Supply chains are commonly thought of as moving in one direction: from manufacturer to vendor to customer. But goods flow the opposite way, too. Customers open boxes, don't like what's inside them, and return the items to the store, which then returns them to the manufacturer. Food products on grocery-store shelves approach and then pass their expiration dates and are sent back to producers. Often undetected, these "reverse logistics" can add substantial costs to supply chains.

The problem gets worse if companies mismanage the growing pile of consumer returns, damaged goods, and overstocked items, says Bill Morrison, CFO of GENCO Marketplace, a liquidator of such merchandise. Many companies "leave millions of dollars on the table" by failing to make the best use of excess inventory, he says.

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