measures and develop systems that are economically, technically and environmentally feasible, it’s necessary to take a long-term, holistic view and invest in detailed planning for growth and development.

Third party reverse logistics 

As supply chain management continues to demand more sophisticated procedures and planning, third party logistics is increasingly coming to the forefront. The sector persists in its shift towards what is likely to become a 4PL revolution. As greater volumes move between manufacturers and retailers up and down the supply chain, it is becoming common practice for the full logistics responsibility to be handed to one lead provider which manages the supply chain across multiple providers. A greater focus on reverse logistics will continue to drive this trend. As requirements become more advanced, it becomes less appropriate for people to make isolated decisions about reverse logistics upstream in the supply chain process. An overarching vision from a third – or fourth – party is needed to ensure efficient and effective transportation of goods both up and down the supply chain.