The Missing Link in Reverse Supply Chain Logistics
The rise in e-commerce transactions, as well as flexible return policies and strict environmental regulations, are shifting the focus of companies to their reverse supply chain. For companies to remain competitive and compliant, it has become a priority for businesses across industries — from retail to automotive to electronics — to update their reverse supply chain management, which is a massive undertaking. That’s why many are searching for the missing link to optimum reverse supply chain logistics.
What Is Reverse Supply Chain Logistics?
Unlike the forward supply chain, which moves from manufacturer to wholesaler to retailer, for example, the reverse supply chain moves from customer to vendor — referred to as a return merchandise authorization (RMA) — or retailer to vendor — also known as return to vendor (RTV). Between the two, it’s difficult to discern which is more common, as it varies by the industry and product, as well as the product quantity and motivator for the return.
The reverse movement can be driven by a variety of reasons, including:
In most instances, the chain will consist of the following processes:
Acquisition: The vendor obtains the product from the user.
Transportation: The vendor transports the products to a designated facility for inspecting, sorting and disposition.
Inspection: The facility staff reviews the products, determining the most profitable option for reuse.
Refurbishment: The products undergo re-manufacturing or refurbishing to restore them to purchase quality.
Distribution: The vendor establishes a secondary market for the products and redistributes them.
For many businesses, the process of implementing a well-managed reverse logistics chain is as resource-consuming and time-intensive as establishing a forward supply chain.
How Companies Are Grappling With It Today
A few factors are pushing companies to address their reverse supply chain management, and include:
More returns: Almost 20 percent of everything sold in the U.S. is returned — that high volume of product returns is making reverse supply chain management a hot operations management topic. While companies can implement a strict returns policy to combat the issue, it often takes away from your business’s competitive edge, which is a risk if you operate in a saturated market. If your reverse supply chain is ineffective, however, that can lead to dissatisfaction among consumers due to slow processing times for their returns.
More regulations: Another reason industries like the automotive sector are paying more attention to reverse supply chain logistics is the rise in regulations by environmental agencies. In the U.S. and Europe, government agencies are focusing on the recycling and disposal of products with an emphasis on goods that pose an environmental hazard, like computers and refrigerators. In fact, the U.S. requires that companies producing refrigerators acquire them after consumer use due to their hazardous materials. Like returns, regulations also impact consumers — you’re emphasizing whether your brand takes an environmentally-friendly approach.
More demands: A newer development in reverse supply chain logistics is the compression of product lifestyles, which stems from the increased need to deliver new products on a routine basis to consumers to drive purchases. As a result, there is more pressure for companies to clear their distribution channels more often, making way for the latest goods. In most cases, businesses will need to use their reverse supply chain to facilitate the return of older products that failed to sell before the launch of the next generation of products.
The fast-paced nature of the marketplace is making it a difficult challenge for companies to develop, test and launch a well-managed reverse logistics chain. While some sectors, like automotive, are experienced with the activities required to retrieve a product, such as when salvaging parts, others are less equipped for the task. That’s why many businesses, such as those in the retail sector, are turning to companies that specialize in not only processing high-volume product returns but also in reworking products.
The Competitive Advantage Hidden in Reverse Supply Chain Management
Whether your company establishes a reverse supply chain in-house or coordinates with an external provider, there are several benefits it can offer, including the ability to:
Mitigate your losses: As a business, you want to maximize your profits and decrease your losses, and you can do that with industry-best reverse supply chain management practices. With a professional rework partner, you can mitigate the potential impact of unsold or damaged products — like last season’s footwear or clothing shipments with mold — by refurbishing qualifying goods and introducing them back into the market.
Increase your profits: Depending on your products, you can also boost your earnings via reworking dead stock into new products. A company that manufactures footwear, for instance, may have dead stock of a certain girl’s shoe that didn’t sell. By adding a bow or other hardware accent, the goods can become a popular seller. Another option is repurposing products, such as an older line of clothing, for a second market.
