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Directing Reverse Logistics – A Corporate Paradigm Shift

Directing Reverse Logistics – A Corporate Paradigm Shift

by Tony Sciarrotta, Executive Director, Reverse Logistic Association

Reverse Logistics Magazine, Edition 91

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There have been many studies that have attempted to size the reverse logistics market in the world today. One of the main struggles of such an effort is that there is no real consensus on the definition of reverse logistics, thus there is constant discussion about which functions that a company engages in actually fall under the RL label. A company may have an executive VP of returns, but potentially neglect recycling or re-use issues on that same level. There are many people within a company engaging in what are considered RL functions, but they’re not coordinating efforts or resources, or worse they are competing for resources. Bringing those functions together is the purpose of this paper - to explore the benefit of a new executive level position over reverse logistics.

In an economic climate where companies are using words like “strategic value,” “profit maximization” & “environmental profitability” with their shareholders, ignoring the RL issue by consistently placing it subordinate to planning, forward-logistics, and marketing functions seems to defy reason. I doubt there would be a company today who would not jump at the chance to capture an additional 5% profit to their bottom line. This figure is the reality now of properly coordinated and executed RL models.



The problem is that companies simply refuse to execute on the fact that better RL management can be as important, or possibly (depending on case) more important to the profits of a venture as is solid design, marketing or flawless to-market execution. One major flaw in the RL model is that there are so many competing voices within the RL space – Director of customer service, Director of returns, reclamation manager, recycling & sustainability manager, CSR, corporate giving, green initiatives, disposition management, recall managers, packaging, remarketing, 3PL/3PSP outsourcing…you get the idea: myriad people functioning separately - usually reporting to different VPs within the company, and doubtless with much overlapping of responsibilities, redundancy, and confusion. A model of this situation might look something like this:

Unfortunately, too often it’s only after some significant failure that a company sees the problem of such an incongruent structure and finally considers the value of a functioning RL model within their enterprise. There are many examples of this, from a company incurring federal environmental penalties resulting from improper disposal, or angry and lost customers because of unsatisfactory failure remediation, to a public campaign for sustainability countered by a lack of execution of green initiatives. It’s time that companies think about a cohesive strategy to bring seemingly disparate functions together within their model.

Consider if all the different parts of the RL machine are actually reporting and coordinating under the more rational singular umbrella of an executive over everything RL - imagine the efficiencies that could be captured, the streamlining that could occur if all these pieces which feature RL functions are coordinated by reporting to a single EVP of Reverse Logistics. This executive could then coordinate with other executives across the corporation. (See Figure 2)



An executive management structure that does not give voice to the reverse logistics viewpoint when considering product development or marketing strategies surely opens the company to future pitfalls. If a company has involved reverse logistics as a whole from the beginning of forward supply chain issues, with cohesive reporting and coordinated execution, there will be significant bottom-line impact. This only works if the involved RL executive has within his reports all areas of a company’s customer service, service logistics, aftermarket supply chain, sustainability initiatives & CSR departments.

I think RL has grown and strategically progressed to the point that many successful companies have identified their reverse logistics approach as a strategic variable with significant profit opportunity, on par with their product development, engineering, or marketing strategy. The fact that companies are identifying reverse logistics as part of their competitive advantage now bears out the need for there to be an executive level position coordinating the efforts of all facets of RL, while effectively representing RL to the balance of executive management.

Because there are so many disparate voices involved in the different areas of RL today, a wise enterprise would create an umbrella position on the executive level to coordinate efforts of the different facets of RL and interface with CEO, CTO, CFO, & CMO positions to address reverse issues from the beginning of the product cycle – the planning stages.

One executive I spoke with at a recent conference who works at a prominent cell phone OEM has done just this. He has advocated RL to the point of being on the VP level, and having a voice with all other executives in product & market execution planning - even to the point of having veto power if he identifies a serious RL pitfall in the process. This company is now preempting risk simply by correctly involving RL in their planning, through essentially C-level participation of an RL executive.

I hope that organizations will follow the lead of a few pioneering companies who have identified reverse logistics as more than what amounts to disaster remediation, and see it as a way to improve cost savings, customer satisfaction, profitability, environmental viability, and ultimately competitive advantage and profits. With so much at stake in business today, I imagine this will become less the fanciful thoughts of a myopic RL professional, and more a standard requirement of business success.
RLM
Tony Sciarrotta is the executive director of the Reverse Logistics Association and can be reached at tony@rltinc.com.
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