Edition 110, September 2020

Why You Need a Reverse Logistics Partner and Not (Just) a RL Solution

By Sruli Richler, The Surplus Company

In the early 50s, a fellow was walking along in the downtown area of Montreal. As he passed a pharmacy, he noticed them dumping large quantities of brand new lipstick into the trash. Upon inquiry, he was told that Canada had just outlawed a certain chemical because of its dangerous components, being that this lipstick contained that chemical, it was no longer sellable. “Hang tight”, the fellow said, and ran around town looking to find a suitable home for this otherwise brand new and useful product. Upon returning a few hours later he proudly exclaimed “Good news, I sold them for you”. The owner protested, “you clearly misunderstood, do you know what the implications are? I’m not allowed to sell this product”. The fellow replied “don’t worry, I sold them to the undertakers at 50% off for open casket funerals and they’re very happy”.

This is a story I’ve heard many times throughout my childhood. It was probably the strongest influencing factor that made me want to join the RL business. The notion that ‘one man’s trash, (in this case, literally) is another man’s treasure’, and the ingenuity and creativity in finding the suitable home for an otherwise thought-to-be-dead product gave me and still gives me a rush today. This fellow also happened to be my great uncle.

When I actually joined the industry in 2012, I noticed a beautiful and major component that I hadn’t noticed as a youngster; not only were we turning one man’s ‘trash’ into another man’s ‘treasure’, but we were simultaneously helping the recipient, by allowing one man to find the ‘treasure’ at ‘trash’ prices. It was truly a win-win.

Which got me thinking, it’s ironic that most companies miss out on this. They use their RL departments just to find someone who is willing to take their ‘trash’, to solve their immediate problem, whatever it may be, as a means to recoup part of their investment, or to salvage some money from a distribution or regulation challenge, but not realizing that they can actually benefit from their own ‘trash’. Not in the traditional way, but in a way that they would profit far more than the menial return of the physical assets. Something that they pay focus groups and market researchers large amounts of money to be able to figure out. They have access to the real ‘treasure’ that they often leave on the table; the data.

As everyone knows, if your RL team is setup in the wrong way, you can create serious distribution, liability and regulation challenges. Very often what is thought as a quick asset recovery, is actually a net loss when you factor in these challenges and negative brand impact.

Your company’s RL strategy cannot be looked at as a one time transaction, and on a broader scale it can have major ripple effects outside of your company, on your employees, your customers, the environment and society at large.

Unfortunately I’m seeing a large amount of top tier brands missing this glaring point. I believe the reason for this is because most companies don’t view it as a big enough problem, it is only a very small percentage on their balance sheets. The industry was born around solving a one time problem, and as the needs grew was never quite converted into a full fledged strategy.

Partner Mindset vs One-Time Solution Mindset

This is the wrong approach. What a company should be looking for is a RL partner mindset, not a solutions based mindset. A Solutions based mindset is transactional and can give you a net loss after brand damage. They don’t care about you, your profit, your product, your brand integrity or your liabilities. They also don’t care for others, including often practicing harmful and wasteful habits, and will try to game the system as much as they can.

Ultimately, the difference is simple, one wants you to have more returns and challenges and one wants you to have less. This problem exists internally within companies as well, if the RL department is solutions based, their job is in jeopardy if they do well. However, if the department has the company’s core values in mind, then it wants what’s best for the company; less RL and more profits.

On the flip side, a partner based mindset will try to get you the most profit, handle the product with the most care with your company’s potential liabilities and brand image in mind. They sincerely care about others, future generations and the long term effects.

A partner is someone who looks out for you, someone who handles your needs as a service. In today’s globalized society where everyone has access to everything, there is less need for intermediaries. There’s less need for companies who handle RL as a product. Brands should be trying to get as close to the end user as possible. A partner mindset will try to connect you with the customer directly, they’re acting as a service. I believe you’ll see much more of this in the future as the way forward to handle RL; service based RL. A partner is someone who will be able to give you the data to fix your problems in the first place, so you have less returns and actually don’t need a solution.

They will help you with things outside of this individual transaction. They give you advice, they help you preempt you RL challenges by making sure that you’re taking advantage of your IP strength, they use their industry knowledge and expertise help you close up your grey market distribution leaks, they can help you implement solutions like serializing your products for example, or any other solution. They’re there to hold your hand. A partner will help you view the process as a circular economy, from product development to sales distribution to reverse logistics and back to product development, round and round. Instead of having the data only flowing down, a partner brings that data upstream to the product developers so they can in turn create a better product!