Retain your brand images: A rising consumer trend is an interest in sustainable, eco-friendly brands. In fact, more than 80 percent of consumers make an effort to find companies with a green approach to business, which is one reason companies are implementing green programs. That’s why it’s essential to not only establish a reverse supply chain management process for your company but also promote the quality and reputation of your reverse supply chain through your public channels.
Improve your sustainability practices: A business can practice sustainability in several ways, from phasing out paper documentation to integrating well-managed reverse logistics. If you partner with a company that specializes in reverse supply chains, for example, they may have multiple locations across your service area. That feature lets your company minimize transportation times, which leads to decreased emissions and streamlined processes for high-volume product returns.
Enhance your competitive advantages: Every market sector is competitive, which is why it’s vital to research and consider how you can distinguish yourself further from the competition. A well-known reverse supply chain reputation can benefit you in several ways. First, you can promote that efficiency and sustainability to consumers. In addition, you can reuse salvaged materials to deliver products at lower prices than your competitors. Lastly, you can rework damaged goods and maximize your profits.
The Missing Link in Reverse Supply Chain Logistics
To demonstrate the above benefits, as well as the difference an external provider can deliver, consider the following real-life example:
A big-box retailer received a shipment of women’s shoes. They’d gone ahead with sending them to their distribution centers, as well as stores across the U.S., ready to engage users with the latest style for the season. What they discovered, however, was that 60,000 pairs featured mold. Unfortunately, it’s not an uncommon problem when manufacturing and importing goods from Asia, and it happens frequently during transport.
While the production costs for a pair of shoes vary, the potential loss facing the company was significant. In response, they partnered with an experienced repair and rework company familiar with high-volume product returns and well-versed in the processes required to quickly restore the product to first quality — Quality Corrections and Inspections. Since our business features facilities on the East Coast and West Coast, we could implement a fast return of the shoes.
We then cleaned and sanitized the 60,000 pairs to first quality standards and returned them to the appropriate distribution center. The company posted zero losses in sales.
Start a Well-Managed Reverse Supply Chain Management
At Quality Corrections and Inspections, we become a part of your reverse supply chain management and radically simplify and improve your company’s returns. We are the missing link that preserves or adds value in record time, mitigating potentially enormous losses throughout your reverse supply chain by restoring or improving goods to a first quality condition.
Learn more about our services by contacting us or browsing our case studies today.
Why Return to Vendor Is the Worst Decision You Can Make
For companies of all sizes and markets, return to vendor (RTV) is a consistent, day-to-day business practice related to the rise of e-commerce. In fact, 2016 saw U.S. shoppers send back $260 billion in merchandise, which translates to eight percent of all purchases in the country. It’s a trend that doesn’t show signs of stopping, which is why RTV has become one of the worst decisions for companies worldwide.
What Is Return to Vendor?
An established process, return to vendor refers to when a user or retailer arranges the return of goods to a vendor. A user, for instance, may initiate a return, sending the product to the retailer where they purchased it. The retailer then forwards the product back to the vendor. Or the user may receive a shipment label that directs the product to the vendor instead of the retailer.
In response to an RTV, which may result in an exchange, refund or replacement, the retailer or vendor will usually inquire why the user is returning a product. A few of the most frequent reasons include product defects or errors and delayed shipments. Depending on the company’s return policy, they may charge the user for return shipping and restocking costs — in most instances, however, the business loses money.
The Real Cost of Return to Vendor
To understand why, and how, return to vendor has become one of the worst decisions for companies, it’s essential to break down its real cost, which includes the following factors:
Time: For every party throughout your supply chain, time is valuable and time is money. The process of receiving, inspecting and approving returns, as well as arranging the shipment of a replacement or issue of a refund, is time-consuming — especially during the holiday season or your company’s peak season.
