Contract manufacturers have largely operated their reverse logistics and repair business as independent third party Service Providers, competing in the open market with the other independents and only a small part of their revenue has been derived from their contract manufacturing base of customers. This is about to change!

The domestic product developers, marketing, sales and service companies (who used to be North American Manufacturers) are pushing more and more onto their partnerships with the contract manufacturers. Contract manufacturers are striving to provide a total product solution that is truly closed loop from cradle to grave. Some contract manufacturers have taken on sustaining engineering and even product design responsibility for outsourced products.

Contract manufacturers are entering the 3PL space. Their strategy is sound although their execution is still maturing. There is no doubt that large contract manufacturers who build the product, provide the logistics support through to the ultimate purchaser and have a full reverse logistics capability, have a distinct advantage over those who do not.

Relationship between 3PLs and Third Party Repair Companies are becoming the norm. If you are in the tangible goods reclamation or the classic hardware repair business, partnering with the right 3PL and offshore box manufacturer may be a requirement to compete and to survive in the repair business over the long haul.

Global capability in reverse logistics is quickly becoming a real requirement to play in this game. Most North American companies who are looking to outsource are making global capability in reverse logistics a requirement to be considered as a partner. This by itself will drive interesting and challenging partnerships in the future.

The good news for the industry is that Reverse Logistics finally is being recognized as a critical link that must be connected in the supply chain. The challenge for those who are in the various links that make up the chain, is to quickly figure out what the rules of engagement are going to be and who to partner with in order to compete. At the end of the day there will once more be a reduction of participants as the best of the best continue to evolve.

No matter what industry you are in, Reverse Logistics is being propelled forward by changes in technology and consumer expectations and is rapidly reinventing and presenting itself as an area of professional expertise and financial opportunity. Service companies, contract manufacturers, logistics companies and consultants are all rushing to get involved in this newly resurrected, but old area of opportunity.

Additional Information:
Mike Shelor is a principal of Patton Consultants, Inc.  He has extensive product service and logistics experience as COO of 3Re.com, Corporate VP & GM of ESSC, and in executive management positions with Genicom and General Electric.  Contact Mike Shelor at 540-256-3738 or MShelor@PattonConsultants.com.

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