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Reverse Logistics Project
Dr. Dale S. Rogers
Jessica Palmer
Kasia Banasiak
Michael WhiteCenter for Logistics Management
University of Nevada
Reverse Logistics Executive Council
April 2002
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U.S. Reverse Logistics Costs
Total U.S. Logistics Costs $1,006,000,000
Approximate RL cost % 4.00%
Estimated U.S. RL Costs $40,240,000
Source for U.S. total costs Bob Delaney, 12thAnnual State of Logistics Report.
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Outsourced Services:2001 vs 2000Service 2001 2000Warehousing 73.7% 63.3%
Outbound Transportation 68.4% 60.7%
Freight Bill Auditing/Payment 61.4% 59.8%
Inbound Transportation 56.1% 44.6%
Freight Consolidation/Distribution 40.4% 32.1%
Cross-Docking 38.6% 25.0%
Product Marking/Labeling/Packaging 33.3% 19.6%
Manufacturing Activities 29.8% 39.3%
Product Returns & Repair 22.8% 17.9%
Inventory Management 21.0% 10.7%
Traffic Management/Fleet Operations 19.3% 21.4%
Information Technology 17.5% 8.9%
Product Assembly/Installation 17.5% 8.9%
Order Fulfillment 15.8% 10.7%
Order Entry/Order Processing 5.3% 2.7%
Customer Service 3.5% 4.5%
Source: Langley, Allen & Tyndall, (2001) Third Party Logistics Study: Results and Findings of theSixth Annual Study. Cap Gemini Ernst & Young.
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Market Trends
Historic & projected growth
Are programs similar to P&G's SLOWprogram the wave of the future?
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Total 3PLMarket
For 2000, the total U.S. 3PL market was$56 billion.
For the last several years the 3PLmarket in the U.S. has grown at a 5%compounded growth rate.
Source: Dick Armstrong & Bob Delaney
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Closed-Loop Supply Chains The disposition choice is determined by the
most profitable alternative: Reconditioning when a product is cleaned and
repaired to return it to a like new state.
Recycle when a product is reduced to its basicelements, which are reused.
Refurbishing similar to reconditioning, exceptwith perhaps more work involved in repairing the
product. Remanufacturing similar to refurbishing, but
requiring more extensive work; often requirescompletely disassembling the product.
Resell when a returned product may be sold
again as new.
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Closed-Loop Supply Chains
Scope of Remanufacturing
Estimated to be in excess of 73,000remanufacturing firms in the United States
Direct employment 350,000
Total annual sales $53 billion
Source: Robert T. Lund, The Remanufacturing Industry: Hidden Giant, Boston University
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Zero Returns Manufacturer or distributor does not allow any
returns to come back all of the way throughthe channel.
Give the retailer or other downstream entity areturn allowance and develop an agreementwith the retailer as to what acceptabledisposition of the product can be.
A typical return allowance is 3.5-4% of salesto retailer.
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Zero Returns Reduces the variability of returns costs.
Retailer has to take responsibility forminimizing returns.
Enables the firm to avoid the problem ofphysically dealing with returns altogether.
Does not reduce much of the physical
burden placed on downstream channelparticipants.
Cannibalization of A channel concerns.
2%/6% Problem
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Zero Returns
For the most part, zero returnsprograms have not been successful.
Loss of control.
Potentially dangerous.
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Competitive Landscape Analysis
Number of companies within the marketspace
Detailed information by company
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Project
Identified 136 U.S. 3PL firms that saidthey were involved in reverse logistics.
Called all of these firms and interviewed58 firms (42.6% response rate).
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Survey Questions What reverse logistics services does your
company provide?
Which industries does your company serve inthe reverse logistics arena?
Does your firm have reverse logistics ITsystem capabilities? What type of system?
Percentage of firm revenue derived from IT
system? Reverse logistics revenues as a percentage of
total revenue?
Do you expect reverse logistics activities to
increase?
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What reverse logistics services
does your company provide? Transportation 47%
Reman, refurb, recycling 17%
Full line 16% Warehousing 9%
Software 7%
Recalls 5%
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Which industries does your
company serve in the reverse
logistics arena? Electronics 22%
Consumer Goods 17%
All industries 16%
Automotive 14%
Food 14%
Pharmaceutical 3% Forest products 3%
Software 2%
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Does your firm have reverse
logistics IT system capabilities?
yes
90%
no
10%
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What type of systems?
Return tracking, RMA 33%
Dispositioning 9%
WMS 24%
Retail 3%
Manufacturing 2%
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Percentage of firm revenue derived
from IT system?
4 software firms included in study
Other than software companies ITrevenues unimportant
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Do you expect reverse logistics
activities to increase?
ye
83
no
17