Money: For many companies, return to vendor costs are the most noticeable impact of RTV. Depending on your return policy, you may be paying not only the price of restocking but also shipping the order to your facility. As an example, Amazon’s delivery expenses are $6.6 billion, with only $3.1 billion of that coming from shoppers.
Image: For all industries — from retail to automotive — brands are invaluable. In fact, 70 to 80 percent of your market value comes from intangible assets, which include your brand equity. That’s why it’s essential to protect yours from negative perceptions, which extended return processes can cause, impacting your company profits.
When you’re assessing the true cost of return to vendor, it’s essential to link together its impact on your time, money and image for a full picture of its influence.
A Case Study of the True Cost of RTV
As an example, look at the real-life scenario a luxury brand faced when 15,000 pairs of women’s shoes featured a poorly glued insole — note, financial figures are hypothetical.
Due to their brand equity, many designer labels will markup their products at a rate of 12 times of the product’s actual cost, which includes the following expenses:
In general, luxury brand women’s shoes will range in price from several hundred to several thousand dollars, such as $500, $1,300 or $1,800. If they carried a sticker price of $1,500, their pre-retail cost would be $125, which translates to a potential profit — or loss — of $20 million. If the company proceeded with distributing the footwear, the retailer or customer would return them.
That introduces the cost of RTV, which consists of the following factors:
Shipping rates can vary by the size, weight and dimensions of your container. To transport 15,000 shoes, however, you can estimate the cost via FedEx Freight® Box Rates, which vary by zone and whether the shipping is priority or economy. The average is $195 for economy shipping and $211 for priority shipping — the largest container for this service is 48 inches by 40 inches by 38 inches, with a max weight of 1,200 pounds.
If 100 pairs of boxed shoes could fit in a single pallet, the company would need to pay for 150 shipments, which would be $29,250 for economy or $31,650 for priority.
Once the shipments arrived at the appropriate facilities, the cost of labor would come into the equation. On average, warehouse and distribution workers receive $13.50 an hour. If the team could process 100 pairs of footwear an hour or 1,000 pairs a day, the entire shipment would take more than two weeks of work with 10-hour shifts, as well as $2,025 per worker. If you designate a five-person team for this project, that’s more than $10,000.
Plus, you’re shipping new shoes out to your retailer — again, footing the freight bill.
While your brand equity comes from several factors, like your premium pricing and price elasticity, we can look at other luxury brands for an idea of worth. Jimmy Choo, for instance, carries an estimated value of more than $1 billion following its sale to Michael Kors. For brands that experience a drop in reputation — whether due to a data breach, drop in quality or internal scandal — the costs can total $200,000 or more, depending on the extent.
After the return to vendor process finishes, the luxury brand’s total cost would be more than $2 million, consisting of the following charges:
$58,500 for economy shipping to and from the retailer
$1.8 million for producing a replacement of 15,000 shoes
$10,125 for processing return with a five-person team
$200,000 for repairing any brand damage
For the luxury shoe brand, however, that didn’t happen. Why? They decided to avoid the pitfalls of return to vendor costs and utilize return merchandise authorization (RMA), which let them partner with a rework company, Quality Corrections and Inspections — which assessed, repaired and returned the shoes to the designated distributors at a rate and cost lower than RTV.
Choose QCI, Not Return to Vendor
At Quality Corrections and Inspections, our team can do the same for you with our convenient facilities on the East Coast and West Coast. Contact us today to learn more!
Mold Prevention & Treatment on Imported Footwear & Apparel
Mold formation on imported products can be a significant challenge for distributors and retailers. When products arrive with mold damage, it can cost the importer thousands of dollars in product loss. It also sets back timelines when they must order new products to replace the damaged shipment. No importers want to deal with mold formations, but the risk is always present when they source products from overseas.
