Food Shippers of America - Spring/Summer 2017 - 79

While most manufacturers have the
forward logistics (outbound) down to
a science, many are not experienced
with returns processing or the
associated activity-based costs.
Many manufacturers provide their
trading partners with a "shrink" or
"swell" allowance. This allowance,
usually 1 or 2 percent off invoice, is
offered to the retailer in exchange
for them self-managing their returns.
The retailer may sell the returns
as damaged goods, offer them in
secondary markets or donate them to
their local foodbank - none of which
require reverse logistics from the
manufacturer. However, selling direct
changes the rules of engagement.
Not only are return rates higher for
online purchases, they are returned
in "eaches" going from consumer
to manufacturer.
Additional Transport Cost
On the surface, retail-level pricing
appeals to manufacturers. But this
is where reverse logistics earns the
moniker "hidden cost" in the retailer's
assessment of net sales. While the
cost of reverse logistics may be built
into retail pricing, the calculations
are based on traditional retailing
models, which are markedly different
from the D2C model. In the D2C
model manufacturers own the entire
product life cycle, which incurs new
costs. Product movement costs are
immediately impacted, considering
the following:
* Online buyers want free returns,
so manufacturers must cover the
return shipping expense.
* Additional transportation costs
between return centers and the
product's final disposition.
* Handling returns requires
dedicated space and additional
labor, or the use of a third-party
service provider specializing
in returns.

Cost increases such as these are often
passed through to the consumer.
However, dynamic pricing and
greater transparency will dilute the
manufacturer's ability to compete
on price. New costing models are
needed to accommodate the nuances
of D2C selling. For example, call center
requirements are not often considered
a supply chain cost, but in e-commerce
they can represent hidden and
uncontrolled profit leakage.
Logistics Impact
Shipping direct to consumers
requires more than implementing
new processes for picking, packing,
shipping, tracking and reconciling.
Inbound returns require completely
different needs for sorting, disposition
and processing to retain as much value
as possible.
Selling direct eliminates the need to
transport goods to distribution centers
and/or to retailers' warehouses. These
cost reductions, combined with lower
inventory carrying costs and a faster
sales cycle, gives D2C great appeal.
However, the D2C model means
manufacturers own the entire product
life cycle, including returns.
When managed properly, value can be
extracted from the returns to offset

the added handling costs. Without the
proper people, processes and systems
in place, returns can erode margins
faster than any other component of the
extended supply chain. For example,
the manufacturer has already absorbed
the cost of producing and delivering
the goods to the consumer. Now they
must absorb the return shipping
and handling costs, as well as the
disposition costs. Keep in mind...in
this scenario, technically a sale was
never transacted. The product simply
changed locations multiple times while
losing value during the process, then
required additional costs upon return.
Depending on the value lost and cost
incurred, the manufacturer would have
been better off not selling the product
at all. Even giving the product away
would have been more fiscally viable.
Food has more of a diminishing
return than other products. This
adds additional urgency to preserve
as much saleable life as possible
by efficiently receiving, qualifying
and integrating returns back into
the forward flow. Even if a returned
product is in pristine condition, it
may have 50 percent or less of its
original product life when received.
Efficient processes, combined with
disposition guidance technology, will
streamline decision-making and help

...the most successful companies will be those
that recognize and act upon emerging trends
before their competitors. Improved corporate
agility, combined with strategic alliances,
will enable companies to innovate, test,
implement (or shutter) and refine processes
without exceeding the company's threshold
for disruption.
FOOD SHIPPERS OF AMERICA | www.foodshippersofamerica.org |

79


http://www.foodshippersofamerica.org

Table of Contents for the Digital Edition of Food Shippers of America - Spring/Summer 2017

