Reverse Logistics

Reverse Logistics

For many manufacturers and retailers worldwide, returns, repair, and exchanges are just part of the whole business process and have only increased with the popularity of e-commerce. A number of companies have also initiated moves to significantly boost sustainability and lower bills by collecting and recycling old or used products. Although it should be the exception rather than the norm, recalls can sometimes happen and it is best to be prepared for such instances.

All of the situations above are parts of the process called reverse logistics. Traditional logistics involves the movement of goods from its point of origin or the manufacturers to the distributors or consumers. Reverse logistics, on the other hand, involves the process of transporting goods from the consumers to the manufacturer or distributors. Some of the best examples of reverse logistics include

  1. Patagonia’s convenient and reliable exchanges, returns, and repairs policies for gears purchased in the store.
  1. Coca-cola’s increased glass and plastic bottle recycling program.
  1. Ikea’s generous return policy that allows you to return a product within the 365-day period for a full refund.
  1. Apple’s device trade-in in exchange for an Apple Store Gift Card, in-store credit, or free recycling.

Reverse logistics can be costly, but many companies can benefit from this supply chain process. Some of the benefits of effective and robust reverse logistics include:

  1. Improved customer satisfaction and increased retention with improved returns management. Better and more convenient returns and exchange policies improve customer satisfaction and help foster loyalty. It also helps manufacturers in analysing what exactly went wrong with the product, and improve it to minimise returns in the future.
  1. Recycling, coupled with effective reverse logistics, can reduce waste and boost environmental sustainability. A robust recycling strategy and reverse logistics employed by a manufacturer can reduce the amount of waste (e.g. appliance parts, beverage bottles, etc.) sent to landfills. Harmful wastes can also be disposed of in a way that would not harm the environment.
  1. Reverse logistics can be a cost-effective contingency plan in case of product recalls. Reaching customers and collecting defective manufactured goods can be easier when a company has a reverse logistics program in place.
  1. Reusing still-working parts from old products can significantly lower material costs.

So, how does one develop a robust reverse logistics strategy?

Prevent/Reduce

Prevent inconvenient returns and costly reverse logistics expenses in the first place by ensuring that your manufactured goods are of high-quality and durable. If there is a high volume of returns for a certain manufactured good, then it is a sign that its quality, features, or packaging needs to be improved. But there will always be instances when manufactured goods will fail to live up to the customers’ expectations or will be damaged due to normal usage. In cases like these, save on cost by working with the customer in repairing the item or device. Publish a product care and DIY repair guide for the customers to use when the need arises. If the product has minor issues and if the customer’s safety will not be compromised, have the technical support team work with the customer in repairing faulty electronic devices or appliances instead of having them shipped to a facility for repair.

Manufacturers can also reduce or completely prevent returns by switching over to digital. This strategy will work well with books, music, and software publishers.

Make the Most Out of It

But in cases when returns are inevitable, then make them as convenient and painless for customers as possible. Some eCommerce companies allow customers to print shipping labels, return forms, and return authorizations on their own which will be attached to the package. Items will be mailed through a third-party reverse logistics provider. Deduct shipping fees from the refund or store credit for a hassle-free shipping. Enlist a third-party reverse logistics provider that sorts and grades goods, and routes them for recommerce, disposal, or return to stock. Employ barcodes or QR codes to keep track of items returned, as well as for refund, disposal, return to stock, etc.

If You Can’t Avoid It, Then Turn Reverse Logistics Into Something Profitable

There are a number of ways companies can recoup any financial losses when merchandise is returned to them. Some of these ways include:

* Redistribution. Products can be returned to the manufacturer or distributor because these goods had been discontinued, unsold or there was an overage in delivery. When goods are returned, it’s better from a financial standpoint to redistribute them to a different location where there is a chance that they will be bought. There are some financial and practical factors that need to be considered when a company decides to resort to redistribution of goods. For example, it can be costly for a company to ship to an out-of-state or international location. State laws regarding product certification can also be different from its point of origin. Packaging and product labels need to be changed and this can also incur some significant costs. In cases of foodstuffs, there should be longer shelf-life for obvious reasons.

* Recycle. Recycling returned merchandise is another good way to turn reverse logistics into something profitable. Working parts or raw materials are extracted from the returned goods and are assembled into new products. Recycling works well with returned electronic parts, printer cartridges, plastics, and metals.

* Refurbishment and remanufacturing of discontinued or surplus products. The refurbished or remanufactured products are then resold to the market. Some of the prime examples are electronic and automotive products that are rebuilt and then resold at reduced prices to agencies.

* Sell at a discount or at an auction. Selling returned, salvaged, or surplus goods at an auction or through discount sales can be done with the help of companies specialising in auctions or discount sales. Labels can also be removed from returned goods, and then sold to auction and discount sales agencies. But ensure that discount sales and auctions will not negatively affect brand image especially for luxury brands. There are also financial considerations when you go this route, such as the cost of transportation and handling.

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