The Challenge of Mold for Importers
Mold growth occurs when imported products travel long distances and experience damp conditions. Products coming from Asia or regions with high humidity are most likely to risk mold growth. Manufacturers in these countries may not have strict regulations about warehouse conditions that can lead to moisture being trapped in the packaging. These conditions allow mold spores to start growing and then continue to spread while the product is in transit. A small amount of mold growth can spread to affect an entire shipment by the time it reaches its destination at your warehouse. Footwear and apparel are at particular risk of mold formation because they are composed of organic fibers that promote mold growth.
When products arrive with mold formation, your company is responsible for footing the costs to replace the product. Depending on how much of the product is affected, these costs can be high. On top of financial losses, these setbacks can cause damage to your brand when you must explain to distributors or retailers why a product is not available on deadline. Even worse, if products with mold contamination accidentally end up on shelves, your company’s image will be severely tarnished.
Luckily, there are many steps your company can take to prevent mold growth on imported goods. When mold formation occurs, mold remediation can effectively remove mold so your products can be saved and restored to first quality. Understanding what causes mold to grow and how to prevent it is essential to avoid the costly impacts of mold formation on imported footwear and clothing.
Environmental Factors Affecting Mold Formation/Growth
Mold spores, the microscopic spores that lead to the growth of mold, exist everywhere in the air and soil. Mold spores are smaller than a human hair — ranging from three to 40 microns in size — and are impossible to remove from the environment. Luckily, mold will only grow under the right conditions, so prevention techniques can focus on creating conditions that are not conducive to mold growth. Environmental factors that affect the growth of mold include humidity, temperature, oxygen and the presence of a food source for the fungus. When these conditions are met, mold spores will thrive and spread rapidly through your product.
Humidity: The most important environmental factor affecting mold formation is moisture. Mold requires water to grow, whether this is damp surfaces, condensation or moisture in the air. Mold grows the best when relative humidity levels are between 70 and 90 percent — however, different types of mold require different amounts of moisture to grow. Humidity and temperature also work in conjunction, with higher relative humidity in the air requiring lower temperatures to discourage the growth of mold.
Temperature: Mold grows best in temperatures between 77 and 88 degrees. However, many types of mold are capable of developing in a wide range of temperatures as long as moisture is present.
Oxygen: As with other fungi, mold requires oxygen to grow. This means vacuum-sealing products can help reduce the risk of mold growth. Traditional packaging, however, provides enough oxygen for mold spores to thrive.
Food Sources for Mold: Mold can feed on almost any organic material, as its primary source of nutrients is cellulose, which you can find in wood, cloth, leather, paper and anything with natural fibers. Mold is extremely opportunistic, however, and can grow on any residual organic material — such as where oil from your skin has left a mark or soap residue. This means mold can grow just about anywhere. Eliminating food sources for mold is not possible if the footwear or apparel product you’re shipping is made of natural materials. Additionally, cardboard shipping boxes and wooden pallets are also perfect food for mold. Switching to plastic pallets can eliminate one source of mold food — however, plastic pallets can be expensive and may not be readily available for the company you are importing products from.
Environmental conditions that promote the growth of mold are likely to occur when importing clothing and footwear. Many of these products are manufactured in countries with high humidity levels, such as China, Vietnam and India. Additionally, due to long transit times, mold spores have plenty of time to grow while the product is shipping. Inside these shipping containers, warm temperatures during the day cause moisture to evaporate, while cool temperatures at night cause the moisture to condensate. This cycling of warm and cool temperatures, condensation and evaporation creates “container rain” and the perfect conditions for mold to spread.
Common Types of Mold That Form on Footwear & Apparel
Footwear and apparel products are a perfect source of food for mold because they are made of organic materials, such as cotton, linen, leather and wool. These materials also hold moisture well, creating an environment that’s perfect for the growth of mold. The molds that grow on clothing and footwear are typically xerophilic fungi, a type of fungi that can thrive on low relative humidity or low levels of water. Common types of mold on clothing and footwear include Aspergillus restrictus, Aspergillus versicolor, Aspergillus sydowii, Aspergillus niger, Aspergillus glaucus and some species of Penicillium.