President’s Letter
Filling the Supply Chain Talent Gap
Expanded Panama Canal = Expanded Options
Capacity Concerns
FAST Act Impact
Cooperative Effort Provides Safe Havens for Drivers
Elaine Chao Returns to Washington as Secretary of Transportation
Industry Forecast
Regulatory Update
Is Your RFP Built to Source the Right ELD Solution?
Top 10
FSA Annual Conference
Retail Trends
As the World Returns
Stop Managing, Start Coaching
A B.O.L.D. Approach to Succeeding in an Unpredictable Business World
People Problems Prevented
Batory Food
Bongards Creameries
Operation Blessing
Ruiz Food Products, Inc.
Save-A-Lot
Scotlynn
Sun-Maid
FSA Members
In the News…
Index of Advertisers
Food Shippers of America - Spring/Summer 2017 - intro
Food Shippers of America - Spring/Summer 2017 - cover1
Food Shippers of America - Spring/Summer 2017 - cover2
Food Shippers of America - Spring/Summer 2017 - 3
Food Shippers of America - Spring/Summer 2017 - 4
Food Shippers of America - Spring/Summer 2017 - 5
Food Shippers of America - Spring/Summer 2017 - 6
Food Shippers of America - Spring/Summer 2017 - 7
Food Shippers of America - Spring/Summer 2017 - 8
Food Shippers of America - Spring/Summer 2017 - 9
Food Shippers of America - Spring/Summer 2017 - 10
Food Shippers of America - Spring/Summer 2017 - President’s Letter
Food Shippers of America - Spring/Summer 2017 - 12
Food Shippers of America - Spring/Summer 2017 - 13
Food Shippers of America - Spring/Summer 2017 - Filling the Supply Chain Talent Gap
Food Shippers of America - Spring/Summer 2017 - 15
Food Shippers of America - Spring/Summer 2017 - 16
Food Shippers of America - Spring/Summer 2017 - 17
Food Shippers of America - Spring/Summer 2017 - 18
Food Shippers of America - Spring/Summer 2017 - 19
Food Shippers of America - Spring/Summer 2017 - 20
Food Shippers of America - Spring/Summer 2017 - 21
Food Shippers of America - Spring/Summer 2017 - Expanded Panama Canal = Expanded Options
Food Shippers of America - Spring/Summer 2017 - 23
Food Shippers of America - Spring/Summer 2017 - 24
Food Shippers of America - Spring/Summer 2017 - 25
Food Shippers of America - Spring/Summer 2017 - 26
Food Shippers of America - Spring/Summer 2017 - 27
Food Shippers of America - Spring/Summer 2017 - 28
Food Shippers of America - Spring/Summer 2017 - 29
Food Shippers of America - Spring/Summer 2017 - 30
Food Shippers of America - Spring/Summer 2017 - 31
Food Shippers of America - Spring/Summer 2017 - Capacity Concerns
Food Shippers of America - Spring/Summer 2017 - 33
Food Shippers of America - Spring/Summer 2017 - 34
Food Shippers of America - Spring/Summer 2017 - 35
Food Shippers of America - Spring/Summer 2017 - 36
Food Shippers of America - Spring/Summer 2017 - 37
Food Shippers of America - Spring/Summer 2017 - 38
Food Shippers of America - Spring/Summer 2017 - 39
Food Shippers of America - Spring/Summer 2017 - 40
Food Shippers of America - Spring/Summer 2017 - 41
Food Shippers of America - Spring/Summer 2017 - FAST Act Impact
Food Shippers of America - Spring/Summer 2017 - 43
Food Shippers of America - Spring/Summer 2017 - 44
Food Shippers of America - Spring/Summer 2017 - 45
Food Shippers of America - Spring/Summer 2017 - 46
Food Shippers of America - Spring/Summer 2017 - Cooperative Effort Provides Safe Havens for Drivers
Food Shippers of America - Spring/Summer 2017 - 48
Food Shippers of America - Spring/Summer 2017 - 49
Food Shippers of America - Spring/Summer 2017 - 50
Food Shippers of America - Spring/Summer 2017 - Elaine Chao Returns to Washington as Secretary of Transportation