At one of the industry conferences, I remember Jeremy Witte from Best Buy discussing how they’re implementing this concept within their organization. They had a product (I don’t recall the exact one) that was yielding a high return rate. Their RL team was able to pinpoint that it actually wasn’t a product defect, but a packaging issue. Because they had this RL system in place, they were able to pass this very simple but highly valuable information to the product development team so it can be adjusted.

That’s what a partner mindset will do for you. Every step along the way is improved, better products lead to happier customers, which leads to less returns, which leads to a better environment and more (top AND bottom line) profits. A partner is there to help you MINIMIZE your RL and help make you more successful, a solution wants you to have MORE RETURNS because their strategy is a selfish one and want to do only what’s best for their immediate business.

In order for the partner mindset to be effective, you need to be completely in line with your RL partners/department. You need to view them as an arm on your team, an arm that’s completely in sync with the rest of your body. It can only help you. You can’t just pay lip service to improve the strategy, you need to believe it, you need to live it. Otherwise you’re essentially asking two departments to row in different directions. If you’re in a leadership position that can make that decision, you need to make sure it’s built into your core values. If you run the RL team for your company, and it’s not built into your values, petition the upper management to include it. This needs to be shouted from the rooftops, we need to all do a better job educating companies (and even 3rd party RL companies) that it is indeed possible to create a win-win for everyone; your company, your employees, your customers, the environment and society at large, reversing the trend and creating a positive ripple effect so that we can be confident that future generations will be able to live in a sustainable and healthy environment.

I’ve seen data with many of the products that have come through our door. We’ve had products from top tier brands, that we could have helped, had there been a broader channel to send this information to, One that sticks out in my mind was a webcam that noted on the packaging that it was only compatible with a specific subset of TV’s. Even though it was stated clearly on the box, customers wouldn’t notice and were buying them thinking it was compatible with all TV’s, resulting in a high return rate. Imagine if they would’ve been more open to receiving this feedback, which came directly from our employees on the floor, who were processing these returns in bulk. They ended up pulling it from their line. Think about the cost of all the returns, recycling, and negative brand image this caused.

How To Find The Right Partner

After the great flood in biblical times, the world needed a universal value system going forward. God gave Noah seven universal laws (7 Noahide laws) to live by. They were given to keep the world a safe and productive place where humankind can coexist in harmony. Today as well, you need to find a partner who has a high moral compass. Who maintains high values, ethics and standards.

There will always be someone who is of the solutions based mindset and tries to game the system quickly just like they did back in Noah’s times. Find a company that doesn’t just say it but lives it.

In the first half of the 20th century in North America, it was difficult for an Orthodox Jew to keep a job if they wouldn’t work on Saturdays, sacrificing their Sabbath. Out of the frustration of having to find a new job every Monday, my grandfather’s brothers (and later on my grandfather joined them) started their own company, Richler Trucks. Over the years they built up their business and reputation. A big break came when they secured a contract with Ford Motor Company. When reviewing the contract, one of the brothers noticed that it stated they would need to be open on Saturdays, their Sabbath. The brothers unanimously and unequivocally pulled out of the agreement, leaving the potential profit on the table. This piece of news flew around Ford until it went up the chain to Henry Ford II. When he heard why the Richler’s turned his contract down, he decided they were exactly the type of company he wanted to be in business with and authorized a one time amendment, something that happened rarely, to the contract allowing them to be closed on “Saturdays and holidays recognized by the Orthodox Hebrew Faith”. A company with such strong convictions, values and consistency was a company he knew he could rely on.

A partner should have the ingenuity and sensitivity for your needs like my great uncle who sold the lipstick, and the integrity and value system of my grandfather and his brothers.

Sruli Richler
Sruli Richler is the founder and CEO of The Surplus Company, LLC, a full service Reverse logistics partner offering a suite of options that resolve challenges ranging from when a product gets returned all the way through the resale or disposal process. The Surplus Company prides itself on building deep relationships and adding consistent value to its partners. Sruli is married to his wife Toby and together are the proud parents of 4 boisterous and adorable children ranging from ages 1 to 6 years old. While not running The Surplus Company, LLC or spending time with his family, Sruli spends time advocating for the many Charities he sits on the boards of. Sruli is also an outspoken advocate for mental health awareness in the education system and business worlds and working to reduce the stigma that is often attached with it.