e - commerce reverse logistics dr.dale s.rogers dr.ron tibben-lembke center for logistics management...
TRANSCRIPT
E - Commerce Reverse Logistics
Dr.Dale S.RogersDr.Ron Tibben-Lembke
Center for Logistics Management University of Nevada
Council of Logistics Management Kansas City, MO1 October 2001
Logistics is :
The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods
and related information from the point of origin to the point of consumption for the purpose of
conforming to customer requirements.
Source : The Council of Logistics Management
Reverse Logistics is :
The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods
and related information from the point of consumption to the point of origin for the purpose of recapturing value
or proper disposal.
Source :Rogers & Tibben-Lembke
Total U.S. Logistics Cost The U.S. Business Logistics System Cost is the
Equlvalent of 10:1 Percent of Current GDP in 2000
Carrying Costs $1.485 Trillion All Business Inventory
Interest
Taxes, Obsolesence, Depreciation, Insurance
Warehosing
$ billions
95
204
78
377
Transportation Costs
Motor Carries :
Truck-Intercity
Truck-Local
Other Carries
Railroads
Water (International 18 Domestic 8)
Oil Pipelines
Air (International 8 Domestic 19)
Forwarders
Shipper Related CostsLogistics Administration
Subtotal
323
158
481Subtotal
36
26
9
27
6
104Subtotal
539
1006TOTAL LOGISTICS COST
U.S. Reverse Logistics Costs
Total U.S. Logistics Costs Approximate RL cost %
Estimated U.S. RL Costs
$1,006,000,000
4.00%
$40,240,000
Source for U.S. total Bob Delaney, 12th Annual State of Logistics report
Adding Valve
■Reverse Logistics should be a set
of business processes that adds.value
to the firm.
■Most firms do not view reverse logistics
as a value adding process.
• Gatekeeping• Compacting Disposition Cycle Time• Reverse Logistics Information Systems• Centralized Return centers• Zero Returns• Remanufacture and Refurbishment• Asset Recovery • Negotiation• Financial Management• Outsourcing
Key Reverse Logistics
Management Elements
Key Reverse Logistics
Management Elements
■ Improve return “gatekeeping.”
■ Compact disposition cycle time
Information systems
Gatekeeping
• First critical factor• “Play the ball. Don’t let the ball play
you.”• Gatekeeping Innovation
Compact Disposition Cycle• Respondent firms that have very
short reverse logistics disposition cycle times have lower average reverse Logistics costs as a percentage of logistics costs
• Shorter reverse logistics disposition cycle times result in reverse logistics costs having a smaller impact on profitability.
Reverse Logistics Information Systems• Very few firms have successfully
automated information surrounding the returns process.
• Few good reverse logistics management information systems exist.
• IS queues• Have to emphasize flexibility.
• Most returns processes are paper intensive.• Reverse logistics processes have so many exceptions.• EDI standards to facilitate this boundary spanning have b
een developed to handle returns.180 transaction set was developed to manage the flow of information surrounding the return process.
• Internet may replace EDI.• Additionally, some firms are testing licence plates and tw
o-dimensional bar codes to fill gaps between systems.
Reverse Logistics Information Systems
Financial Management
• Avoid Policies that make little Long-run Financial Sense.
• Battle of the Chargebacks• Cash Flow• Third Party Specialists in Accounting
and Reconciliation
Barriers Barrier Percentage
Importance of reverse logistics ralative to other issues 39.2%Company policies 35.0%Lack of systems 34.3%Competitive issues 33.7%Management inattention 26.8%Financial resources 19.0%Personnel resources 19.0%Legal issues 14.1%
Strategic Role of ReturnsCompetitive reasonsProduct FreshnessCustomer Trust/Risk ReductionIncrease Switching CostsClean ChannelLegal Disposal IssuesRecapture ValueRecover AssetsProtect MarginCash FlowGood Corporate Citizenship
Reverse Logistics Executive Council■ Mission - The Reverse Logistics Executive Council is a not-for-profit professional organization whose purpose is to : ㆍ develop best practice industry standards that take costs out of the system for consumers, retailers and manufactures; ㆍ provide on-going benchmarking; ㆍ return casual information in order to improve the entire Reverse Logistics process
E-Commerce vs. E-Business
US Market sizeExpected eCommerce Growth in US
E-Business MarketPenetrationin 2004
Size of Returns
• Data unclear.Return rate vary by category.
