BUS203: Principles of Marketing

So what happens if products end up broken or unusable as they travel through their supply chains? And what do companies do with scrap materials and other "junk" produced, such as packaging? Increasingly, firms now run products and materials such as these backward through the supply chain to extract value from them. The process is known as reverse logistics.

Patagonia developed a reverse logistics systems for environmental reasons. After garments made by Patagonia are worn out, consumers can mail them to the company or return them to a Patagonia store. Patagonia then sends them to Japan to be recycled into usable fibers that are later made into new garments. The company has also convinced other clothing makers to do the same, even though it can add to the cost of products.

Most companies set up reverse logistics systems to "turn trash into cash". Pittsburgh-based Genco is firm that specializes in reverse logistics. Companies like Best Buy, Sears, and Target hire Genco to find buyers for defective or broken products. A recent study suggests companies can recover up to 0.3 percent of their annual sales this way, which for Best Buy would amount to $100 million a year.

TerraCycle, which we mentioned in Chapter 5 "Market Segmenting, Targeting, and Positioning", is a company dedicated to extracting value from waste and using it to create new products - a process that's being called "upcycling". In addition to selling fertilizer in used (but relabeled) plastic bottles, TerraCycle makes backpacks and pencil cases out of the metallic juice pouches used in drink boxes. The company also creates tote bags out of plastic bags, and contracted with Target to make clocks out of old vinyl records.

Video Clip

TerraCycle Turns Garbage into Gold

TerraCycle founder Tom Szaky explains how his company makes money while saving the planet, too.