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RETURN ON RETURNS. Like every other retailer, Sears is in the business of pushing sales out the door, not pulling them back in. And yet, the retailer has put in place technology that enables it make money on that which its customers bring back, as reported by Kim S. Nash in Baseline magazine (Jan 03). "Returns can actually be profitable," says Prof. Dale Rogers of the University of Nevada at Reno. "It sounds crazy but it's true...It has become an objective for a lot of enlightened firms."
The challenge for Sears, typical of most retailers, is that every supplier has a different set of standards regarding returned merchandise. Some want the stuff "sorted by type of product" and another wants stuff back "only when the pile hits a certain dollar value or number of units." But for Sears, with some 10,000 suppliers and 2,900 stores, the chaos was a real losing proposition, to say the least. So in 1993 it engaged Genco Distribution Systems to put in place "reverse logistics," and "since 1999, Genco has processed at least 23 million returned items every year for Sears."
Genco not only built a database of supplier returns protocol, but set up three warehouses from which all returns are processed. Sears simply hands the whole arduous process off to Genco. Store personnel just piles up the returns, unsorted, on a pallet and calls Genco to come and pick it up. Genco estimates that "centralizing and outsourcing returns can cut in-store labor to about 10 hours per week per store...Annual benefits -- increased manufacturer credits, fewer labor hours on the chore, more cost-effective shipping -- are pegged at $4 million per year." Clay Valstad of Sears actually won't confirm exactly the profitability of reverse logistics for the retailer, but confirms: "In addition to recovering significant dollars in vendor credits or through recycling, we are able to recover all the costs of running our reverse logistics program."
Tim Manners, editor
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