Building an Optimized Return Solution from Logistic Network Commodities

by Eelco Meenhorst, Cycleon

Reverse Logistics Magazine, May/June 2008

The logistics market in Europe today is characterized by a multitude of high-quality logistics networks ranging from national postal networks to express networks and long-haul road logistics. There is really no need for additional networks, although there is a continued need for increased connectivity amongst these systems to optimize capacity usage, traffic and volumes. The reverse logistics industry is growing rapidly but, given its relatively small size in comparison to express and postal markets, is reliant on existing logistics infrastructure. As a result, when providing a reverse logistics solution, the focus is on customer requirements rather than network limitations. Trucks, warehouses and drop-off points are readily available throughout Europe, with a very high density. The real challenge is to knit all these different platforms together into a seamless reverse logistics solution centred on customer requirements. With a powerful IT system, any reverse logistics solution can be designed without the limitations of an owned logistics infrastructure or network.

Traditionally, solutions based on express networks were often the default option in reverse logistics. The rapid development of reverse logistics and its changing role for many organizations has allowed for more differentiated views on how to address these developing needs. This makes it possible to look at other existing logistics infrastructures, such as national postal networks, as part of a comprehensive fit-for-purpose reverse logistics solution. Obviously, client needs should continue to be the main determinant when selecting the right logistics components. A selection can be made on criteria such as the size and weight of the return. Pick-up solutions are usually more convenient for heavy and large items. Smaller boxes, up to a maximum of 60x60x60cm (23.6x23.6x23.6 inches) and with a weight below 20 kg (45 pounds) can easily be handled by the national postal networks. Those networks are specifically designed to handle these types of packages. In addition, consumers often prefer to drop off the return instead of having to wait for a courier to collect it from their homes. Another important criterion is timing. Whereas returns can easily be managed through express, the speed and associated cost of express often overdelivers. The return might just as well be managed with a combination of post and express, or a combination of post and trucking. By looking carefully at the required time of delivery and cost parameters, it is easy to arrive at a customized network solution. This applies to both consumer-to-business and business-to-business returns.

Developing a reverse logistics solution by leveraging available infrastructure through IT requires in-depth knowledge of the different systems. This ensures a design that utilizes the strengths of each system component. The combined postal networks in Europe, for example, are by far the largest logistics system available. With over 120,000 post offices and more than two million other drop-off locations such as mail rooms in 27 markets, the number of accessible specialized drop-off points is unmatched by any other system. This is a benefit for the end-user, who simply drops off the return whenever he wants at any post office or mail room. National postal networks in many markets are characterized by state-of-the-art logistics facilities ensuring high quality. No matter what the origin of the return is, the cost remains the same, making a solution that leverages the postal network very predictable in terms of cost. And just imagine the capacity of postal networks, able to handle millions of packages per day, ensuring maximum scalability. Whether it is just a single digital camera or a hundred thousand printer cartridges, the postal network cannot easily be saturated. The liberalization of the postal market will mean more competition, which will result in more choice and potential cost savings. The express market, on the other hand, is already an international and consolidated market with a limited number of players. They can offer high speed, but that comes at a premium price, which is not necessarily the right answer when looking to optimize the reverse logistics chain. The overall logistics market remains highly fragmented, with a large number of local, regional and international operators that are able to ship and store. Deploying these different, flexibly based systems into one integrated solution can enable an optimized reverse logistics chain.

The challenge is to ensure that the return travels together with an uninterrupted information flow. When integrating a number of logistics systems into a single reverse logistics solution, a strong umbrella system is required. This umbrella system should be able to receive and process data, but more importantly provide input or assignments to other systems based on clear rules and protocols. Beyond generic Electronic Data Interchange (EDI) capabilities, it should allow real-time and on-demand reporting services as well as easy integration with a client website or call centre. The system should be able to support modern protocols such as SOAP and different data formats ranging from XML to CSV and Excel to EDIFACT in order to easily integrate with and communicate to different systems. Obviously, data safety is critical for a system that needs to be able to interface with numerous external systems. There are only few commercial systems in the market today that can meet these requirements and are able to function as an umbrella system. Developing a powerful proprietary system therefore creates an immense competitive advantage. It allows you to deploy a fully flexible reverse logistics solution leveraging the strength of existing high-quality networks, but without the burden of capacity in an owned network. This creates an opportunity for fit-for-purpose, customer-centric reverse logistics solutions. Whereas in some returns time is crucial, in other returns a slower consolidated shipment with minimal per-item cost may be preferred. No matter what solution is chosen, the system will be able to deliver and ensure that information always travels together with the return. This allows organizations to manage an efficient return process while creating the possibility to obtain valuable customer data at the same time. Building an optimized return solution based on network commodities is already possible today.

Eelco Meenhorst, CEO of Cycleon is responsible for overall management and strategic development. He closely works with partners, investors and key customers to enable the company to further expand its leadership position as the only dedicated provider of pan-European reverse logistics solutions.

Cycleon is the only dedicated provider of pan-European reverse logistics solutions, leveraging the national postal networks for the first mile, and providing transparency and control throughout the entire return process. Since 2007, Cycleon has been part of the Reverse Logistics Group, which provides a full range of reverse logistics solutions through its group companies CCR Logistics Systems AG, Cycleon Netherlands B.V. and Vfw GmbH.