Reverse Logistics Solution

Averagely, manufacturers spend 9-14% of sales on product returns annually. However, 45 percent of manufacturers fail to utilize a reverse logistics solution. Instead, these manufactures rely on retail or wholesale partners to deal with any customer returns, recalls, and seasonal overstocks. Initially, manufacturers saw no need to reject any customer returns, product recalls or overstocks. However, this changed after the mid-1900s when most of the U.S. manufacturing base moved offshore causing the closure of many factories. The facilities in charge of processing the returned inventory also closed down in the process. Thus, customers no longer get to enjoy the traditional luxury of returning the inventory as deemed necessary. The strict laws regarding environmental pollution have seen many manufacturers change their vendor return terms and conditions

Initially, manufacturers would make deals with retailers and wholesalers who would charge a fee for the disposal of returned inventory. In return, the retailers and wholesalers would get credit for the returns. Many retailers opted to liquidate the products in available secondary markets. The retailers would then keep the proceeds from the products. Retailers generated a great additional income in the process since most products would be liquidated at a range of 10-30% of the retail. With time, this percentage grew from 20-50% or more for the total goods processed, making it more appealing to the retailers. The tightening of environmental regulations throughout the world placed numerous constraints on this arrangement. Today, manufacturers are liable for wrongly disposing their products, which may be costly in terms of lawsuits or reputation.

While working with the same objective and principles, the Consumer Product Safety Commission, Environmental Protection Agency and the Food and Drug Administration supervise manufacturer disposal trends and ensure they observe the law. According to the law, all always responsible for their products, regardless of the terms and conditions stated on the purchase agreement. In case a company breaks this law, serious consequences, significant fines and a tainted reputation follow such a manufacturer. In the past, many companies have suffered for careless disposal such a 2010 case where a computer manufacturer lost $22 million in a fine because the state of Rhode Island found a trailer full of the company’s product illegally dumped in a landfill. While the manufacturer may not have placed the products at the location, it was liable for violation of the state’s laws.