MyCIMA

Reverse logistics - a new focus

Posted: Thursday 13 May 2010 by Louise Ross
Replies : 2
Category: Management accounting
Keywords: costs, Manufacturing, retailing, reverse logistics, transport
Louise Ross's picture

Did you know that up to 30% of a company's products might be returned by customers? Not just because of faults. For example, a customer (bad customer!) unsure what size will fit her best might order two sizes of clothing from a mail order retailer, returning the item she doesn't want.

Many mail order retailers facilitate this by providing free postage for returns. Neither are bricks and mortar retailers or wholesalers immune from customers changing their minds, and in the interests of long term relationships, will accept returns for credit or refund.

Photo courtesy of renaissancechambara on Flickr

[Image courtsesy of renaissancechambara on Flickr]

These faulty or unwanted goods go back up the supply chain like spawning salmon fighting agains the river currents.  Many of them don't get very far (the retailer might destroy or discount the item) but sometimes they are sent back to distributors, or manufacturers.  This return journey is a much more sporadic and random process than the item's orginal logistically optimised journey to the customer; and is therefore more costly. So there is potential to minimise these costs to the immediate benefit of the bottom line.

Managing these returns is known as reverse logistics, and I'm a bit surprised I haven't read more about this topic.  We've just published a research executive summary at http://www.cimaglobal.com/reverselogistics about research CIMA funded to develop a toolkit to help companies identify savings and improve customer service in relation to returns. 

The report concludes that management accountants have a key role to play in reverse logistics, given our expertise in performance measurement, quality costs and cost benefit analysis.

The toolkit was developed for the UK's Department of Transport and a link is provided in the report. No, I'm not going to put the link in here - read the report! (seriously, it is only 8 pages so a good return on your time..)

I'd be interested to hear from anyone for whom this is a significant issue, or who feels they have good practice to share.

--

Read more in Richard Young's article in the June 2010 issue of Insight - Return to sender: managing reverse logistics

Reverse Logistics

Posted by John Smith on Monday 07 June 2010 16:42

An extremely interesting subject, thanks. 

As a network freight company, my employer is looking at new reverse logistics ideas for the re-use and recycling of packaging materials used in the initial delivery.  I hope to be in a position to share these ideas in the near future. 

I entirely agree with you and John Cullen's team that CIMA members are in a great position to play a key role in providing effective reverse logistics.

 PS:  Do you think there should be a transportation and logistics CIMA group?

Proposed transportation and logistics group - sign up here

Posted by Louise Ross on Tuesday 15 June 2010 14:34

Thanks for your comment John, and interesting proposal for a group.  Let's see if there's an appetite for it - any interested parties please respond to this blog or email me. It should be a virtual group so it can be global - I suggest we do it as a discussion board. If it takes off we can think about events or visits. I can provide links to CIMA and to a lesser extent other work in this area but the group will need a critical mass of active members to contribute real life insight and informed comment. Remember you don't have to be a CIMA member to join anything on CIMASphere.