Creating an Efficient
Flow of Returns
APQC has worked with a number of leading-edge organizations to learn how they design
and implement responsive,
cost-effective and efficient
channels for the backward
flow of returns. One aspect of
successful reverse logistics is
the strategic design of the
returns function. The critical
elements are gaining stakeholder support, identifying
and solving the reasons for
returns, and developing a
sound disposition plan.
—Marisa Brown, director of APQC
Knowledge Center, and Rob Spiegel,
ailure to implement effective reverse logistics can result in numer-
ous problems, including:
• higher and unnecessary costs,
• higher customer-service administration costs,
• greater finance, accounting, and credit issues,
• habitual product quality problems,
• messy, inefficient warehousing, and
• increased numbers of dissatisfied and lost customers.
Raising awareness is key to designing a successful reverse logistics program.
The best-practice organizations APQC studied recognize the importance of
reverse logistics initiatives in meeting the organization’s goals. They implemented and continue to execute their returns programs in order to accomplish
common goals such as increased profitability, increased customer responsiveness, and maximized asset recovery.
Cross-functional support for reverse logistics is also critical. Best-practice organizations create cross-functional alliances among the reverse-logistics team and
finance, sales, procurement, manufacturing, and customer service. The alliances
were involved in setting reverse-logistics and returns management policies.
Another important process is analyzing returns information to minimize
returns. Reason codes—shorthand explanations for customer dissatisfaction—
were developed to communicate returns information. The goal is to identify
and correct counterproductive internal processes that lead to returns.
Finally, best-practice organizations make disposition part of the reverse
logistics strategic design. The organizations work with customers and suppliers
to predetermine disposition business rules to minimize handling and improve
asset recovery. Innovative disposition avenues were sought not only to remain
compliant with environmental regulations and minimize risk, but also to
recover the most value from returned product.
APQC found in its reverse logistics best practices study that successful reverse
logistics strategy design requires the buy-in from a number of groups in the
organization. A reverse logistics effort must be championed by senior management and supported by cross-functional teams. Reasons for returns must be
identified to solve problems that cause returns, and a disposition strategy
should be an integral part of the reverse logistics strategy.