For all retail businesses, unnecessary costs within the supply chain must be contended with and reduced where possible. Reverse logistics is one such widely known cost center in the supply that, when left unchecked, can disrupt the entire supply workflow. The result can cut into profits and leave retailers with inventories that cannot be sold. But when reverse logistics is optimized, they can present an opportunity for retailers to maximize sales and reduce costs.
Especially in the age of a booming e-commerce market, efficient reverse logistics planning is an essential tool for retailers. Below, we will outline the ins and outs of reverse logistics management, the reverse supply chain, and the benefits of streamlining these workflows.
Reverse logistics moves goods from the traditional endpoint of the supply chain at least one step backward. This process can involve various plans and controls. Some companies prefer to outsource this work to a 3PL company like Flex Logistics.
What Is Reverse Logistics?
Reverse logistics is a type of supply chain management that moves goods from customers back to the sellers or manufacturers. Once a customer receives a product, processes such as returns or recycling require reverse logistics.
Reverse logistics start at the end consumer, moving backward through the supply chain to the distributor or from the distributor to the manufacturer. Reverse logistics can also include processes where the end consumer is responsible for the final disposal of the product, including recycling, refurbishing or resale.
Typically, logistics deal with events that bring the product TO the customer. In the case of reverse logistics, the resource goes at least one step back in the supply chain. In this arena, goods move from the customer back to the distributor or to the manufacturer
Any process or management after the sale of the product involves reverse logistics. If the product is defective, the customer would return the product. The manufacturing firm would then have to organize shipping of the defective product, testing the product, dismantling, repairing, recycling or disposing of the product.
The same process could be used for reusing/reshipping produce and perishable goods to prevent spoilage if transportation is unavailable or otherwise challenging. The product would travel in reverse (compared to traditional logistics) through the supply chain network to retain any use from the defective product. It is the backwards flow of goods that gives rise to the name.
Traditional Logistics vs. Reverse Logistics
Each retail company designs and optimizes their sales system so products end up in customer’s hands at the most efficient cost. No company directly designs their processes around customers returning goods. The goal is always to get it right the first time.
The hardest part of reverse logistics is that it is very difficult to predict. It is safe to say there will be returns, but predicting where they will come from is almost impossible to pin down. The retailer does not initiate the reverse logistics flow, but they must react and respond to the consumer’s needs. Repossession of an item is costly and time consuming, but necessary to ensure the customer’s experience remains positive. After the collection is complete, the retailer must decide if repairs are worth it, or if it is more cost effective to dispose of the item.
Types of Reverse Logistics
Reverse Logistics relates to any of the following activities after the initial purchase:
- Unsold goods
- Rentals & leasing
- Repairs & maintenance
5 Steps to Good Reverse Logistics
- Process the Return
- Deal with Returns
- Keep Returns Moving
Why Reverse Logistics Is Important
With the rise of e-commerce on the global platform, more companies are now focusing on this sector of the supply chain. Reverse Logistics holds significant importance for e-commerce due to the sheer size and volume of returned goods. Finding innovative and result-oriented solutions can help businesses deliver robust customer satisfaction and establish themselves as a leading brand.
Data clearly suggests even minor modifications in the whole chain can save millions for businesses around the globe. It can also indirectly benefit businesses by reducing storage costs and freight costs.
Executing Your Reverse Logistics Strategy
Like your sustainability mindset itself, however, a well-conceived reverse logistics strategy will grow organically and become a part of your overall business and corporate brand.
A few general tips for reverse logistics success:
- Draw clear lines between your outbound logistics and reverse logistics operations.
- Reverse logistics strategy should be planned from the start. Incorporate reverse logistics planning with all other channels.
- Consider the costs and environmental impact of additional miles from Reverse Logistics so you can factor it into your carbon footprint and offset calculations.
The FLEX Logistics Team is Here to Help!
The demand for e-commerce is growing due to convenient online shopping experiences that have been improved upon during the pandemic. As this demand increases, it influences supply chains to refine reverse logistics as a way to build customer trust and loyalty. Transportation and logistics firms are already preparing for or participating in this global transformation toward more sustainable business practices.
Our team understands the importance of getting your products to the market. That is why we aim to understand your business and build lasting relationships with you and your team. Whether you are looking to add a new warehouse to your existing operations, growing and need to increase your distribution efforts, or starting a new company, FLEX has the solutions to meet your supply chain needs.
Contact us today to discuss your current and future warehousing and logistics needs. We will work together with you to understand your requirements and develop a solution that will set you up for future success.