Aspergillus molds are very common and live in regions across the globe. They can survive in a wide variety of temperatures and are found in air and soil. Aspergillus molds produce a lot of enzymes, which makes them particularly efficient at destroying the cloth materials found in clothing and shoes. When Aspergillus molds grow on footwear or apparel, they can cause it to deteriorate and also give it a musty odor.
Penicillium molds are commonly known for their usefulness in medicine, as the fungus that penicillin comes from. However, when penicillium grows on your product, it can cause severe damage. Penicillium grows particularly well on leathers and can cause leather products to deteriorate.
Identifying Mold on Footwear & Apparel
Aspergillus molds typically appear on clothing in white, green, brown or black spots or blemishes. These spots can be tiny and hard to recognize, or mold growth can cover a large surface of the product. When found on clothing these molds are not typically fuzzy nor do they protrude from the fabric. Penicillium molds are generally easy to recognize because they appear in green, blue and yellow patches. Molds on clothing or shoes will typically appear in areas where moisture gathers, such as seams or near the soles of shoes. However, once mold growth begins, it can spread to any area of a garment or shoe. When these molds do not appear visibly, they can be identified by a musty odor on the product.
Because mold can appear in a variety of colors and patterns, it’s not always easy to identify the exact species of mold on your product. However, you should always remove mold from a product regardless of the type.
Risk Analysis on Mold Formation in Your Supply Chain
There are several areas of the supply chain at which products are susceptible to mold growth. From manufacturing to shipping to storage, it is essential to assess your import supply chain for risk of mold growth. Preventing mold from growing in the first place is the best way to avoid costly damage to your product. Performing risk analysis can allow you to identify areas susceptible to mold formation and implement techniques to help you prevent its growth.
Mold Formation Due to Lack of Climate Control
Mold growth can occur on products during manufacturing or while they’re being stored if the manufacturing center or warehouse is not well-ventilated with climate controls. Your products are at risk if the warehouse they’re stored in has high humidity levels, warm temperatures or a lack of climate control, causing the conditions inside the warehouse to fluctuate.
To best protect your product, implement climate controls to the highest degree possible. Each room of your processing center should have temperature and humidity controls. Check these controls routinely to ensure they’re working correctly and stay within the appropriate range. You should maintain climate control through every step of the supply chain, including transportation. Proper ventilation and a good HVAC system are also essential to maintain safe conditions in the warehouse. Air circulation promotes drier conditions that are less likely to allow mold to grow.
Mold Formation Due to Poor Packaging
Proper packaging is crucial in preventing mold growth. Often, the companies you’re importing shoes or clothing from will use the most economical packaging materials, rather than those that best protect your product. However, if your product is damaged during shipment, the cost will land on your shoulders. Mold growth can occur when a package is crushed or otherwise punctured during shipping, allowing air to enter the product. This can happen when cheap materials are used in packaging, as well as when a product is stacked improperly or mishandled. Mold can also occur inside of packages if the product was not dry when it was packed, typically due to poor warehouse climate control.
To ensure your products are not vulnerable to mold growth during shipping, you should set clear standards for how your manufacturer should package them. Here are a few features of packaging that are essential to prevent damage to the product and reduce the risk of mold growth during shipping:
High-Quality Cardboard: Request double or triple-walled cardboard, because thicker cardboard is less likely to absorb moisture that could lead to mold growth. Many types of mold love to feed on cardboard products and will quickly grow on cardboard that retains dampness. Multi-layered cardboard can also withstand more pressure, so it’s less likely to break during transport.
Nylon Bands Around Pallets: Large pallets or packages that are being stacked should always be wrapped with nylon bands. This will help prevent boxes from popping open during shipping.
Wrap Pallets in Plastic: Reinforcing pallets by wrapping them in plastic will make them easier to move and thus less likely to incur damage. The plastic will also provide an additional level of protection against moisture that allows mold to grow. Wrapping product in plastic is even more essential if the product will be exposed outdoors at any point during shipping.
