From Bins to Billions :The “Reverse” Supply Chain story of GREENDUST

THE MESSAGE

“Your FlipKart “replacement” consignment with Tracking ID DXXXXXXX is out for delivery and will be delivered before 7.00 pm today. Thank you and we hope you continue shopping with us “.

My phone buzzed.                 

“That was fast “, I thought. This “replacement” parcel was a substitute for a pair of speakers I had bought through FlipKart. But unfortunately, the original speakers were delivered with a loose wire detached from one of the speakers. I called up the FlipKart customer care for a replacement, completed the formalities and what do you know! Next afternoon, I had the brand new speakers delivered at my doorstep. 

The Flip Kart guy asked me to hand over the defective speakers.

“So, what are you going to do with them?” I asked him

“They go back to the manufacturer!” he replied

“Ok. And what does he do with them?”

“No clue!”
                That got me thinking. Where do these “returned” products go? Are they just treated as ‘orphans’ that lay in a warehouse corner gathering dust and loosing value? When I decided to dig further into this I found that many a times the gadgets which we have returned,  due to the device developing a technical snag , sit idle at the manufacturer’s warehouse, taking away a lot of time, space and money. Moreover this also adds up a lot of costs which include the maintenance of warehouse space , returns processing cost,  decrease in  productivity and, above all making sure that its reuse & recycle policies are compliant with government’s e-waste regulations. 

          The further I went, even more interesting it became. And it brought me to a relatively new and untapped business sector which runs on a unique yet quite logical proposition called “ Reverse Supply Chain “.

                                           

What’s that?

Now, when one is asked to define “Supply Chain “, the Wikipedia definition states that

A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

Correct? Well only partly. This is just 50% of the answer.                               
                             A supply chain is divided into two parts. The first is the Forward Logistics which talks of the movement of goods, services and products from manufacturer to customer, where wiki definition is spot on. However we miss out on a very obvious yet crucial activity which happens in a supply chain – The Return of Goods. And that is “Reverse Supply Chain”

A reverse supply chain can be defined as the process of moving a product from the consumer to its typical final destination i.e manufacturer, the point of origin, for return, re-use, or for the purpose of capturing value otherwise unavailable, or just for the proper disposal of the products.

                                         

The Potential

                     In an ideal world, reverse logistics would not exist. But with large scale demand and reduced product lifecycle, dis-functionalities are bound to happen. And that results in large scale returns. In the US the size of the reverse supply chain industry can be gauged by the statistics that for every 100 products forwarded to the customer, an average 10 come back to the manufacturer. Comparing this with India, for every 100 items supplied by Indian companies, about 4-5 items come back across all categories. Taking into consideration all the goods produced in India and the returns, the opportunity size for reverse logistics is estimated around $15-20 billion (Rs 74,287 crore-79,226 crore). Most companies in India have overlooked the tremendous potential that this market offers. The reason the return rate in India is lower than that in the US is because Indians don’t believe in customer service. Companies fail to understand that a good return experience can actually increase revenue. Research indicates that 80% of the customers do not buy from the brand again if they have had a bad return experience.

                            

 Weakest Link?

                     It is said that a supply chain is only as strong as its weakest link. And in India “reverse supply chain” is the weakest link of most manufacturing companies. Most companies don’t even have “Reverse Supply Chain Managers”. Every day you hear about variation of new products launched, just months after the first. Look at Samsung mobile phones. It started with Series S, followed by S1, S2, S3 and then moves on to Note, again followed by Note I, Note II and now they are back with the earlier series with the launch of Samsung S4. The rapid progresses in technology and rigid e-waste regulations have made professional management of this sector a must.

What’s stopping them?

The obvious questions that crops up is “Why have companies till now refrained from effectively handling returns?”

                  Well there is a business reason for their reluctance. Individual companies do not have enough return volume to justify the cost involved in doing returns management the right way. As discussed before, managing returns involves a lot of additional costs above the item costs like:

• The transportation costs of moving the items from the retail stores to distribution center.
• Repackaging of serviceable items for resale.
• Cost of warehousing the items.
• Cost of disposing of items that are unserviceable, damaged, or obsolete.

For companies to invest such a huge amount in bringing back faulty products just doesn’t make any business sense.

Solution: The GreenDust way

So what do we do with all those faulty products which have no takers and are just lying in the warehouses costing millions of dollars to the company?
Well Simple .We repair and sell them off these factory seconds to Indian consumers who are extremely value conscious and are constantly on the lookout for quality deals.

That’s what US return Microsoft ex-employee and IIT Roorkee alumnus, Hitendra Chaturvedi, thought of doing. And thus “Greendust” was born.
                                       

Green Dust is a “one of its kind” reverse logistics outsourcing (RLO) company in India which has successfully able to cash-in on the lack of reverse logistics systems in the Indian scenario. This company basically enables retailers and manufacturers to focus on their Key Consumer Benefit factor of building core products and making them available to their customers while outsourcing their entire reverse logistics process.

