DC Velocity - December 2014

BY TOBY GOOLEY, SENIOR EDITOR
REVERSE LOGISTICS

ONE OF THE MOST IMPORTANT decisions a company can make concerns the configuration of its distribution network. How many warehouses or DCs should there be, where should they be located, and who will operate them? It’s a complex matter, and the decision rests on a host of interlocking factors. When reverse logistics is involved, that decision becomes even more complicated.

Although the typical site selection considerations for any warehouse or DC— A question that bedevils reverse logistics operations is whether to centralize or decentralize returns processing. In other words, which is better: a single processing center for the entire market, or multiple regional facilities? As is true in many business decisions, it depends—not just on cost and efficiency but also on the company’s business model, on the service it promises to customers, and on regulatory requirements, among other factors. Here are suggestions from industry experts on how to go about answering this important question.

CENTRALIZATION: PROS AND CONS

For some companies, a single centralized returns processing center is the right way to go. But, as is the case with any strategic decision, each option has its upsides and downsides. On the plus side, a central processing center offers the benefits of economies of scale, says Dr. Robert Lee Gordon, program director, reverse logistics management at American Public University. For example, having just one facility creates opportunities to consolidate returned goods from retailers into larger loads and thereby reduce freight costs.

That doesn’t apply in business-to-consumer (B2C) e-commerce,
where returned goods typically arrive via the postal service or par-
cel carriers, notes Steve Sensing, vice president and general man-