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Adapting to Reverse Supply Chain Challenges

Unreliable solutions are proving to be costly – usually in the form of disruption within distribution centers, transportation networks, and retail stores – ultimately impacting core business revenue and operating costs.

By Jeff Rechtzigel · March 25, 2021

Editor’s Note: Jeff Rechtzigel is VP & General Manager, Retail at Liquidity Services, one of the world’s largest B2B e-commerce marketplace platform for surplus goods with over $8.5 Billion of completed transactions. Recognizing there is a better way forward in the $150 billion reverse supply chain industry, they support retail client sustainability efforts by helping them achieve zero-waste initiatives while maximizing asset recovery on their bottom line. He can be reached at Jeff.Rechtzigel@liquidityservices.com.

Retailers and consumer brands faced unprecedented disruption over the past 12 months. Online sales surged by a staggering 44% and shifting consumer behavior has created an environment where retail and supply chain innovation is vital. Challenges in the reverse supply chain are no different. Online sales produce a return rate three times higher than brick and mortar sales, increasing the complexity of managing more than $400 billion in merchandise returned annually from consumers to retailers.

The challenges of the past year forced many companies to adapt their reverse logistics and disposition strategies to mitigate cost and disruption. Shifting from in-house returns and resale teams to external providers in order to maintain focus on core business operations and investing in new partners who specialize in on-demand models are examples of reengineering the reverse supply chain. While there is no one-size-fits-all solution for handling returned and excess inventories, there are several universal strategies that every organization should consider:

Asses the reliability of your solution.  Retailers and brands often use an array of solutions to resell their excess and returned inventory, including local liquidators, in-house sales teams, and third-party service providers. While recovery value remains a key factor in evaluating success, the pandemic reinforced the importance of operational reliability. Unreliable solutions are proving to be costly – usually in the form of disruption within distribution centers, transportation networks, and retail stores – ultimately impacting core business revenue and operating costs. To be sure you have the right solution, consider the following:

– Do your partners have contingencies for unexpected events?  Relying solely on single facilities, a few buyers, a singular sales channel, or small/informal transportation solutions are potential signs of unreliability.
– Does excess/returned inventory move continuously through your supply chain? It’s important to work with a partner who can help you build a routine cadence that does not allow inventory to accumulate or reach critical levels.
– How does your solution respond to unexpected increases in volume or changing product mix?  The best solutions will have proven playbooks for effectively handling these unexpected changes so that your core business is not disrupted.

Capture market-driven recovery.  Product value in the secondary market depends on many ever-changing factors, including consumer demand, technology advances, seasonality, and supply. A modern recovery solution will identify and respond to these changes and optimize net recovery. Best practices to achieve this include:

– Multiple sales channels.  This will help your organization balance and compare sales recovery and velocity, and may include direct-to-consumer, bulk sales to SMB buyers via auction and fixed price methods, as well as bulk sales to enterprise buyers.

– Multiple options for aggregating inventory. When you can sell inventory in different configurations—single items, bulk by category and/or condition, and truckloads of mixed inventory—you open doors to more buyers and higher potential recovery revenue.

– Dedicated Marketing Resources. Companies able to leverage strong marketing strategies have a competitive edge in the secondary market. This includes digital tactics, effective photography and relevant product content—all of which attract potential buyers and support a strong customer experience.

Focus on responsible and sustainable practices.  You can use reverse supply chain logistics to support environmental, social and corporate governance (ESG) initiatives with more purposeful distribution of non-new inventory. Improvement to your reverse supply processes will extend the life of your assets, prevent unnecessary waste, reduce carbon emissions and defer products from landfills. Consider establishing refurbishment programs to increase net recovery of usable items. Experts in reverse supply chain solutions can help you responsibly remove all customer information and private data from returned items, and some have the capabilities needed to market non-working items to repair experts or recycle them in Earth-friendly ways.

These three key strategies reflect a shift in reverse supply chain dynamics towards optimizing net recovery value via multiple sales channels balanced with operational reliability and a sustainability strategy.

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