Poor management of reverse logistics has the potential to cost European retailers billons of euros every year. With the credit crunch putting pressure on the bottom line, LINPAC Allibert, a leading supplier of returnable transit packaging (RTP) materials and services, believes retailers could be missing a great opportunity to deal with the issue once and for all. Managing Director of LINPAC Allibert, Laurence Tanty (below), explains:

 

“According to the latest figures around €8.66 billion* worth of goods were returned in the UK alone last year. How much businesses recover from these potential losses is very much down to the speed and effectiveness of their reverse logistics management. It is estimated that as much as 70% of the potential market value of these goods is lost on these goods through poor management. This level of loss in the return supply chain is clearly not acceptable in the current economic climate, especially as it is so easily preventable.

 

“In many cases, particularly electrical and larger consumer goods, once they enter the return supply chain they can quickly become lost, obsolete or even damaged, minimising the opportunity to return them to the market place and forcing them into global markets with long and complex distribution networks, or even, in the worst case scenario, on to the scrapheap.

 

“As suppliers of plastic totes, containers and pallets to the distribution and reverse supply chains throughout Europe we see many returned goods that are poorly packaged, if they are packaged at all. Once they have left the store little is done to protect the asset from damage in transit or storage, with items left vulnerable to crushing, knocks and scrapes - making it difficult to optimise their value on the open market. Indeed some returned goods simply vanish, becoming lost or stolen at some point during the reverse logistics process.

 

“We have seen retailers and logistics companies in Europe putting much more emphasis on finding ways to streamline their supply chains and address every other kind of inefficiency, but this is the one area where companies are still not stepping up and tackling the issue and it is costing them dear. Latest estimates put losses at over €550 million per annum in the UK - and similar levels of losses could be replicated throughout Europe unless urgent steps are taken to meet this challenge. 

 

“Reverse logistics covers an array of activities, including customer returns to retail stores, retail returns of obsolete or out-of-date stock, retail product recall, refurbishment programmes, end-of-life producer responsibility and service repair logistics. Products such as white and brown electrical goods, CDs, books, computer goods and clothing in the retail supply chain make up a substantial proportion of these items.

 

“For more than a decade LINPAC Allibert has focussed much of its investment in new products into finding ways to help retailers cut costs in the direct retail supply chain and reverse logistics. This has involved an increased emphasis on developing lightweight, durable containers that fold or nest to the smallest size to help logistics managers optimise use of space in the vehicle, reduce the number of journeys and save on fuel costs.

 

“We have also developed alternatives to cardboard and wooden packaging that help retailers to minimise damage to fragile goods in transit, while for mobile phone and high value goods retailers we have built in tamper-evident security seals to our attached lid containers and folding large containers to help eradicate potential losses through theft.

 

“We have used this expertise to help a UK Government initiative with the Chartered Institute of Logistics & Transport and Cranfield University to develop a best practice handbook designed to give logistics managers the tools to optimise the value in their return supply chains.

 

“There are a number of key points within the framework of reverse logistics activity where improvements can be identified, change implemented, and financial benefits quickly accrued. Some of the most costly errors involve lack of planning, poor care and management of stock both in transit and the warehouse, and no clear strategies in place to handle returns.

 

“An in-depth study into the problem by Professor Mike Bernon of Cranfield University and Professor John Cullen of Sheffield Hallam University estimates that if retailers took an integrated approach to the management of returns, they could potentially reduce their logistics costs by as much as 40%.

 

“Careful planning to optimise the opportunities to collect products at the same time deliveries are made can help to optimise load space in the vehicle and make managing returns more efficient. Use of RTP not only delivers cost saving benefits in handling, health and safety and transport, but an independent study shows that it also helps retailers - under the consumer spotlight - to minimise their carbon footprint.**

 

“Tracking of returned items can also be a big issue and if they are not in their original packaging, consideration needs to be given to ensure all returns can be accounted for and their cost to the business accurately assessed. This means that access to some kind of track-and-trace capability within returns packaging offers significant advantages in helping to speed up the returns process and make it as profitable as possible. 

 

“For certain industries the speed and efficiency of the reverse logistics operation is particularly critical. Products such as CDs & DVDs within the entertainment industry are a prime example. New titles which fail to sell in one location need to be redirected to stores which run out, as many titles have a very short window of appeal before sales can quickly tail off.

 

“This can also happen within the communication sector with satellite navigation systems and mobile telephones which can very rapidly be superseded by newer models.  Therefore a reverse logistics methodology which gets these products returned, processed and back on to the shelf in the minimum amount of time will maximise the revenue opportunity.

 

“As a team intimately involved in both pan-European and local logistics, we believe retailers need to see applying best practice to reverse logistics as an essential weapon in the battle to maintain margins as we face recession throughout Europe. The cost of returns is like the elephant in the room, everyone knows the issue is there but few are taking steps to deal with it. However, in our view it has now become business critical.

 

“Transport and logistics in Europe has undergone significant transformation over recent years and this is a major challenge for all concerned. It can no longer be ignored.”

 

* Figure for the value of returns compiled by Professor Mike Bernon, of Cranfield School of Management and Professor John Cullen, of Sheffield Hallam University, based on 2007 total UK retail sales of €291 billion.

 

** The carbon footprint analysis carried out by Sustain Limited, under the new standard PAS (Publicly Available Specification) 2050: 2008 Assessment of the Life Cycle Greenhouse Gas Emissions of Goods and Services, which has been introduced and endorsed in the UK by the Carbon Trust and its partners, showed the carbon footprint of LINPAC Allibert’s RTP is up to 67.8 per cent less than cardboard.