3pl reverse logistics 04.02

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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