IN REVERSE

IN REVERSE

“India loses three per cent of its GDP (gross domestic product) to supply chain inefficiencies and ranks second from the bottom,” remarks Hitendra Chaturvedi, founder-chief-executive officer of Reverse Logistics Company Pvt. Ltd. (RLC). Be it is supply chain or reverse supply chain needs, the country is in dire need of a more organised approach. And to address the nation’s reverse supply chain needs, Chaturvedi established RLC and its brand, Green Dust. To define reverse supply chain, it is when a product or service moves in the opposite direction, from the consumer back to its origin and this movement could be due to reasons including defects, end of life, warranty, overstock and more.

“Over a one-year period, I stayed in touch with a few VCs that I found interesting, kept giving them progress updates and built a pitch based on my analysis of opportunities” – Hitendra Chaturvedi on raising venture capital funding

Chaturvedi confesses that when he returned to India in 2006, having spent 17 years working in the U.S., to head Microsoft’s OEM (original equipment manufacturer) unit, he had no intention of starting his own enterprise. However, when he shared his business experiences of having worked in a reverse logistics company prior to Microsoft, people’s lack of awareness on the concept itself took him by surprise. It also had Chaturvedi thinking that this was a gap that he could plug efficiently. He began the exercise with a mini-questionnaire to prospective clients that included questions on return rates, asset recovery and compliance with government regulations on electronic waste disposal. Through his answers, Chaturvedi was able to show them the immense value-add that reverse supply chain management brought to their business process. By mid-2008, Chaturvedi set up the New Delhi-based RLC with seed capital of U.S. $ 100,000. It took the venture one year to turn profitable and by April, 2010, RLC closed its series-A funding from investors Kleiner, Perkins, Caufield & Byers (KPCB), Sherpalo and Reliance Venture Asset Management.

Building a back end

Chaturvedi insists that the RLC business model offers its clients several advantages including a reduction in returns processing costs by over 25 per cent, higher asset recovery, cutting leakage in reverse supply chain by 80 per cent and more. Take the case of a used laptop. If the company were to pay U.S. $ 300 to Green Dust for recovery and repairs, it could be sold to the franchisee at a 15 to 20 per cent margin. This, in turn, could be sold to the consumer for a higher margin. Where the consumer stands to gain is that he receives a quality product at a discounted price, inclusive of warranty.

Snap Shot

RLC
Founder: Hitendra Chaturvedi
USP: One-stop shop for reverse supply chain management in India
No. of employees: 100
City: New Delhial funding

“I consider us to be the pioneers of this industry in India and the fact that we have a customised technology platform in place gives us an edge,” he says. But, this first mover advantage has not come sans challenges. As Chaturvedi says, “The biggest challenge I faced was educating people on the impact that reverse supply chain management would have on their business.” Ultimately, the first few clients for RLC were won over by sales pitches made by Chaturvedi which showed them the difference to top line and bottom line. Today, RLC’s clientele includes retailers such as Future Group and technology driven companies such as Dell, Wipro and Hewlett Packard, amongst others.

As for getting other people to join his venture, Chaturvedi says that the initial recruits saw his passion and believed in his commitment. With time, the RLC brand name grew and now, Chaturvedi says that people see opportunity to work with a pioneer.

The fund hunt

“The first question I got asked by venture capitalists (VCs) was if I was an Internet or mobile phone company,” says Chaturvedi. He adds that breaking through the herd mentality of VCs took some work. “At the start, I did not know much about the venture capital market and went straight in, only to be alarmed by the stake that VCs wanted in the company,” shares Chaturvedi. “Over a one-year period, I stayed in touch with a few VCs that I found interesting, kept giving them progress updates and built a pitch based on my analysis of opportunities,” he elaborates. “It was the initial spade work that made finding funds relatively easy.” Another thing that worked in Chaturvedi’s favour was his background which included relevant work experience of nearly 20 years.

Looking to the future, Chaturvedi has an ambitious roadmap for RLC. “I want to see us grow into a U.S. $500 million company by 2014 and why stop there? I want to hit the billion dollar mark soon after,” he states. And to take RLC there, expansion plans are in place. Over the next three to five years, Chaturvedi is looking at taking this business model to countries like Sri Lanka, Bangladesh, Middle East and Africa. In the immediate future, Chaturvedi expects RLC’s 2011 fiscal to reflect revenues of close to Rs. 100 crore. Given that the company holds the pioneer tag for reverse supply chain management in India, it holds the edge over competition, if any. But, the real challenge lies in getting more Indian companies to latch on to the idea and see how it improves their bottom line. And RLC is up to the task.