Competitive pressures have forced many retailers and manufacturers to liberalize their returns policies in recent years and gladly accept for a refund just about anything customers regret having bought.

Well, maybe not gladly. Most companies continue to view returns as a costly nuisance, and few have formal strategies for dealing with products that customers don’t want.

But figuring out how to efficiently reuse returned items can increase profitability by reducing materials requirements: Every component reinserted in the forward supply chain is one unit fewer that must be procured or manufactured. And by reusing rather than disposing of units, a firm may be able to increase loyalty and attract new customers as it boosts its environmental image.

Managing the flow of finished products back into the company can be an important profit driver, write Vaidyanathan Jayaraman and Yadong Luo of the University of Miami School of Business Administration in a recent issue of the Academy of Management Perspectives. Jayaraman and Luo say the evidence shows that a “reverse logistics” value chain strategy can strengthen a company’s competitiveness.

The authors cite Estee Lauder’s strategic management of its returned goods flow. In the first year after investing $1.3 million to build a system of scanners and other technologies, the company was able to sharply reduce the percentage of such goods that it dumped into landfills and also to save half a million dollars in labor costs. It has built a $250-million product line from returned cosmetics, selling them to seconds stores or to retailers in developing countries.

Among the insights Jayaraman and Luo offer executives: first, in many industries, such as computers and peripherals, short product life cycles mean that returned items must be treated as perishable. Every delay in transporting, sorting, grading and repackaging returned printers, for example, reduces the value remaining in the product.

Second, value-chain partnerships are crucial. Specialized third-party providers can often handle tasks such as credit issuance and transportation more efficiently than the manufacturer can.

Third, a well-managed reverse logistics system allows the company to retain contact with customers and derive valuable feedback from them. That information can be used to improve the company’s product mix and, if products are returned because of defects, correct any failings in the operational infrastructure.                                 

(Andrew O’Connell is an associate editor at Harvard Business Review.)

Give your team a challenge they can’t resist

It’s not easy pulling a group of diverse individuals together to work as a team. Barriers abound in the form of fierce territoriality, incentive systems that reward individual rather than collective achievement, and mistrust spawned by an acquisition, merger or major internal restructuring.

Improve your return on returns

Competitive pressures have forced many retailers and manufacturers to liberalize their returns policies in recent years and gladly accept for a refund just about anything customers regret having bought.

A staged solution to the catch-22

Companies launching two-sided platforms—businesses that connect two groups of users, as credit-card companies do—have often subsidized one group to get it to use the platform. This is a risky approach, because it requires a big upfront investment.

Ship shape

For an employee, a company-sponsored overseas trip could mean mostly fun, with, of course, some work in between. For a chief executive of a company, however, it would be the opposite, and most of the time the fun part takes place in between working or not at all.

Winning: Stay the course…especially if it’s a new one

Q: Sometimes companies need to change even when there is not a crisis forcing the issue. In such cases, how do you keep your people excited about a change initiative after its newness has worn off? Trevor Smith, Singapore

A: You have to stay excited yourself. And not just excited, but obsessed.

If I had a hammer

HASHIM squinted before pulling the trigger. Although the 19-year-old is used to holding Soviet-made AK-47 assault rifles in the deep jungles of Mindanao three years back, this particularly weapon was new to him.

Big failure, little dreams

CASTELLANA, Negros Occidental—It is already past noon and yet Edelyn Pineda is still lazing around Sitio Odiong here along with her little friends.

The Morning Meeting: Best-practice communication for executive teams

Does your company’s executive team struggle with chronic communication problems and a lack of shared accountability? Many times when my colleagues and I are called in to help out an organization, we find that these two core issues underlie their problems.

Lessons from the leaders of retail loss prevention

Preventing theft, damage and errors such as food spoilage has long been an unyielding and poorly understood problem for retailers. But a few companies stand out in their ability to limit losses, and if every retailer were as successful as they are, the sector could save billions of dollars annually—as much as $27 billion in the United States alone.

The Jock Correlation in business

WITH many sports headlines today trumpeting organizational and solvency issues with various teams and sports associations across the world, there is often an almost missionary zeal to bring to sports a more “business approach.”

Winning: Developing a successful succession plan

Q: What companies would you hold up as examples of succession planning done right? Robert Handfield, Raleigh, North Carolina 

A: It’s sad to say, but your question would be a heck of a lot easier to answer if you had asked for examples of succession planning done wrong. That trend is gaining such ground these days it’s alarming.

Accounting can be fun

People quick to dismiss accountants as the ultimate bean counters have definitely not run into the likes of Roberto Manabat and Emmanuel Bonoan, the dynamic duo that has redefined the business of accounting in the Philippines. Currently sitting at the helm of KPMG Manabat Sanagustin & Co., the Philippine affiliate of KPMG International, the pair has ably guided Philippine companies through the accounting labyrinth without getting in the way of their business activities.

‘I’ll stop exposés if they stop doing wrong’

Sen. Ping Lacson tells the Quijano de Manila forum why investigation is an essential Senate role 

(Excerpts from discussions of journalists with Sen. Panfilo Lacson at the Quijano de Manila Symposium, October 24, 2007, Cherry Blossoms Hotel, Manila. At the panel were Butch del Castillo and Inday Varona of Philippine Graphic magazine, Amado Macasaet of Malaya, Jimmy Gil of dzBB, columnist Lito Banayo and BusinessMirror Senate reporter Butch Fernandez.)

Idiot Box No More

WHERE life is tangled in knots and snarls in the marooned mountainous areas in Mindanao, 12-year-old Mel Velyn Escobar of Midsayap, a town in North Cotabato, finds hope in Knowledge Channel to pursue her education.

Coaching your team’s performance to the next level

Teams are the workhorses of today’s businesses, but they’re workhorses prone to many ailments, from open bickering and sabotage to resolute conflict avoidance. And even teams that generally plow ahead productively can be improved.

Break the paper jam in B2B payments

Electronic invoice and payment systems have been slow to catch on, even though they offer enormous promise for cost savings, speed and transparency in business-to-business transactions.