The Importance of Reverse Logistics

Published on
October 15, 2020

Reverse logistics is becoming a complicated and expensive step in the supply chain, especially with the rise of customer returns. According to Invespro, 30% of products purchased from an online retailer are returned. This accounts for $400 billion worth of returned inventory annually and this amount is expected to increase to over $500 billion by the end of 2020. Check out this article as well about the Growing Problems of Customers Returns.

The following is a breakdown of everything you should know about reverse logistics.

What is reverse logistics?

The Reverse Logistics Association defines reverse logistics as the all activity associated with a product or service after the point of sale. This typically involves Five Key Areas: returns, recalls, repair, repacking, or recycle.

What are some examples of reverse logistics?

  • Customer Returns
  • Unsold or Excess Inventory
  • Repackaging
  • Refurbishment
  • Remanufacturing
  • Remarketing
  • Selling Inventory to Secondary Market
  • Repairs and Maintenance
  • Recycling
  • End-of-Life Inventory

When is reverse logistics used?

Reverse logistics is used when products like customer returns, excess or unsold inventory comes back to the retailer. The retailer then decides whether they can use of the five key areas of reverse logistics to recapture value or properly dispose of the products.

Why is reverse logistics important?

According to AER WorldWind, an electronics life cycle resource, reverse logistics provides a way for retailers or companies to capture value from products that are at the end of their product lifecycle. The goal is to save money, protect your brand, and promote sustainability.

What is the difference between reverse logistics and traditional logistics?

Traditional logistics, or forward logistics, is the flow of products from manufacturer, distributer, retailer and then lastly, the consumer. Reverse logistics typically involves the flow of products back to the retailer, distributer, or manufacturer from the consumer. These companies have to decide what they would like to do in terms of recapturing value.

How does reserve logistics work?

First, a consumer initiates a return back to the seller. A third party logistic (3PL) takes the product and handles the logistics of bringing it back to the seller. The seller then has the decision of the next steps of capturing value from that return.

What are the benefits of reverse logistics?

The benefits of reverse logistics involve increasing customer satisfaction and reducing the environmental impact and cost associated with customer returns. According a study conducted by Statista, businesses can expect to see a 36% increase in tangible cost savings. Check out this article to see more about the Benefits of Reverse Logistics.

What is returns management?

Returns management is all activities associated with customer returns and reverse logistics. Implementation of a proper returns management procedure involves the efficient flow of products in the reverse supply chain, identifying ways to reduce unwanted returns and looking for new opportunities to increase the value captured.

What is a centralized returns center?

A centralized returns center is a dedicated destination for customer returns. Instead of products flowing back to retailers, manufacturers, or distributers, it goes directly to a centralized returns center. Having a dedicated location helps businesses focus their resources on the issue of customer returns.

What is disposition in reverse logistics?

Disposition in reverse logistics is the best method to recapture value. This may involve returning the product back to the vendor, returning the product back to stock, liquidation, recycling, or salvaging. In general, businesses should seek to make deposition decision at the earliest stage of the returns process. Deposition decisions play in important role in the success of reverse logistics.

What is in a reverse logistics system?

A typical reverse logistics system has a built-in way for you you track the unit economics of your business. When it comes to disposition decisions, reducing costs and recapturing value is the ultimate goal. Businesses that can measure and track the cost associated with each product received. A powerful reverse logistics system helps you reduce costs, cut back on environmental waste, and increases profits through data-driven decision making.

What are the key performance indicators(KPIs) in reverse logistics?

Key performance indicators vary across the supply chain industry but here are some relevant to the reverse logistics industry.

  • Disposition Cycle Time – The total amount of time from the product’s return to its destination.
  • Handling Cost – The cost of holding products in your inventory.
  • Cost of Repair or Refurbishment - The cost of how much is being spent to repair or refurbishment.
  • Rate of Recovery – The amount of value you captured after the product reaches its destination.

Check out this article for additional information about Key Performance Indicators in Reverse Logistics.

How can reverse logistics strengthen your brand?

With the rise of customer returns and waste produced from it, consumers are shifting towards companies that have environmental-friendly business practices. A business that deploys a reuse or recycle program reap the benefits of increased customer satisfaction and brand loyalty.

How can reverse logistics increase customer satisfaction?

Reverse logistic can help with the returns process to increase customer satisfaction. If a business can provide a hassle-free return, it will provide a excellent shopping experience for the customer. Customer Thermometer found that 70% of consumer support a business that delivers great customer service. In addition to that, it also found that 52% of customers made an additional purchase for the reason as well.

How can reverse logistics help you reduce costs?

Reverse logistics can help you recapture lost revenue. As soon as a product returns to your business, it is already considered a sunk cost. This refers to money that has already been incurred and cannot be recovered. The business is then tasked with finding a way to recapture some value. It will probably in involve one of five key areas of reverse logistics.

How does reverse logistics minimize environmental impact and promote sustainability?

As mentioned earlier in the article, 30% of products purchased from an online retailer are returned. From these returns, eventually 5 billons pounds of returns end in up landfills every year. Business can minimize environmental impact and promote sustainability by having an efficient reverse logistics program. Instead of returns going into a landfill, a consumer might find value in the product that you’re selling.

How should reverse logistics be handled for e-Commerce companies?

Reverse logistics for e-Commerce companies should be customer centric. Attracting and keeping new customers through a hassle-free returns experience is the best way to increase customer satisfaction and brand loyalty. In addition to this, having a disposition decision at the earliest stage of the returns process can help e-Commerce companies find better ways to recapture value.

Can reverse logistics be outsourced?

The cost associated with customer returns, and unsold or excess inventory is increasing. Outsourcing reverse logistics provides a significant benefit to companies looking to reduce costs and save time.

Would you like to see the benefits of reverse logistics?

Patturn is here to help you streamline your revenue and returns processing. We can help you strengthen your brand, increase customer satisfaction and recapture revenue through our proprietary platform. Contact us here for more information.