What Is Reverse Logistics?

February 14, 2021
| by David Miles

Reverse logistics is becoming ever-increasingly popular, thanks to the evolution of the E-Commerce world and the demand for no-fuss return policies. The process refers to sending goods back from the customer to the retailer and further up the supply chain. It’s essentially the opposite of standard supply chain, in which goods are shipped to a retailer, who then delivers them to customers.

According to the Reverse Logistics Association, returns are 4-5 times higher in E-Commerce businesses than their bricks-and-mortar competitors. Which is why the reverse logistics process is becoming more and more necessary to businesses.

A customer returning an item is the first stage of the process, but what happens after the item is back with the retailer?

Returned goods can be resold if still in sellable condition, repurposed or disposed of. Sometimes, manufacturers will be able to re-use components of a finished product again, so that there is less waste.

When something is returned to a store or online shop, the retailer doesn’t just immediately put everything in their office bin: The product has to be disposed of properly, and faults need to be identified to be able to improve the product in future. As such, the returned item is sent back down the supply chain to the manufacturer to re-use or dispose of.

What Is Included In Reverse Logistics?

Reverse Logistics includes the following activities, some of which your brand is probably already familiar with:

  • Returns – When a customer returns a product to the retailer
  • Returns Avoidance – When a business aims to reduce return requests
  • Refurbishing – Sending products back to be fitted with new components so it can be resold Alternatively, using components from a returned item to make a new product
  • End-of-Life – Products that have reached their end of service life are returned to the manufacturer for proper disposal. This might include machinery or toxic products
  • Delivery Failure – If an item hasn’t successfully been delivered by the courier, it will find its way back to the sender
  • Rentals & Leasing – Products that are available for renting are sent back to the business to be leased out again. E.g.: Carpet cleaners or cars
  • Repairs & Maintenance – Products will be sent back to the manufacturer to repair if your item is still within warranty or suddenly breaks
  • Unsold Goods – Goods that are no longer in season, or haven’t sold in a considerable amount of time will be sent back up the supply chain for repurposing or disposal

3 Phases of Reverse Logistics

There are three stages of reverse logistics, all of which need to be planned and properly implemented for the process to work efficiently:

Return Policy & Procedure

This refers to the retailer’s return policy initially, as well as the manufacturer’s if they are different. Your return policy should be clear and accessible on your site, so that anyone who wishes to request a return, can do so without jumping through hoops.

Your policy should include how long the customer has to return an item, whether they have to provide a reason for return, and the process of returning goods.

Most customers now expect returns to be free in some way. This might include dropping the item off at the company’s physical store, having the cost of return reimbursed or having a shipping parcel sent to them for free. For larger items, some return policies will offer free collection of unwanted items.

Remanufacturing or Refurbishment

In this phase, manufacturers or retailers determine what happens to the returned product. Some products – like machinery and cars – can be remanufactured and resold, while others can be quickly refurbished before selling on. Refurbishing might include simple fixes like changing the packaging, while remanufacturing is a longer process.

Waste Disposal

As the name states, still phase is when items are disposed of as they cannot be re-used or resold.

Why Should I Have A Reverse Logistics Strategy?

The objective of reverse logistics is asset recovery. Somewhere along the supply chain, part of the finished product can probably be reused, and as such save you money. Without a process in place, it is easy to find yourself with unhappy customers, decreased brand loyalty and lower profits.

If your returns policy isn’t clear and working in the customer’s favor, that’s your first issue. Then, if you’re not recycling, re-using or safely disposing of your returned product, you’ll quickly lose money from storage and waste.

A strong reverse logistics process will save you tons of money in admin, transport and support costs.

Reverse Logistics and the Fight for Sustainability

By repurposing, recycling and refurbishing returned goods, businesses can achieve higher sustainability.

As we know, sustainability is more important than ever – especially to consumers – so if you can show you’re doing your bit, you can gain new customers to fit your business’s values.

Reverse logistics also contributes to zero-landfill goals your company might have, as well as reducing the need for harmful emissions and energy usage which are typically needed for improper waste disposal.

How Can I Improve My Reverse Logistics Strategy?

Returns Avoidance

The easiest way to improve the process, is by reducing the number of returns you have to deal with. With ReturnGO, you can leave return management to the experts. This simple integration tool works alongside your standard returns policy, but offers the customer store credits to cancel their return and keep the item, donate it or return it at a different time.

Using a returns avoidance tool will enable you to focus more time on creating new exciting experiences for your customers, while AI reduces the number of returns you have to deal with.

Improve Your Product Information

You can also reduce returns by making sure your product pages are informative and detailed, so that customers can find all the information they need about a product before deciding to buy it. The more informed your customers are, the less returns you’ll have to manage.

Ship Directly Back to the Manufacturer

If products do have to be returned, make sure the parcel is tracked when shipped, and delivered directly to the manufacturer. This reduces emissions, costs and double handling.

Analyze Your Returns

Every return should be recorded, as well as the reason for return. By analyzing the reasons for return, and the products that are being returned the most, you can make decisions on the best way to proceed. This might mean discontinuing the product, or working with the manufacturer to identify faults and how to improve them for the next batch made.

There is so much more businesses can do to improve their reverse logistics, and a clear and structured strategy needs to be in place with supply chain so that everyone can benefit.

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