 GreenDust manages the entire process from customer pick-up, call center management of returns, warranty management, repair, refurbish, repack of returned items, and then resale as refurbished items to end customer.

Hitendra spent 17 years in the US working for companies like Ernst & Young, A.T Kearney, and Microsoft. He came to India in 2006 via Microsoft. In India he saw the dire need of an outsourced reverse logistics model and when the time came to go back to the US he decided to take the entrepreneurial plunge and started the brand GreenDust in 2008.

                         

How does it work?


Greendust basically earns in two ways.

First it acts a Reverse Logistics Company to its clients handling the entire Reverse logistics process from customer, back to the producer.
And second, they take the rejected / defective / unsold / returned products from the OEMs, refurbish them, provide a year's warranty from their side, and finally sell them as factory seconds through the brand Greendust.
Greendust.com is their online shopping portal where customers and bulk buyers are given the option to purchase unused, branded factory seconds, surplus, overstock, and refurbished products at guaranteed lowest prices. When you visit the online website you will be pleasantly surprised to see the variety of items stocked up in their menu ranging from rice cookers, hair dryers to mobiles, laptops and television set at 25-30% off the current market price. I even saw some products which were discounted up to 50% of their price. A great bargain , even by Indian standards.

                                

They went offline a year ago, with brick-and-mortar stores in the country when they realized that the Indian customer would like to touch and feel a factory seconds product before buying. Once this trust is established in the market, they plan to ramp up their online model as well. 

                            

The Risk

One would ask, “What’s the guarantee that these products will work?” According to the company, the GreenDust logo on their product is similar to an ISI mark. The product will still be a factory seconds but when it goes through their 50-point strict inspection process they fix any small problem using genuine parts from the company and put a ‘certified GreenDust’ sticker on it. Thus reassuring the customer that they are getting a branded product that is certified by GreenDust and comes with a 1 year warranty. 

Results

Well, for now their results seem promising. The company started with a seed capital of 60 lakhs, a 800sqft warehouse in Mumbai and 3 employees, and in three years the company has grown to become a Rs 300 crore business venture with stores in Delhi and Bangalore for sourcing, refurbishing and distributing returned products. It also has 15 distribution centers across Jaipur, Cochin, Chennai, Mumbai, Lucknow, Hyderabad and Ahmedabad (which store and re-distribute the finished goods), around 40 franchisees and 1,000 dealers and over 400 employees. Hitendra is optimistic that the company will break even in the next two years. The company aspires to be No.1 Logistics Company in emerging markets touching the 1 billion dollar mark in the next 5 years.


GreenDust  bagged Future Bazaar as their first client , for reverse logistics outsourcing and now have an enviable clientele with LG, Sony,Samsung,Lenovo, HomeShop18, Dell, HP, LG, Samsung, Toshiba, Phillips, Panasonic, Wipro and Acer – managing their reverse logistics functions and sourcing products. It currently claims to have more than 5,000 SKUs across 11 categories (further divided into sub-categories), including mobile, laptop, camera, electronics, and kitchenware and personal care items, among others. With efficient returns management rapidly gaining a spot on the CXOs’ agenda, the companies have found solace in GreenDust’s business model of providing compliant, cost effective and environmentally responsible reverse logistics solution


The Larger Good

And as all MBA stories end with a “Social Message” so does GreenDust’s. The company has brought over five lakh returned products back to life from the verge of being scrapped and by providing them a new home the company has decreased the amount of pollutants that would have gone into the environment. The company has also raised awareness and knowledge about waste management and the benefits of green initiative amongst manufacturing organizations. By  entering a space dominated by the unorganized sector : dealers and individuals who buy damaged/old consumer goods at throwaway prices and channel them to grey markets or salvage components in environmentally unsafe ways before disposing off the rest, Greendust has paved way for a safe, sustainable and standardized supply chain of  returned goods.

All that ends well

With 100s of e-commerce companies cropping up almost daily on the internet, this model is a breather -- a brilliant execution example of reverse supply chain. And with 20,000 visitors a day, and a conversion rate of 3 per cent, the company already is doing almost 18000 transactions per month, which shows that the customers are interested in buying such products. A 1 crore investment  aspiring to be a billion dollar company itself talks a lot about this untapped potential and doing it all from e-waste that would have otherwise would have gone to the scrap yard ?

That’s what I would call making billions from dust, or should I say GreenDust! 

References:

• Reverse Logistics , Ratan KR Paul, Cargo Talk
• The Goods Samaritan of Electronics, www.forbes.com
• Greendust, www.greendust.com
• Greendust: Ecommerce Company , www.wooler.com
• Hitendra Chaturvedi on making money out of refurbished factory seconds : www.techcircle.in
• Reimagining Supply Chain : Vidhi Chaoudhary , www.livemint.com
•  Love for environment , Rajat Bhatia , www.merinews.com