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Heineken Beer Flows Upstream

The Heineken Line-UpHeineken is one of the largest breweries in the world, generating sales of €11.8 billion in 2006 and brewing more than 10 billion liters of beer. (Try to imagine what that looks like, in bottles.) An interesting twist in their massive operation is that they take back millions of reusable packaging items (bottles, kegs, crates) from their customers -- a complicated and expensive task.

The process of taking products back from the market is known as reverse logistics, and it's gaining more attention as an important area to manage strategically. A semi-obscure book, Managing Closed-Loop Supply Chains, elaborates the way Heineken got serious about reverse logistics and found a way to save millions of Euros. Here's a trimmed version of the story:

A few years back, Heineken stuck microchips (different from RFID) in the packaging crates at one of their breweries to figure out how much time they spend in the full logistics loop, from brewery to customer and back again. Information from these microchips showed they had about a million crates more than they really needed, which corresponds to €3.5 million in wasted capital investment -- just at that one brewery. And they have more than 100 breweries altogether. Back-of-the-envelope math says the savings opportunity is upwards of €350 million.

The key is that Heineken identified reverse logistics as an important strategic component of their operations and dug deep to find a way to streamline it. Other companies, like HP with their refillable ink cartridges, have come to the same realization and now manage reverse logistics for strategic advantage.

(Image of Heineken Bottles by Tavallai, CC 2.0)

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