What are some Key Performance Indicators (KPIs) in the reverse logistics industry?
KPIs in the reverse logistics industry vary across the board but some indicators remain the standard. Tracking and analyzing KPIs will significantly improve your operations and reduce costs in processing your returns.
Cycle Time is the total time to move a unit from the beginning to the end of a physical process. In the world of reverse logistic(s), tracking the amount of time it takes to process an item from the receiving stage to when the item is sold is a common KPI. If your processes are more streamlined and standardized, this reduces your disposition cycle time.
Handling costs are the cost of holding products in your inventory. As a rule of thumb, you can estimate $1-2 per touch for a product and $3-4 per touch of a pallet. The cost-per-touch on average is 2-5% of the inventory value.
Understanding the cost of repair or refurbishment is a common KPI that is measured. Keeping track of this cost reveals whether a product is worth repairing or not. Depending on the category, some parts can cost more than the item itself, making the item unprofitable.
How much did you spend on repairing the item? How long did it take for the item to return to stock? How much did it sell for on an online eCommerce channel? The rate of recovery will show you how much value you captured after the item is sold. This is an important KPI because returned inventories are subject to a higher rate of depreciation. According to CBRE, depreciation levels vary by category, with consumer electronics losing between 4% to 8% of their value per month.