Request Plastic Pallets: Wooden pallets are one of the biggest culprits of absorbing moisture and promoting mold growth. If possible, request that they use plastic pallets or slip sheets instead of traditional wood pallets.
Use Desiccants in Packaging: Desiccants are designed to draw moisture from the air to keep products dry. Products manufactured in countries with humid climates or monsoon seasons are very likely to have humidity inside of the packaging — especially if those manufacturers do not have strict climate control standards in their facilities. Desiccants will help prevent mold from growing on the product and reduce the chance of the cartons absorbing moisture. If packages become damp, they’re more likely to get crushed during transportation.
Whenever possible, enforce these standards for climate control and proper packaging to reduce the risk of mold growth on your imported products. You can opt to perform container loading inspection or other quality control inspection before the product leaves the exporting country. An inspector can ensure proper loading to reduce the risk of product damage and perform a random check to ensure the packaging includes desiccants. Taking steps to prevent mold growth will save you time and money by avoiding product loss or mold treatment.
An Effective Process for Mold Remediation
If mold does grow on your products, you may be able to perform mold remediation to restore the product to a sell-able condition. However, mold remediation must be done effectively for all of the molds to be removed from the product — because some mold is microscopic, it could still grow back again even if it appears to be gone. A proper mold remediation process will take your product through several steps to ensure that it is cleaned, sanitized and returned to first quality, so it is ready for shipment:
Evaluation of Mold Damage: Before beginning the cleaning process, it is essential to identify the extent of mold damage to the product. Because mold can cause product deterioration, it may not always be possible to perform mold treatment effectively. When mold remediation is plausible, evaluating the extent of the damage enables professionals to select the best mold removal technique.
Cleaning the Product: The first step in mold remediation is to clean the product thoroughly. You can do this by brushing off the mold and washing the product until no visible mold is left. Use detergent and other cleaning chemicals to remove any discoloration.
Treating the Product: After you’ve cleaned the product, any lingering microscopic mold spores must be destroyed. If you don’t neutralize all the mold, growth may begin again. Treating the product will also remove any musty odor associated with mold growth. Typical mold treatment includes disinfection using chemicals or high heat treatment — professionals may also use mold ozone treatment. This shock treatment technique uses ozone to kill mold spores by blasting them with the gas and causing them to deteriorate. Ozone treatment also effectively reaches surfaces of the product that traditional cleaning techniques cannot treat.
Finishing the Product: Sometimes, small refinishing or repairs are necessary to restore the product to first quality for sale. Leathers, in particular, may need to be treated for coloration to be restored. Proper cosmetic treatments will ensure your product looks as good as new before it hits the stores or even makes it to your distributors.
Re-Package the Product: When a product has mold growth, dispose of and replace all of the tissue used in the packaging, as it may contain mold spores and cannot be cleaned adequately without deteriorating. Cartons can often be treated to remove all mold spores and then the product can be re-packaged with new fillers.
Effective mold treatment can return a product to first quality by removing all signs of mold growth including odor. Your company can save thousands of dollars in product loss through an effective mold remediation treatment.
Quality Corrections and Inspections Provides Solutions to Mold Formation on Imported Footwear & Apparel
With more than 30 years spent as the leader in mold remediation services, Quality Corrections and Inspections is the place to turn for your mold cleaning and treatment needs. Each year, we perform mold treatment on more than a million apparel and footwear products from top footwear companies and department stores.
Our mold remediation process involves cleaning visible mold and sanitizing your products and packaging. We assess each product to ensure the best mold removal process is selected for optimal results in eliminating mold and other organic growths. Our exclusive process for cleaning and sanitizing footwear eliminates 99.9% of the bacteria that causes mold and mildew. When your product leaves our rework facility, it will be first quality, ready for distribution and sale.
If you have an issue with mold on your imported footwear or apparel, request a free analysis to see how Quality Corrections and Inspections can help you.