Five ways to improve your refurbishment operations
Refurbishing and reselling returned goods can make some serious money for your company—if you can do it quickly and cost effectively. Here are some tips for getting it right.
Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
Decisions, decisions. What should you do with all the returned goods flowing back to your facility through the reverse logistics pipeline? Some companies dismantle them and recycle the parts. Others simply destroy the goods. But there's a third option: repair, refurbish, and resell them.
For some companies, that third route makes an awful lot of sense: If done right, repairs and refurbishment can be a moneymaker instead of a cost center. Trouble is, it's not always easy to do it right. The costs of refurbishment (labor, equipment, transportation, and so forth) tend to add up quickly, making it difficult for companies to recoup their investment. And it can be tough to get products back on the shelves quickly enough to avoid some loss of value.
If you're not sure whether refurbishment is right for your company—or are wondering whether there are ways to make your returns operation faster, more efficient, or more cost effective—the following five tips might point you in the right direction.
1. Make sure your product is a good candidate for refurbishment.
One of the keys to running a fast, cost-effective refurbishment operation is to be smart about which products you refurbish, says Timothy Konrad, vice president of reverse logistics for Genco, a third-party logistics service provider (3PL). He says it's not uncommon for Genco to find a new customer is paying more to refurbish an item than it's likely to recover through the item's resale.
How do you determine whether a particular product is worth refurbishing? It will probably require some number crunching, says Terry Steger, a senior executive in Accenture's Supply Chain Management practice. Basically, what you have to do is calculate what it costs to recover and refurbish a product and compare that with the current resale value of the revamped item, he says.
In the case of consumer electronics and information technology products, Konrad advises his clients to follow a simple rule of thumb: Consider refurbishment only if the product originally sold for more than $125. Konrad notes, however, that there's one exception to his rule. If you have a hot item, like a high-end MP3 player, where there's a demonstrable market for a refurbished version of the product, then by all means go ahead with refurbishment.
For items with a longer shelf life than consumer electronics, different standards apply. Jeffrey Pepperworth, president of 3PL Inmar Reverse Logistics, believes that even relatively low-value products, such as kitchen appliances or sporting equipment, can be worth refurbishing under the right conditions. The key factor is volume, he says. "If the volume is large enough, economies of scale make processing even low-value materials feasible."
Even if you've already done all the cost calculations for your product, it could be time to revisit your decision. "Sometimes, a device or product is so old that, at that point in its lifecycle, it no longer makes economic sense to refurbish it," Steger says. For products with very short shelf lives, such as wireless devices or high-end consumer electronics, the decision may have to be reviewed on a monthly basis.
2. Evaluate whether refurbishment is truly necessary.
Experts agree that only a small percentage of returned products actually require refurbishing. For example, in the consumer electronics arena, 50 to 70 percent of all returns have nothing wrong with them, says Konrad. "Products that have been returned due to buyer's remorse or because the consumer didn't understand how to use the product don't need to go to the refurbishment operation," he points out.
The sooner you can perform "triage"—that is, assess which products can be immediately resold and which actually need to be fixed—the better. By making this determination as early in the process as possible—say, at the retail return center or a regional DC—you eliminate touches, reduce transportation expenses and the potential for damage, and increase cash flow, says Pepperworth. It also allows you to get the product back on the market sooner and may help reduce (or even avoid) the need for markdowns.
3. Monitor your service provider's performance and costs.
Although some companies like to handle refurbishment themselves, many choose to outsource this activity—largely for reasons of cost. For most companies, it's more cost-effective to use a 3PL that has specialized equipment and a specially trained staff in place, says Dale Rogers, professor of supply chain management at the University of Nevada-Reno and author of a textbook on reverse logistics.
But that doesn't mean you should just hand off this task and forget about it. It's important to monitor the process to make sure that your partner is running an efficient, cost-effective operation.
For example, Steger recommends keeping an eye on parts usage. Most third parties charge the contract owner for the parts they use, so it's wise to put a mechanism in place to assure providers aren't replacing parts unnecessarily, he says.
Another way to keep costs from getting out of hand is to establish a "time required to refurbish" threshold, Pepperworth says. "If the product takes longer than X minutes to refurbish, it should move to recycle or scrap disposition," he explains. "If it is within the threshold, a company can refurbish it and increase asset recovery."
4. Choose the right location for your operation.
Where a refurbishment operation is located can have a big impact on the overall cost. While a centralized location provides economies of scale with regard to labor and facility expenses, the savings could be offset by higher transportation costs if the goods have to travel far. By the same token, using regional or local refurbishment centers usually cuts transportation costs but is likely to mean higher facility costs. For this reason, Steger recommends using a local model for heavy or large products that are costly to transport and a more centralized model for lighter products.
These days, some companies are relocating their refurbishment operations to Mexico to take advantage of lower labor costs, Rogers says. But labor costs are only part of the picture, warns Konrad. When considering whether or not to move your operation south of the border, he says, be sure to factor in the additional transportation costs as well as any political and security considerations.
Steger notes that it may be possible to employ a mixed strategy—for example, using a Mexican facility to serve Southern California and the Southwestern states and a U.S.-based facility to handle the rest of the country. That might allow you to take advantage of Mexico's low labor costs without having to bear the costs of shipping from, say, Mexico to New England.
5. Make full use of the available data.
One of the biggest mistakes companies can make when it comes to their refurbishment operations is failing to collect and mine data on returns. "The real value in refurbishment lies in tracking and analyzing data," says Gary Noone, vice president of global aftermarket services for 3PL ModusLink.
It can also make the returns operation itself more efficient, Noone says. For instance, if a company is able to identify the most common causes of failure for a particular item, it could then use the findings to improve the triage operation—say, by having employees at the processing center sort returns by type of failure. Those items could then be shipped together to the refurbishment operation, which improves efficiency downstream.
Perhaps more to the point, however, the company could share its findings on product failures with the original manufacturer's product design or engineering team. That kind of information has the potential to lead to advancements in the product's design, which would ultimately produce the biggest improvement of all: reducing the actual volume of returns.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”