1. Reverse Logistics: Important or Irritant?
The Reverse Logistics Association was founded in 2002 when research studies were completed which revealed that over $750 billion annually was being spent on reverse logistics processes in North America alone.

2. reverse logistics would not exist.”
“In an ideal world,
reverse logistics would not exist.”
Jim Whalen, “In Through the Out Door,”
Warehousing Management, March 2001

3. reverse logistics is seen
“Now, more than ever,
reverse logistics is seen
as being important.”
Dale Rogers, Going Backwards, 1999

4. Reverse vs. Forward Forecasting Distribution Centers Quality
Disposition
Marketing

5. Reverse Logistics - What is it? The Commercial Perspective
Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.

6. Typical Reverse Logistics Activities
Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory
Recycling packaging materials/containers
Reconditioning, refurbishing, remanufacturing
Disposition of obsolete stuff
Hazmat recovery

7. Why Reverse Logistics?
Competitive advantage
Customer service
- Very Important: 57%
- Important: 18%
- Somewhat/unimportant:23%
Bottom line profits

8. Reverse Logistics - New Problem?
Sherman
Montgomery Ward’s
Recycling/remanufacturing in 1940s
World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff
Salvage and reuse of clothing and shoes in the Pacific Theater World War II

9. Key Dates in Reverse Logistics
World War II – the advent of refurbished automobile parts due to shortages
Tylenol Scare - Johnson and Johnson
German ordinance that put teeth in environmental reverse pipeline
Summer 1996 – UK Packaging and Packaging Waste Legislation
2001 – EU goal of 50-65% recovering or recycling of packaging waste

10. Reverse Logistics
A US Army Perspective

11. Operation Iraqi Freedom
The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months

12. Jane’s Defence Weekly “Recent report (Aug 2003):
There is a 40 hectare (~100 acres)
area in Kuwait with items waiting
to be retrograded back to the US.”

13. Does this create a problem?
From GAO Audit Report

14. From GAO Audit Report

15. The Commercial Perspective
Reverse Logistics
The Commercial Perspective

16. Mattel's expanded product recall
of 19 million toys is pushing a lot
of product back through the supply chain.
Recall of 3912 items from Peanut Corporation of America Salmonella problems causing “constipation” of forward supply chains
Dell recall of faulty laptop batteries
2010 – toys, pallets, Tylenol
2011 – 4 million Toyotas

17. Reverse Logistics Rate of returns? Cost to process a return?
Time to get the item back on the shelf if resaleable?

18. Costs - above the cost of the item
Merchandise credits to the customers.
The transportation costs of moving the items from the retail stores to the central returns distribution center.
The repackaging of the serviceable items for resale.
The cost of warehousing the items awaiting disposition.
The cost of disposing of items that are unserviceable, damaged, or obsolete.

19. Process inbound shipment at a major distribution center = 1.1 days
Costs
Process inbound shipment at a major distribution center = 1.1 days
Process inbound return shipment = 8.5 days
Cost of lost sales
Wal-Mart: Christmas returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers
PalmOne - 25% return rate on PDAs

20. More Costs
Hoover - $40 Million per year
Cost of processing $85 per item
Unnamed Distribution Company - $700K items on reverse auction
over $60 billion in returns; $52 billion excess to systems; $40 billion to process

21. Is it a problem? Estimate of 2004 holiday returns: $13.2 billion
% of estimated holiday returns: 25%
If true, value of 2011 returns ~ $120 billion
Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day)
Personal Computers: $1.5 Billion annually = approximately $95 per PC sold
79% of returned PCs have no defects
Home Depot ~ $10 million in returns in the stores

22. More consequences
Increased Customer Wait Times
Loss of Confidence in the Supply System
Multiple orders for the same items
Excess supplies in the forward pipeline
Increase in “stuff” in the reverse pipeline
Constipated supply chain

23. Impact?
Every resaleable item that is in the reverse supply chain results in a potential stock out or “zero balance” at the next level of supply.
Creates a “stockout” do-loop

24. Results?
This potential for a stock out results in additional parts on the shelves at each location to prevent a stock out from occurring.
More stocks = “larger logistics footprint” = the need for larger distribution centers and returns centers.

25. Reverse Logistics
According to the Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, is an astounding %.
Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline

26. Electronics Reverse Logistics
$677 billion
$132 billion
60 million – 12 million
100 million
20-50 million metric tons
2-5%
70 %
4 billion pounds
4 million pounds
75 pounds/40,000 pounds

27. “The truth is, for one reason or another,
materials do come back and it is up to
those involved in the warehouse to
effectively recover as much of the cost for
these items as possible.”
- Whalen, “In Through the Out Door”

28. Impacts of Reverse Logistics
Forecasting
Carrying costs
Processing costs
Warehousing
Distribution
Transportation
Personnel
Marketing
Customer Service
Bottom line profits

29. Supply Chain Security/Supply Chain Preparedness
“the single biggest threat facing
American traders is
supply chain security”
Website for C-T PAT

30. Supply Chain Security
“We have proved to our management that good security is good business.” — Ann Lister of Texas Instruments

33. Supply Chain Security What’s the cost of 9/11 to the Supply Chain?
Fortune Magazine - $50-80 billion a year
inefficient supply chains
higher transportation costs
increased inventory