• E-commerce retail returns generally higher than brick-and-mortar.
• Because of gatekeeping advantages some items have lower return rates than brick-and-mortar
US Market returns• Typical retail returns 6%
B2C Returns
• Nearly 3billion parcels delivered to consumers by 2003.
• 1.4items per order.• E-commerce markets do not know how
to manage returns.Chaos exists.• In many firms, forward processes not
under control. Unlikely that reverse logistics will be an addressable priority soon for many 2-commerce marketers.
Myth of Disintermediation
•Few customers will avoid intermediaries and go directly to original source.
•Opportunities for third parties.• Inventory management and
positioning.
Supply Chain Complexity
• As a supply chain matures, it almost always becomes more complex.
• Number of middlemen increase.
• In long run, middlemen may become most powerful portion of supply chain.
Reverse Logistics Elements
■ Customer Touch - Gatekeeping - “Severe Desk” - Technical support - Sale save - Routing
■ Product Touch - Gatekeeping - Routing - Disposition - Asset recovery - Defacing - Refurbishment - Recycling
Reverse is Different
Product quality uniform Product quality not uniform
Disposition options clear Disposition not clear
Routing of product unambiguous Routing of product ambiguous
Forward distribution costs more easily understandable
Reverse costs less understandable
Pricing of product uniform Pricing of product not uniform
Inventory management consistent Inventory management not consistent
Product life cycle manageable Product lifecycle less manageable
Financial Management issues clearer
Financial Management issues unclearer
Negotiation between parties more straightforward
Negotiation less straightforward
Type of customer easy to identity and market to
Type of customer difficult to identify and market to
Visibility of process more transparent
Visibility of process less transparent
Who Pays ?
Manufacturer?
Costs Reverse Logistics
ㆍ In bank & mortar models, consumers subsidize return transportation costs.ㆍ Negotiated sharing of costs.ㆍ Consumer transaction costs need to be low.
Ownership ?
• At what point does ownership transfer from the consumer?
• Supply chain ownership transfer.• End of quarter – end of period.
Return Policies:From the Consumers Points of View• Purpose - Determine return habits and
examine attitudes surrounding return policies and processes for both brick and mortar and e-commerce retailers.
Focus Groups
Stay at home moms Reno , NV 3/13
Stay at home moms Fabyan, CT 3/21
Hispanic , immigrants Reno , NV 4/11
Hispanic , immigrants Reno , NV 4/12
Young professionals Toronto , Canada 4/14
Affluent women Marin County , CA 4/27
College students Azusa , CA 4/27
College students Chicago , IL 4/29
Women(35-45) Grand Rapids,MI 5/4
Senior women Lansing , MI 5/5
Jazzercise women Cleveland , OH 5/6
College students Newnan , GA 5/19
Women(45-70) Newnan , GA 5/19
Is it easier or more difficult than returning a product to a traditional store?• Generally, the belief was that it is
easier to return Internet items• Prefer on-line store that has brick-
and-mortar location to return to• “They come pick it up”
City Logistics
E-commerce Players
Pure Play
Pure Play
• Focused on building business – not focused on returns.
• Using fulfillment infrastructure – often not well.
• Supply chain not efficient in either direction.
Current Fulfillment(Catalog)
• Most experienced similar return cannel.
• Some having difficulty.• Easy to add selling capacity.
Difficult to add fulfillment capabilities – particularly returns.
Clicks & Mortar
• Benefit of storefronts.• Strain capacity.• Drop-off.• Blend returns into store inventory.
Brick & Click Return Advantages• Customers get prompt credit processing • Immediately get replacement item• Web shoppers less likely to be willing to
wait for credit or exchange• Customer may have already seen item
in store, and be less likely to return it.• Online and brick & mortar too close
Return Models
Website Guys
Physical
Processors
Full Service
Return Models – Website Guys
• Ping database• Attempt to disposition• Credit reconciliation• Select shipping method• Print label• Procure RMA• Need infrastructure
Return Models – Physical Processors
• 3pls• Consolidation• Refurbish• Recycle• Hot replenishment & backorders• How fed?
Return Models – Full Service
• Ping database• Advantage of both• Infrastructure may be necessary• Returns not standardized process. Separation of inventory and
information more difficult.• Value-Added service
Returns Volumes
• Brick & Mortar customer returns established at 6%
• On-line returns higher? - Easier to return items - Catalogs much higher• Lower? - Customized product - Gatekeeping at service desk