As CFO, there’s a lot you need to worry about—technological innovation, big data, an increasingly complex financial sector, and an ever-changing regulatory environment. But when it comes to your company’s finances, it often boils down to one thing: balancing the operating costs with the income you make to ensure that you can grow your bottom line. With the right reverse logistics platform, you can track and manage the entire process to ensure smooth and efficient operations. It starts with having the right information at your fingertips. Here are metrics that every CFO should be running and reviewing regularly.
1: Sales and return volume by product
One of the key metrics that all CFOs should be tracking in terms of reverse logistics is perhaps the most basic—what products are being returned, and in what volume? Knowing these metrics can help you identify the costliest products so you can work with others throughout your organization to:
- Remove low-performing or high-return products
- Identify better strategies for marketing and sales to reduce returns
- Renegotiate manufacturer or vendor contracts to return defective or low-quality items and avoid taking a total loss
2: Disposition cycles times
The longer a product remains in your inventory, the more its value declines. Many companies understand this in terms of the forward logistics process and create inventory rules to ensure that items are appropriately moved off the shelves to avoid becoming obsolete. Slow-moving inventory is eventually discounted to get it out of your warehouse or store, since you know that holding onto it only costs money as the value goes down. Reverse logistics is no different. Shortening the time you keep returned items in your system, reducing unnecessary touches, and speeding up its disposition (either as a clearance sale item, return to vendor, or disposal) can help you minimize reverse logistics costs. Identifying average disposition time on returned items can help you locate inefficiencies and get these items out of your system sooner.
3: Other product disposition metrics
There are several items to measure in terms of product disposition, including:
- Percent of products reclaimed and resold
- Percent of costs recovered in resale
- Volume of products that can be recycled
- Products that must be disposed in landfills or other waste facilities
- Per-item handling costs on returns
4: Freight and shipping costs
Since returns are a mostly inevitable part of doing business today, it’s important to understand how much it’s costing you to ship items out to your customers, and also to have them shipped back. Offering free or discounted returns shipping can help boost sales, as multiple studies show that free returns can lead to higher consumer confidence and more willingness to buy, but they come at a cost to your bottom line. For companies offering free or discounted returns, tracking those costs is essential.
Make the Most of Your Data
Data is essential for CFOs to make the best decisions regarding reverse logistics and maximize profits over time. To learn more about how ReverseLogix can help you gather, track, and visualize reverse logistics data, contact us for a demo.