Going In Reverse
It's an unfortunate fact of consumer goods manufacturing that not every bottle, tube or pack flows through distribution to a retailer's operations and, ultimately, to the consumer's home and stays there, satisfying the customer. Some come back.
For a company on the scale of Unilever, the products that come back amount to 10 million units a year in the United States alone. So the U.K.-based maker of food, personal care and home cleaning products has taken an aggressive approach to reverse logistics, seeking to recoup as much revenue as possible from the process while minimizing its costs.
Reverse logistics "is an area we do not want to be experts in," says Mary Lane, director of customer and financial services for Unilever. "We're a firm believer in outsourcing."
Centralizing Operations
Unilever's Chesebrough-Ponds division had already made the choice to outsource its reverse logistics operation to Genco Distribution Systems when the company merged its Helene Curtis, Chesebrough-Ponds and Lever Brothers divisions into Home and Personal Care, North America, in 1997. In 2001, the division chose to merge all of its reverse logistics operations into a single facility in Jefferson City, Missouri, to be operated by Genco. Genco also operates three of five Unilever forward-supply chain mega distribution centers.
"The synergy of having them run our distribution centers and our reverse logistics process is obviously very strong," Lane notes.
Returns might come from customers dissatisfied with a product, a retailer that closed a store or chose to stop carrying a product type, or items that got damaged somewhere in the supply chain. Most are routed back to the center through Unilever's transportation system, by making use of backhaul and other transit opportunities.
All products eventually make their way to the vast, 95,000-square-foot facility. There, Genco personnel root through cases of returned items, scanning each item into a reverse logistics inventory database and evaluating its condition.
Genco workers determine if the item fits within Unilever's definition of resalable, and if so, enter it back into saleable inventory. "For example, a strawberry shampoo may no longer be sold by a store, so we take it back into inventory, and sell it to other customers or use if for free goody bags or donations," Lane says. Some items are limited by legal statutes, such as those under the review of the FDA.
Some items have incurred slight damage, and Genco personnel route them to a clean-up area where they are conditioned for resale. For goods determined non-saleable, the nature of any damages are recorded in the database and the items are disposed of appropriately. Genco manages resale of salvageable goods.
Eliminating the Source
The ultimate goal for the operation, says Lane, is to eliminate itself. To that end, Unilever turns to Genco for hidden damage supply chain audits.
"What we're really looking for in the reverse logistics arena is to avoid damages by improving product integrity," she explains.
Mining the reverse logistics database helps highlight particular products that are seeing a higher-than-expected rate of return. "There may be a lot of Q-Tips coming in, and something may have happened in the supply chain," Lane says. "Genco does a good job alerting us without our having to go through the data," she continues.
A team from Unilever and Genco follow a particular product from the point of production through the company's distribution, to the customer's distribution center, then to the store.
"We watch that pallet and see the handling, what damage occurs," Lane says. As problems emerge, "we might change the footprint for the loading process, for example, eliminating overhang on a pallet, or start using air bags on a particular size load."
Unilever staff can also take these findings to retailers to help them in the mutual goal to eliminate damage."We do this for different classes of trade and different levels of supply chain," Lane says, since differing handling techniques may be used at different levels of retail.
Reducing Returns, Boosting Sales
Together, Genco services, which include asset recovery and hidden damage supply chain audits, have helped to reduce Unilever's returns volume in the United States by 15 percent in the past year and helped fund itself by increasing the rate of return to the saleables category, Lane says.
"Obviously we want to grow revenue, but the goal is to eliminate reverse logistics so that we get to the point where the product doesn't need to be returned," Lane explains.
Despite the success, Lane is circumspect about the reverse logistics process. "It's a necessary evil that products come back to us through the supply chain," says Lane, "but if we can generate revenue and reduce costs, that fuels growth for our business."