Reverse logistics involves moving products back from customers and reworking products and materials to create another product that can be sold. In other words, it’s about moving products backward through a company’s supply chain network. This process has become an integral component of any streamlined, successful supply chain. It has been a part of the retail industry for more than 100 years when companies like Montgomery Ward (mail order and department store retailer) and Sears Roebuck (a chain of department stores) first implemented it as part of their supply chain. In the past several years, there has been an explosion of reverse logistics in the eCommerce segment, and now both forward and reverse logistics are beneficial to businesses and consumers.
Let’s take a look at the concept of reverse logistics to help you understand it and get started.
What is Reverse Logistics?
We can define reverse logistics as “the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal.” In other words, it’s the process of traditional logistics performed in reverse. Reverse logistics typically comes into play when a dissatisfied customer wants to return an item, but can also include:
- Responsible disposal and recycling of materials from previously sold products
- Inward recycling or disposal of packaging materials
- Refurbishment and re-manufacturing of goods
- Remanufacturing of goods from defective product
- Return of unsold items by distribution partners
- Maintenance and repairs as per guarantee agreements
- Existing and growing market dynamics (e.g., need for reuse and recycling and higher customer return rates)
- Selling of products to a secondary market in response to overstocking and returns
How Does It Work?
There are many different ways in which reverse logistics can play out, and it all depends on the specifics of how the business operates. But in almost all cases, the reverse logistics process can be broken into two main parts: remanufacturing or refurbishing and returns management.
- Remanufacturing or Refurbishing
The aspect of reverse logistics that gets the recycled or returned product ready to hit the store shelves again is called remanufacturing or refurbishing. The process can be relatively straightforward and simple for certain products. For example, if a customer returns a dress or a pair of pants before they wear it, the manufacturer can add a new price tag to it and put it back in the store.
However, things get more complicated when receiving a returned product that’s been used or when recycling a product. In these cases, the company employs its quality department to inspect the item and determine whether it’s covered by the returns policies and suitable for a customer refund. If they decide that it can be repaired and resold, it’s an opportunity for creating revenue for the company, and the product shouldn’t be scrapped. Many products get returned because of damaged packaging, and they can be repackaged and put back into the store.
- Returns Management
The aspect of reverse logistics management that deals with managing the products returned to the company. The company first determines whether they can accept the item. When accepted, returns management will make sure that it ends up in the right hands (for example, a warehouse manager who knows how to store it).
Benefits of a Reverse Logistics Solution
In the past, reverse logistics operations were often ignored and neglected. Even today, reverse logistics departments of many companies are working in outdated formats. Nevertheless, effective logistics systems can bring a number of benefits that get translated into material gains and savings for your company.
- Collecting valuable product data
This is probably one of the most significant benefits of effective reverse logistics. It can provide companies with valuable product data, essential for mending issues leading to product returns. A well-planned and properly implemented reverse logistics process can help you collect useful data on the reasons for customer returns, common product lifespans and defaults, and other valuable data.
- Customer satisfaction
A smooth reverse logistics process improves the customer experience and increases customer satisfaction. Whenever a customer wants to return a product, then there’s probably something they are unhappy with. Therefore, a seamless customer experience and customer satisfaction are very important with reverse logistics.
You can improve the customer experience with your company by simplifying the return process. Delayed refunds, having to pay for return shipping, and other complications can drive your customers away. To make the whole returns process easy, you should always engage in communication with your customers. Also, consider including a return shipping label, so they don’t have to pay extra costs or take extra steps to return items.
- Enhanced service and customer retention
Upon the return of items, a functioning reverse logistics department will provide their unhappy shoppers with an excellent level of service. That is especially important in competitive markets. Return processing is a critical point in the relationship between the brand and consumer, which makes enhanced service even more vital. Customer influence online and social media sharing can have a tremendous impact on your organization’s reputation and foundation in the market.
Increased customer retention is another stellar benefit of a well-implemented reverse logistics process. According to this UPS research, 95% of those surveyed said that they wouldn’t buy from a brand again if their experience with product return is negative. By ensuring that the customer has access to convenient return processes, your reverse logistics system can significantly increase customer retention levels.
- Potential for additional revenue and reduced losses
Streamlined and well-planned management of materials and goods traveling back up the supply chain can bring in additional revenue and reduce losses. For instance, error-free returns handling and tailored returned policies can save on losses related to product returns. The additional revenue can be realized by repair, recycling, and refurbishing goods, as well as by selling returned materials and products from them.
- Reduced costs
With reverse logistics, companies come across more opportunities for cost reduction. The cost areas where you can reduce costs include:
- Returns labor, technical support, credit reconciliation, vendor management, and processing.
- Storage costs.
- Costs associated with fraudulent returns.
- Return shipping costs for both returns and delivery. To provide heightened levels of customer satisfaction and reduce transportation overheads, some companies combine replacement shipping with return shipping.
The reverse logistics costs are often spread over several parts of the supply chain. Since no person or department is directly accountable for these costs, it leads them not to be minimized or even addressed. But with a reverse logistics department, companies will have an entity that accurately tracks and analyzes these costs and finds ways to reduce them.
- Improved brand image by minimizing environmental impact
Brands that offer recycling solutions for end-life-products enjoy recognition for “green” practices and efficiency. If improved returns processes and reverse logistics act to reduce negative publicity and yield heightened levels of services, enhanced levels of the brand image naturally follow. One of the best examples of reverse logistics is Apple’s reverse logistics process. They provide customers with a discount on new purchases when they bring their old devices in-store. Besides enjoying all the positive publicity, Apple also has material gains because they can reuse materials and parts from end-of-life goods.
Furthermore, some items may contain toxic components (e.g., heavy metals), and people may not know how to dispose of those products properly. If the manufacturing company is upfront and transparent about the safest way to dispose of their products, the consumers will appreciate them. According to a 2019 survey, consumers care about the environmental impact they make through their purchases. Of 6,000 participants surveyed, 83% said they believe companies must create products that can be recycled or reused.
By providing full transparency across your reverse logistics flow, you will get customers to trust your returns operations. For example, send them a notification to confirm that their product has been picked, then another one when the items have reached a service center, and the last one when you’ve reimbursed the customer. Also, be sure to include customer ratings because it shows them that their experience matters to you. Such customer-centric reverse logistics will be felt by logistics providers and retailers. Automated and digitized reverse logistics lead to higher end-customer satisfaction, reduced losses, and a substantial impact on your supply chain’s bottom line.
Efficient reverse logistics processes come with a myriad of advantages. However, creating such an efficient process requires a bit of work. The key lies in having the right software, and your best bet would be to hire a professional third-party logistics provider to handle your returns logistics processes. When you hire a logistics professional like Red Bird Logistics Services, you can rest assured that you will get our undivided attention to make sure that all aspects of your reverse logistics system work together flawlessly. We are also there if you need help with forward logistics, project logistics, last-mile delivery, inventory, warehousing, and many more.Contact Redbird Logistics Services today to find out more about the services we provide and how we can help you improve your reverse logistics process.