What Are Forward and Reverse Logistics?
If you’ve heard about forward and reverse logistics as part of transportation management but don’t really know what they are, you’ve come to the right place. Logistics is filled with jargon, and these two are perfect examples of this fact. Written from the perspective of the firm in charge of logistics, these terms will make complete sense. But for the uninitiated, not so much. To that end, we’ve created this article to help you get a better understanding of the difference between forward and reverse logistics as well as what transportation logistics manages as a whole.
What Is Forward Logistics?
A forward or traditional logistics system deals with the flow of products from raw materials to the manufacturer, to the retailer, and finally to the consumer. There are different types of forwarding supply chain management that include direct order fulfillment, hub services, pick-and-pack services, and shipping.
The impact of these factors will increase the value that will be added to the product as it passes through each step along the route to the point of consumption. Forward logistics also becomes more divergent the further away it is from raw materials.
Sometimes, these raw materials can be found in only a few places, while the end product may reach consumers all around the world. As such, customer demand as part of supply chain management dictates the rate of forward logistics, as well as the inventory, kept at every stage of logistics processes.
What is The Importance of Reverse Logistics?
When we focus on the reverse flow we consider the movement of goods in reverse to the point of origin. It starts at the end-user and finds its way back to the retailer or manufacturer for proper disposal or to remanufacture or refurbish a defective product, and even as far back as raw materials via recycling. The speed of a reverse logistics program depends to some extent on the supply.
Many returned goods can make the supply chain system busier, faster, and more cost-effective, while a lack of product returns management can have the opposite effect. Also, the value of a product in the reverse flow declines with every stage that it goes through. This is because costs tend to rise due to additional time and resources being added in the return processing. The reuse of products and materials is still highly recommended.
The Benefits of Reverse vs. Forward Logistics
Sometimes called a green logistics system, reverse logistics has gained a lot of popularity in recent years, mainly due to its eco-friendly benefits. The difference between forward and reverse flows is that reverse logistics is never initiated by the company’s decisions or activities but by the activities of the customer. By planning and implementing returns management, a third-party logistics company better controls the efficient flow of return products. They can also reap numerous direct and indirect benefits. These include things like:
- As a business strategy, it provides a secondary ROI from every product in the reverse flow.
- It helps decrease capital tied into inventory.
- Enhances transparency across the supply chain network.
- Better product performance tracking throughout its entire life cycle.
- Improves public brand perception due to its attention to the environment with the focus on eco-friendliness.
- It lowers the company’s overall carbon footprint via the reuse of products when you remanufacture or refurbish products and materials.
- It helps enhance productivity and growth and controls the efficient day-to-day operations of the supply chain position.
- Boosts consumer satisfaction and loyalty by focusing on customer requirements.
The Difference Between Reverse and Forward Logistics
While there are plenty of benefits to be had from integrating reverse logistics into your supply chain management system, it’s important to realize that there are certain challenges. Below, we’ll talk about the difference between forward and reverse logistics.
- Forecasting– Unlike many reverse logistics, which is dependent on the consumer and where the supply is more uncertain, traditional logistics is pretty straightforward. However, certain trends can be observed over time. Typically, sales, promotions, or holiday seasons are followed by a higher influx of return products. According to reverse logistics research and other related information In the United States, during the first week of 2017, some 8 million packages were returned. Also, different types of products will have different return rates, further complicating forecasting in your logistics systems.
- Packaging and Product Quality – Packaging often poses a challenge during the reverse logistics process. This is often incomplete or damaged, making the handling more complicated. An incomplete package can also lead to product damage, as well as the misidentification of the product. The same principles can also apply to a defective product.
- Reverse Destinations – Reverse Destinations – Because the range of possible destinations for a returned item is larger, determining where any particular one will be shipped can increase the time and costs of the process.
- Pricing – It’s fairly obvious that the reverse flow of product will have a lower value than when it was first sold. What’s more, the pricing range will not be uniform since it will depend on its current quality. Various life cycle issues will play a role here. It may be more difficult to determine ahead of time if the product will no longer be attractive to new buyers.
- Costs – Generally, the transportation costs of reverse logistics will be higher than traditional logistics. This is because the nature of transportation management will be less structured. Handling costs will also be higher given the state of the packaging as well as the variety of return products. Similarly, the cost of the reverse flow of products can be further increased by the difficulty in the identification of returns and/or by proper disposal of the product. On the other hand, return products have a much lower incidence of theft.
- Inventory Management – With reverse logistics, the arrival of products tends to be less organized and predictable. Likewise, the price at which it will be resold is unknown beforehand. This will make it more difficult to manage inventory properly.
- Product Life Cycle – In forward logistics, the life cycle of a product is measured until it has made its way to the end-user. With reverse logistics, that life cycle is extended, also influencing the value that is possible to recapture.
- Negotiation – Since the quality of return products is not uniform, price negotiation is made more complicated than with new products.
- Marketing – Since prices will be lower for return products than for new products, this raises certain marketing problems. Likewise, taking into account issues from the perspective of the customer, a retailer cannot assure a consistent supply of return products given the uncertain nature and variety of the supply chain network and returns management.
The impact of these factors, as highlighted in reverse logistics research, will typically push many third-party logistics companies to disregard the importance of reverse logistics. And while it’s true that reverse logistics manages with newer challenges in the supply chain position, the benefits will often outweigh the added costs. If you want to learn more about the importance and difference between reverse and forward logistics, Redbird Logistics Services is at your service.
We have ample experience with forward and reverse flows of logistics systems and can help you set up a reverse logistics program and a supply chain network business strategy that will generate you a steady ROI. For more related information, don’t hesitate to contact us!