Today’s supply chain managers are faced with three forces driving the reverse loop in distribution: regulatory compliance, sustainable practices and money saving strategies. Any one of these reasons will work, say business leaders, and the payoffs are similar in the extreme. Indeed, by “doing the right thing” companies are helping themselves while saving the planet. The ongoing economic “volatility” is teaching manufacturers and retailers a great deal about squeezing the margins of inventory and creating a viable and sustainable alternative distribution network, says a prominent reverse logistics expert. According to Dr. Dale S. Rogers, professor of logistics & supply chain management, and codirector of the Center for Supply Chain Management at Rutgers University, logistics managers are under more pressure than ever before. “Rising transportation costs along with global clinical uncertainty and shifting demand patterns have increased the complexity of their missions,” he says. One overarching trend Rogers pointed to was less reliance on China. “With the wage structure rising there, and added expenses associated with the reverse cycle, we see a gradual move away from the massive manufacturing sourcing of the past,” he adds. This will not happen suddenly, cautions Rogers, who maintains that the first temptation for U.S. shippers might be to simply send aftermarket goods into landfills. But with the growing global focus on sustainability, that tactic will not last long. “Environmental pressures will be exacerbated by commercial forces as well,” he says. “With the shortage of precious and rare earth metals, the need for reuse will be enormous. And you can’t return old electronic goods to China. Those days are coming to an end.” As resource scarcity becomes increasingly apparent – from oil to water to rare earth elements – the configuration of supply chains and the ability to recapture products for components or materials will become increasingly important for supply chain managers. At the same time, Rogers says, Brazil and other emerging nations are drafting laws to require manufacturers to recycle unsold goods. This will further complicate a supply chain based on point-of-sale imperatives. “The lack of infrastructure in some of the more remote regions of Brazil make it almost impossible to regain any margin on the reverse cycle,” he says. “It’s very expensive to just get your product to market in the first place.” The traction that “near-shoring” is gaining will have an impact in the longterm, says Rogers, with more sourcing going to crossborder factories in Mexico. “It’s not going to happen all at once,” he cautions, “but it will make local refurbishment less costly eventually. This is especially true of high-tech products that require a high yield rate in the secondary market.” According to Edgar Blanco, research director at the MIT Center for Transportation & Logistics, shippers should also keep their eyes on the Caribbean Basin for reverse logistics. “The Panama Canal expansion is going to be a game-changer,” he says, “driving a great deal of logistical activity in the region. “We are keeping a keen eye on Colombia, for example. Electronics manufacturers there are recycling batteries and cartridges on a massive scale. This is a very aggressive reverse process that neighboring countries are going to emulate.” Blanco, who also serves as the executive director of the MIT SCALE Network in Latin America says that U.S. manufacturers may even move some repair and repackaging operations in the coming years. “Miami is already feeling the impact of this, and other major U.S. cities in the Gulf may be next,” says Blanco. “At the same time, however, a secure network of suppliers has to be put in place. This means complete transparency between first-, second-, and third-tier partners. Without that, there’s too much risk. Food and pharma shippers will be the most vigilant in this regard.” Supplier transparency is key to any reverse cycle. But supply chain scholars note that other risks must be examined as well. Diane A. Mollenkopf, Ph.D., McCormick associate professor of logistics department of marketing and logistics University of Tennessee College of Business Administration says the tsunami disaster in Japan highlighted the vulnerability of being too lean in terms of inventory protection levels. “One also runs the risk of having too few suppliers, especially when geographically concentrated,” she says. “Shippers will surely be reconsidering how much inventory is really needed in the supply chain and where that inventory should be located.” Near shoring on the rise. Is the trend of “nearshoring” having an impact on reverse logistics? According to Dr. Mollenkopf, the answer is a definite “Yes.” The economics  of managing the reverse flow of goods through the supply chain are such that return goods are much more expensive to transport and handle than forward-flow goods. When manufacturers and suppliers are off-shore at a long distance, it is not cost-effective to return goods to them. This limits the recovery potential that could be gained from returned goods. When goods are sourced from near-shore suppliers, it makes the prospect of returning goods for refurbishment or parts recovery much more feasible from both a cost and a time perspective. Thus, reverse logistics networks may be developing in new ways to take advantage of new opportunities to recapture value in return goods. Mollenkopf notes that from a reverse logistics perspective, some shippers may find that they can increase their inventory protection by more effective and timely recapture of return goods. “So an effective reverse flow may help mitigate some of supply risk,” she says. “Shippers just need to realize the inventory potential they may have within their existing market areas.” Third-party logistics providers. Finding a third-party logistics (3PL) provider capable of managing an offshore reverse process is still difficult, though. According to Mollenkopf, the economics of forward and reverse flows pose different challenges. “A good 3PL not only handles transportation, but also has a network of facilities for sorting return goods,” she says. “This is a very specialized type of business, and shippers must make sure that the skill sets are in place before committing to a third-party strategy.” According to Michael Blumberg, a certified management consultant and president of the Blumberg Advisory Group, shippers should seek 3PLs offering a “Reverse Logistics Management” (RLM) tailored to their specific needs. “It should come as no surprise that reverse logistics will play a significant strategic role in supply chain development,” he says. “But it’s not a ‘one size fits all’ type of business.” Blumberg contends that RLM also contributes to the bottom line by reducing cost and protecting revenue. “When you consolidate your administration, you have liability protection and resource optimization,” he says. “Then there are gains in productivity and efficiency. Ultimately, shippers provide customer service and goodwill that translates into more orders.” Other analysts maintain that being a good “world citizen” also comprises customer service. According to Gary Cullen, chief operating officer of 4PRL LLC, a growing trend of being “cheaper and nearer” seems to fit well within the costsensitive and “eco-conscious” reverse logistics chain of events. “Much efficiency can be found in nearsourcing third-party service providers (3PSP) who specialize in redeployment, repair, reuse, recycling, reclamation and resale,” he says. “This appears to be a successful business model in today’s fuel conscious and green-minded environment.” There are many valid reasons to outsource reverse logistics to a 3PL,” he says. “The key is to have a good contract that will protect everyone’s interests, achieve the original goals that drove the decision to outsource and ensure a win/win relationship between the parties.” —Patrick Burnson, Executive Editor for Logistics Management and Supply Chain Management Review magazines and websites. Patrick is a widely published writer and editor who has spent most of his career covering international trade, global logistic and supply chain management. pburnson@ehpub.com.