Food Shippers of America - Spring/Summer 2017 - 52
Food Shippers of America - Spring/Summer 2017 - 53
Food Shippers of America - Spring/Summer 2017 - 54
Food Shippers of America - Spring/Summer 2017 - Industry Forecast
Food Shippers of America - Spring/Summer 2017 - 56
Food Shippers of America - Spring/Summer 2017 - 57
Food Shippers of America - Spring/Summer 2017 - Regulatory Update
Food Shippers of America - Spring/Summer 2017 - 59
Food Shippers of America - Spring/Summer 2017 - 60
Food Shippers of America - Spring/Summer 2017 - 61
Food Shippers of America - Spring/Summer 2017 - 62
Food Shippers of America - Spring/Summer 2017 - Is Your RFP Built to Source the Right ELD Solution?
Food Shippers of America - Spring/Summer 2017 - 64
Food Shippers of America - Spring/Summer 2017 - 65
Food Shippers of America - Spring/Summer 2017 - 66
Food Shippers of America - Spring/Summer 2017 - Top 10
Food Shippers of America - Spring/Summer 2017 - 68
Food Shippers of America - Spring/Summer 2017 - FSA Annual Conference
Food Shippers of America - Spring/Summer 2017 - 70
Food Shippers of America - Spring/Summer 2017 - 71
Food Shippers of America - Spring/Summer 2017 - 72
Food Shippers of America - Spring/Summer 2017 - 73
Food Shippers of America - Spring/Summer 2017 - Retail Trends
Food Shippers of America - Spring/Summer 2017 - 75
Food Shippers of America - Spring/Summer 2017 - 76
Food Shippers of America - Spring/Summer 2017 - 77
Food Shippers of America - Spring/Summer 2017 - As the World Returns
Food Shippers of America - Spring/Summer 2017 - 79
Food Shippers of America - Spring/Summer 2017 - 80
Food Shippers of America - Spring/Summer 2017 - 81
Food Shippers of America - Spring/Summer 2017 - 82
Food Shippers of America - Spring/Summer 2017 - Stop Managing, Start Coaching
Food Shippers of America - Spring/Summer 2017 - 84
Food Shippers of America - Spring/Summer 2017 - 85
Food Shippers of America - Spring/Summer 2017 - A B.O.L.D. Approach to Succeeding in an Unpredictable Business World
Food Shippers of America - Spring/Summer 2017 - 87
Food Shippers of America - Spring/Summer 2017 - People Problems Prevented
Food Shippers of America - Spring/Summer 2017 - 89
Food Shippers of America - Spring/Summer 2017 - 90
Food Shippers of America - Spring/Summer 2017 - 91
Food Shippers of America - Spring/Summer 2017 - 92
Food Shippers of America - Spring/Summer 2017 - Batory Food
Food Shippers of America - Spring/Summer 2017 - 94
Food Shippers of America - Spring/Summer 2017 - Bongards Creameries
Food Shippers of America - Spring/Summer 2017 - 96
Food Shippers of America - Spring/Summer 2017 - Operation Blessing
Food Shippers of America - Spring/Summer 2017 - 98
Food Shippers of America - Spring/Summer 2017 - Ruiz Food Products, Inc.
Food Shippers of America - Spring/Summer 2017 - 100
Food Shippers of America - Spring/Summer 2017 - Save-A-Lot
Food Shippers of America - Spring/Summer 2017 - 102
Food Shippers of America - Spring/Summer 2017 - Scotlynn
Food Shippers of America - Spring/Summer 2017 - Sun-Maid
Food Shippers of America - Spring/Summer 2017 - FSA Members
Food Shippers of America - Spring/Summer 2017 - 106
Food Shippers of America - Spring/Summer 2017 - In the News…
Food Shippers of America - Spring/Summer 2017 - Index of Advertisers
Food Shippers of America - Spring/Summer 2017 - 109
Food Shippers of America - Spring/Summer 2017 - 110
Food Shippers of America - Spring/Summer 2017 - cover3
Food Shippers of America - Spring/Summer 2017 - cover4
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