Thinking Forward in Managing Returns

by Jeroen Weers

Reverse Logistics Magazine, Aug/Sept 2007

The facility for manufacturers to offer customers a convenient and free-of-charge method of returning goods, whether for repair, exchange, a product recall, recycling or end-of-life return is increasingly essential for more and more businesses. In Europe, thanks to its extensive network of local post offices , service providers can offer manufacturers a range of attractive solutions to this problem, with the added benefit - by skipping the retail channel – of being in direct contact with their customers.

The most mature reverse logistics market can be found in the US. At an estimated value of about € 1 billion for the total returns market, it is almost as big as the European and Asia-Pacific market combined. The European market is growing more rapidly than the US though, and is estimated at around € 0.8 billion. In the EU more emphasis has been placed on returning goods for environmental reasons. In the Asia-Pacific market the concept of reverse logistics is still relatively new. In many Asia-Pacific countries little value is attributed to customer service, and also environmental issues are less important. However, there are exceptions, such as Australia and Japan. The value of the Asia-Pacific returns market is estimated at € 0.55 billion.

A reverse logistics system that is based on an extensive post office network such as in Europe, can be more attractive to both end-users and manufacturers or distributors than a product pick-up from the customer’s home or office address. The latter arrangement is generally not popular with consumers, who are often reluctant or unable to wait for items to be picked up, while for manufacturers this is difficult to organise and a costly service to provide.

Both issues tend to be magnified when items need to be returned in an emergency recall. This happened, for example, last year when a major computer manufacturer had to recall millions of laptop batteries because of a potential fire hazard. In such a case, customers expect immediate action and manufacturers need to provide them with a quick, simple means of return at short notice.

In many instances of both planned and unplanned product returns, the ideal solution for both manufacturers and consumers is to provide an easily accessible drop-off point where customers can leave items for subsequent pick-up by the manufacturer or its logistics service provider at a time that is convenient for them and at a location that is close by.

That is where Europe’s post offices come in, offering a network of over 100,000 potential drop-off points. They are familiar to consumers as well as business customers, are easy to access, and are trusted by both. Not surprisingly, this network plays a major role in European reverse logistics operations. For example, over 10 million toner cartridges are now returned each year via the postal system.

The reverse logistics market can broadly be split into two segments; non time sensitive, low value products such as toner cartridges, where costs are a decisive factor, and high value time sensitive products such as consumer electronics. This latter category often requires more sophisticated tracking and tracing, whereby reliability and speed are the critical factors. It may require an end customer to obtain a label from the internet or a call centre before dropping off the item at the local post office for returning the item.

The return of the product to the manufacturer or distributor is not always the end of the story though. In some instances, particularly where the product has been returned because it is unwanted, not suitable or broken, it may have to be recycled, cleaned or repaired before it is shipped off again to its next destination. This means that manufacturers should also consider having a forward logistics process in place as an integral part of their reverse logistics system.

Unlike the United States, a complicating factor in Europe is the multitude of national postal operations across all countries. While it might seem appropriate to select a local provider in each of the individual countries, most manufacturers will in reality opt for a single return address for the entire region in order to keep their own management and personnel costs down. If one then has to deal with 20 plus mail providers, each with different requirements, different invoicing and different service levels, making sense of international reverse mail logistics becomes quite a task. This is especially so if a manufacturer wants to keep easy track of all his reverse shipments while maintaining a simple and predictable cost structure.

The solution then lies in working with a postal provider that can genuinely offer cross border mail services and can give proper advice how to best approach this in the most efficient and cost effective way.

Jeroen Weers is Development Manager for Reversed Mail Logistics (RML) services at Spring Global Mail, a cross border mail service provider (Joint Venture partners are TNT, Royal Mail, and Singapore Post) with over a decade of experience in reverse logistics. Spring offer its customers (tailored) forward and reverse solutions using its global postal network.

Reverse Logistics Magazine, Aug/Sept 2007