A Guide to 3PL Reverse Logistics and Returns Processing

There’s nothing quite as disappointing to a business owner as having a great week in sales only to see return requests start trickling in. Whether it’s due to damages in shipping, errors in fulfillment, or cores for remanufactured items, returns are a fact of life in commerce. However, working alongside an experienced 3PL can take the sting out of reverse logistics and processing returns.

Key Takeaways

• Reverse logistics is the process by which a business receives returned merchandise for repair, resale, or recycling.
• The reverse logistics market is forecast to grow in value from $729.24 billion in 2024 to $909.87 billion in 2028.
• This process starts with your business’s return policy and ends once the returned shipment has been reconciled back into inventory, returned post-repair, resold, or recycled.
• Enlisting a 3PL to handle your reverse logistics leaves you free to work on other aspects of your business, including marketing and customer satisfaction.

Let’s back up and examine the key elements of the reverse logistics process. 

3PLs and Reverse Logistics: Terms and Definitions

Understanding the key terms in reverse logistics can help businesses streamline their processes and enhance customer satisfaction. Here are some essential definitions:

• Reverse Logistics: The process of managing goods that flow back through the supply chain after their original delivery. This includes returns, repairs, cores, and goods earmarked for recycling. 
• Return Merchandise Authorizations (RMAs): An RMA is an approval issued to customers before they can return a product. It provides a tracking code and information for both the customer and the business.
• 3PL (Third-Party Logistics Provider): A 3PL is a company that offers outsourced logistics services, such as warehousing, order fulfillment, and reverse logistics. 

By 2028, the global value of reverse logistics is expected to grow to $909.87 billion, a percentage increase of nearly 25% from 2024. This serves to illustrate why shippers need an effective returns process in place that balances customer satisfaction with preserving profitability. 

What Are the Five Rs of Reverse Logistics?

The reverse logistics process can be broken down into the following five basic steps.

On a general level, these steps cover everything from the customer’s return request to how returned goods are reconciled by shippers and warehouses. Let’s examine each of these five steps in the process more closely.

1. Return Policies

A business’s return policy must clearly explain:

• The circumstances under which returned merchandise will be accepted.
• Customer responsibilities, such as filling out an RMA, repackaging, and printing/applying shipping labels.
• Tiered approaches to returns, such as when merchandise is only eligible for  partial credit.

A 3PL that can handle reverse logistics on your behalf will most likely use warehouse management software (WMS) to automate the pure shipping and storage elements of this step. 

Additionally, a modern WMS should integrate with your chosen ecommerce platform, so your 3PL will be able to tell if a return is authorized or not.

Related: Putaway Process: A Thorough Guide to Efficient Warehousing  

2. Repair

For retailers, repair is often the best-case scenario in a return transaction. If a customer receives a broken product and agrees to repair per your particular RMA process, it’s true you’ll lose some money from shipping charges and time during the repair itself. However, you’re likely to retain more profit (at least in the short term) than you would from other return options.

Common circumstances under which a customer might opt for repairs include:

• Limited Item Availability: The item(s) in questions have no direct replacements ready to ship.
• The Merchandise is Customized: This could include automotive accessories painted to match a particular vehicle’s color, wiring adaptors built to exact specifications, or any other circumstance where a replacement isn’t available off the shelf.
• Mass Defects: A retailer returns multiple items, usually with the same stock keeping unit (SKU) due to the same defect or defects affecting every item.

Most return policies require the customer to send goods back for inspection, even if they’re not willing to wait for repair. Even if you have to send an immediate replacement, you may be able to salvage the value of returned goods via remanufacturing or refurbishment.

3. Reselling Returned Merchandise: Remanufacturing or Refurbishment?

Products that undergo one of these two processes are sometimes known as remans or refurbs. Whichever process is used, the purpose is essentially the same: to transform an unsaleable item into one which can be sold. 

However, there are important distinctions between remanufacturing and refurbishment. 

• Remanufacturing is used on items that were always meant to be returned in the first place. For instance, if you buy a new battery for your car or truck, you’ll probably have to pay a core charge. Once you remove your old battery, you can return it to the shop to have that charge refunded. The manufacturer will then use the non-wearable parts of the core to make a ‘new’ battery.