34. Problem? Terrorism/Piracy Obsolescence Pilferage Information Breach
Proprietary Data – Camera Phones; Thumb Drives
Cyberspace Security
RFID Data Security
66% of Sealift Containers arrive at 20 Major Ports
>58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach
~44% through Los Angeles/Long Beach
Lengthening of Supply Chains – coupled with Globalization
6/24/2018

35. Supply Chain Security/Disruption Headlines
IMB identifies rash of false shipments into North Africa
Pirates intensify attacks in new areas
New High for Piracy
Russia Sends Warship to Somali Coast to Fight Piracy – Bloomberg.com
UN adopts new Somalia piracy resolution

36. Supply Chain Headlines
“New Budget includes $10.2 Billion for Border Security.”
“Major Data Theft Leads to Major Legal Problems” Baseline Magazine
“Polo Ralph Lauren – Lost Point of Sale Data”
6/24/2018

37. Examples Major Distributor, Dec 2006 Locks on trucks
Security and Accountability for Every Port Act - SAFE Port Initiative
Scanning of Containers
C-TPAT
Threats in the international market-place know no borders.

39. Please see below figures for piracy and armed robbery incidents as reported to the IMB Piracy Reporting Centre in 2012
Worldwide Incidents: updated on 25 June 2012
Total Attacks Worldwide:
Total Hijackings Worldwide: 19
Incidents Reported for Somalia:
Total Incidents: 67
Total Hijackings:13
Total Hostages: 195
Current vessels held by Somali pirates:
Vessels: 13 Hostages: 185

40. Risk
Supply Chains are inherently complex, dynamic, and fluid, characterized by uncertainty, ambiguity, and friction. These characteristics cloud the operating environment: they create risks

41. Risk Assessment Terrorism Theft
Port Security – over 14 million containers annually to the US; ~500 million world wide
Port Security – 300 US Ports
Longshoremen Strike – 2002
Potential Airport Attack – LAX; MPS; LGA
Potential loss of attack to major port - $20 billion estimate

42. Problems? 66% of Sealift Containers arrive at 20 Major Ports
>58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach
~44% through Los Angeles/Long Beach
Lengthening of Supply Chains – coupled with Globalization
Top 5 “Hottest Global Markets”: China, Mexico, Eastern Europe, Southeast Asia, India

43. New Problem?
“There were no ‘secure’ rear areas.” General Joseph Heiser on Vietnam Logistics
Sun Tzu – Chapter 1, The Art of War
Native Americans
American Civil War – Great Train Chase
Pirates of the Caribbean

44. Supply Chain Security
A Global Perspective

45. Top 5 European Ports Rotterdam – 9.743 million TEUs in 2009
Hamburg – million TEUs (9.7 mil in 2008)
Antwerp – 7.3 million TEUs (8.6 in 2008)
Bremen – million TEUs (5.5 in 2008)
Valencia – 3.65 million (3.6 in 2008)

46. Other Key Ports Singapore – 25.87 million TEUs Shanghai – 25 million
Hong Kong – 20.9 million
Shenzhen – million
Pusan – million

47. SAFE Port Act
The SAFE Port Act codified into law a number of programs to improve security of U.S. ports, such as:
Additional requirements for maritime facilities
Creation of the Transportation Worker Identification Credentials
Establishment of interagency operational centers for port security

48. Safe Port Act Container Security Initiative Foreign port assessments
Customs Trade Partnership Against Terrorism

49. Container Security Initiative
CSI consists of four core elements:
Using intelligence and automated information to identify and target containers that pose a risk for terrorism.
Pre-screening those containers that pose a risk at the port of departure before they arrive at U.S. ports.
Using detection technology (X-Rays) to quickly pre-screen containers that pose a risk. Using smarter, tamper-evident containers.

50. Containers - Concerns Cost to X-Ray containers Manpower Delays
Radiation

51. C-TPAT Voluntary November 2001 > 10,000 members ~50% of all imports
Mutual Recognition Agreements – New Zealand, Korea, Japan
Canada has a program very similar to C-TPAT named FAST – Free and Secure Trade.

52. Orlando International Airport
No staffing of doors for employee entrance to baggage claim areas
Guns smuggled into planes by employees
“no requirement for us to staff those doors” OIA Spokesperson; TSA – “not my job!”
Identified as security issues in 2004
2006 – ½ of TSA Screeners failed test that measured how well employees could identify explosives, guns and other weapons on the scanner – but can identify bottles of mouthwash and toothpaste
Source: Mike Thomas, Orlando Sentinel, Mar 15, 2007, p. B-1

53. Food Security
Salmonella

54. BioTerrorism? Dole Foods recall April 2012
Peter Pan Peanut Butter – e coli – 2007
E-coli from fresh Spinach – 2006
Chi Chi’s e-coli – from green onions – 2003
Taco Bell – e coli 2005
None were terrorist attacks but impacted supply chains
US Salmonella/e-coli scare 2008
Salmonella epidemic >3921 separate items recalled

55. Summary
Direct link between supply chain security and homeland security
Logistics costs are large part of manufacturing costs
Savings in supply chain costs to bottom line
Supply chains need to be prepared for man-made and natural disruptions