Supply Chain Analysis & Consulting

A recent survey of 1,000 executives in the service arena finds a high level of awareness about the importance of efficient reverse logistics programs. But that doesn’t mean that companies are doing a particularly good job in that area. In the survey, conducted by the Aberdeen Group and Choice Logistics, 61 percent of respondents said they considered the reverse logistics function to be either “extremely” or “very” important to their companies’ bottom lines and future growth. Yet the same percentage said they were “not” or “somewhat not” satisfied with their own performance in managing reverse logistics, according to Micky Long, Aberdeen’s research director for strategic service management. The function was considered most critical in the aerospace and defense, high-tech and medical device industries, he said, speaking at the annual conference of the Reverse Logistics Association in Las Vegas. The top “pressure points,” according to Long, were customer satisfaction, overall profitability, costs, inventory management and stockout avoidance, and competition. The last category relates to a company’s ability to differentiate itself through good reverse logistics management.

Still, industry leaders are finding ways to improve their reverse logistics programs. The number-one best practice, Long said, is the appointment of a higher-level executive in charge of the process. Other tips include integration of the service function with product design, marketing and sales, and aggressive cost control. The rewards are substantial; best-in-class performers show a fivefold advantage over “average” companies in recapturing initial product value through reverse logistics, he said. In addition, Aberdeen has been tracking a surge in companies’ reliance on outsourcing aspects of reverse logistics. The firm has seen a 60-percent rise in the outsourcing of parts logistics, 50 percent in product repair and remarketing, and 44 percent in basic reverse logistics.

So how can companies improve their reverse logistics abilities? “Think big picture,” Long said. Companies should view the service supply chain and traditional logistics as integrated processes. They should work to tear down functional walls, both within and without the organization, and embrace information systems that allow for the smooth flow of demand data. They should identify their core competencies and outsource processes that don’t meet that definition. And they should “measure, measure, measure.” Every relevant Aberdeen survey has found that at least 30 percent of laggards can’t even tell whether they are measuring key performance indicators. Finally, Long urged the appointment of a “champion for change” in service management. “Find a champion,” he said, “or become one yourself.”

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