Success in reverse

There are few things more annoying than finding out that the product you purchased doesn’t work the way it’s supposed to. You fiddle with knobs, press buttons, switch batteries and scratch your head until you give in and return it for a replacement or to get your hard-earned money back.

The process is no more pleasant for the retailer or the manufacturer of the defective item. While the routines constructed for the conveyance of new products in identical packaging to their ultimate destinations are streamlined, the trip back for products that are missing parts or that are in packaging that is damaged or not original isn’t as simple.

Taking back an item is bothersome for retailers; it can take as much effort to process one returned item as it does to order a carload. Yet, it’s a necessary evil in the course of business. Retailers that refuse to take back items don’t ingratiate themselves with their customers, and manufacturers that leave their customers holding stacks of returns risk being sent packing.

Genco Inc., a Blawnox-based company, has made a successful business out of taking the pain out of the process for retailers and manufacturers by employing reverse logistics, a process for controlling the flow of goods or materials back to their source. Not a new concept — businesses have long had a need for a system to handle returned goods — but the function typically was slow and required intensive paperwork. Genco pioneered the application of information technology to streamline the process and, as a result, return dollars to the bottom lines of its client companies.

The Aberdeen Group calls reverse logistics “one of the largest and most overlooked opportunities for savings and improvement.” Expenditures for reverse logistics activities were estimated for 2003 at $35 billion by the Reverse Logistics Executive Council.

The need for reverse logistics has grown as companies have found it valuable in recycling and reusing packaging materials and containers, handling hazardous materials and creating asset recovery programs. The growth of catalog and online retailing, segments with the highest rates of returns, is expected to expand the demand for reverse logistics services.

Companies traditionally viewed returns as a cost item only, but over the past decade, implementing efficient returns processing has come to be considered a way to save substantial dollars. For instance, cosmetics manufacturer Estee Lauder spent $1.3 million in 1997 to build its own reverse logistics system to handle the flow of returned goods.

The company recovered its investment in the first year in reduced personnel and other costs.

Reverse logistics isn’t Genco’s only service. Indeed, the 5,000-employee company — the company calls employees “teammates” — is a full-service transportation logistics provider, offering no fewer than 20 services that range from warehousing and transportation logistics to software and consulting.

“It’s not the same business it was 30 years ago,” says Herb Shear, CEO and third-generation in the business.

Not by a long shot. Genco’s annual revenue in 1971 was $300,000. Last year’s revenue exceeded $375 million. Its client list includes some of the top names in retailing and consumer and electronic products, including Kimberly-Clark Corp., Pep Boys and J.M. Smucker Co.

Genco began as H. Shear Trucking Co. in 1897, launched by Shear’s grandfather, Hyman, with a blind horse and a wagon. Shear’s father, Samuel, took the business over in the 1940s, and in 1971, the business passed to a third generation.

Since Herb Shear took over the company, it has been transformed into a full-service transportation logistics company.

Forward in reverse logistics

Shear says Genco was drawn into the reverse logistics field when PharMor, the now-defunct retailer, approached the company in the late 1980s for a storage solution for its goods bound for return to its suppliers. Not only did PharMor lack storage space, it didn’t have a very good system for processing this merchandise.

Genco had a small software development group at the time, and Shear put it to work with PharMor and came up with a model to handle the function that utilized state-of-the-art barcode technology and programming. Shear says the system worked well, but didn’t achieve a breakthrough in the marketplace until 1992, when retailer Target Corp. decided to use it for its returns handling. Sears, Roebuck, Kmart and WalMart followed in adopting the solution.

Shear says his education at Southern Illinois University and exposure to the emerging IT field convinced him when he joined Genco in 1971 that applying computer technology could revolutionize the way companies moved materials and information.

“Even though the computing power wasn’t available, you could see that things were becoming more systems oriented,” Shear says. “If you could find ways to incorporate that in your business, that would be a good thing.”

That notion imprinted on Shear so profoundly that it ultimately transformed the company. Genco made large investments in software development so that it could customize applications for each customer’s needs.

“In the late 1980s, most people in our industry were using what I would call canned software, a prewritten package, and probably spent $25,000 a year on software and systems We did our own systems and spent 10 times that much, but the reason we did it was for customer response,” says Shear.

Faster response to customers, that is. The in-house capability to create software that could be tailored for each individual customer’s need was a key factor in Genco’s growth.

“If a customer needed something, we didn’t say ‘We’ve got this canned package. We’ve got to go back to the developer, see if they can make a change. Maybe they can do it in six months,'” says Shear. “We could say, ‘Yes, we can do that for you next week, or two weeks from now we can have that in and working.’ By having that orientation over time, it led to a lot of new opportunities. That really helped propel the company in the ’90s.”

And, says Shear, technology will be a key driver in the logistics industry and critical to Genco’s future.

“In our industry, technology is really important, and companies are differentiating themselves with their technology and their ability to integrate. So if we don’t stay technology-savvy, we’re not going to do well in the future,” says Shear.

Customer and employee care

While Genco is a business that rides on its technology, it thrives on its relationships with its clients, says Shear. Maintaining a close relationship with customers is critical enough to engage even those at the top level in direct contact with Genco’s customers.

Senior managers each have responsibility for contacting a half-dozen or so customers each month to gauge their attitudes toward Genco’s service and uncover ways to better serve their needs.

“It does two things,” Shear says. “One, it gives us proactive feedback on how we’re doing and what we need to do better with that customer, but it also keeps our senior managers in touch with our customers.”

Genco’s employees are surveyed each month to find out how well the company is living up to its commitment to a corporate mission that emphasizes continuous improvement and delivering value to customers, employees and shareholders.

Staying on top of technology, keeping employees motivated and meeting the needs of customers aren’t optional, says Shear. They’re mandatory.

“Maintaining the status quo just doesn’t cut it in today’s business environment,” says Shear. “Everybody is thinking how we can do this better, not just maintain it.” How to reach: Genco,