• Refurbishment is used on merchandise that can be repaired or resold. This is common with consumer electronics such as cell phones, tablets, and laptop computers. Such goods don’t come with core charges, but customers upgrading from one generation of a phone to another might trade in their old model at the time of purchase. Many businesses refurbish these trade-ins to sell at a discount.

Both of these processes involve repairs. However, in reverse logistics, the ‘repair’ option is used when the end user is willing to send defective merchandise back, wait for it to be fixed, and then sent back to them. This maintains a closed loop between buyer and seller. Remanufactured and refurbished goods are almost always sold to new end users. 

Retailers may return large amounts of goods that don’t sell well. For shippers, kitting in warehousing is an option you can use to create value for your customers and move poorly-selling merchandise. 

4. Repackaging

When a product is returned, it may require new packaging to make it ready for restocking or resale. Repackaging ensures that products retain a new, sellable appearance and are protected from further damage, allowing businesses to recapture value from returned items rather than taking a loss.

Here are several ways a 3PL excels at repackaging in reverse logistics:

• Quality Control and Inspection: The 3PL team carefully inspects returned items for damage or wear. 
• Efficient Repacking Processes: With access to high-quality packaging materials and specialized equipment, 3PLs can easily repackage items to appear brand new.
• Re-shelving: Once items are repackaged, 3PLs can reintegrate them into their inventory systems, making them available for resale or redistribution.

Effective repackaging by a 3PL prepares returned products for resale and enhances brand recognition. With experienced third party logistics providers, businesses can focus on growth while their returns process is expertly handled.

5. Recycling

Though it can be considered a worst-case scenario, recycling components from merchandise that is otherwise unsaleable is sometimes the best option. This is especially true of modular goods such as home computers. 

A fringe benefit that comes from a solid recycling plan is sustainability. Environmental concerns have become a key component of customer decision-making over the last several years. Partnering with a 3PL whose expertise and partnerships accommodate this need will have a positive impact on the perception of your business. 

Why You Should Partner With a 3PL For Return Logistics

There is an appeal to handling every aspect of your business first-hand, but turning logistics over to professionals can prove beneficial in several ways, such as:

• Expertise and Infrastructure: 3PLs have specialized knowledge and established infrastructure, allowing businesses to handle returns efficiently without needing to build an in-house department.
• Use of Warehouse Management Systems (WMS): An advanced WMS gives insight into return rates, inventory levels, and product conditions. 
• Scalability: 3PLs can scale their operations to accommodate peak return periods, such as the holiday season.
• Reduced Costs: Outsourcing return logistics can be more cost-effective than maintaining an in-house team, particularly for small- to mid-sized businesses that lack the resources for full-scale operations.
• Improved Customer Satisfaction: Businesses can experience faster processing times, real-time tracking, and a superior customer experience.
• Reverse Logistics Optimization: 3PLs can often help reduce waste and maximize the recovery value of returned products by facilitating refurbishment, recycling, or reselling.

If all of that sounds like a lot of work, guess what? It is. Wouldn’t you rather devote your time and resources to building your brand and meeting the needs of your customers? If so, the good news is that by outsourcing reverse logistics to a 3PL, you can do just that.

3PL Reverse Logistics With Fulfillment and Distribution

From single-item ecommerce transactions to large-scale returns and denial of shipments, shippers can’t afford to lag behind the competition when it comes to reverse logistics. You need a clearly defined returns process with multiple options to mitigate customer dissatisfaction and the resulting dent in profitability. 

That’s where we can help.

Fulfillment and Distribution’s 3PL services include modern reverse logistics solutions powered by up-to-date WMS and years of experience. By partnering with us, you can ensure that your returns are being handled professionally while you concentrate on issues like gaining market share and increasing profitability.

We can also assist your business with:

• Picking and packing
• Retail fulfillment
• Full 3PL warehousing
• And more 

Don’t let returns throw your business goals into reverse. Call us today at (866) 989-3082 or submit a contact form online today.