Reverse logistics is an important part of the supply chain and can be leveraged to improve your bottom line. Once you understand what is reverse logistics, you’ll be able to make the most of your supply chain process.
What is reverse logistics? Reverse logistics refers to the return of goods. You’ll find that reverse logistics happens after the point of sale. Reverse logistics might refer to the return of items sold. It also might refer to:
In many cases, the flow of reverse logistics starts with the return of goods sold. There are many reasons a customer might return goods. The product doesn’t match the description, or it arrived after it was needed. Maybe the customer just doesn’t like the product.
In all of the above scenarios, the return of the product would start the return logistics process. It's important to think about how returns are handled at your company.
What are the steps you take for a returned product? In many cases, the steps might include:
The way you handle your product’s reverse travel back into the supply chain can help your company avoid making the same mistake twice. It can also allow you to recycle products and make the most out of your components.
Understanding the reverse logistics system can help your business make the most of returns and leverage your bottom line.
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Reverse logistics are an important part of ecommerce fulfillment. In fact, many consumers review an online retailer’s returns process before placing an order. Companies that don’t have streamlined return policies and reverse logistics procedures lose business.
There are many reasons why reverse logistics are important. These reasons include:
One of the most important parts of understanding reverse logistics is understanding how it compares to other types of logistics.
The four types of logistics are:
Supply chain management is the coordination and planning of materials needed. The materials generally need to be in a certain spot by a certain time for manufacturing, construction, assembly or even military production. Supply chain management includes staging the right materials so production can take place.
Distribution and material movement involves the process of managing how a stored or supplied material gets to the location where it is needed. It entails loading, transportation and unloading. It can also entail tracking of stock or product and recording how the supplies are used. It might include transporting supplies from a central warehouse to a retail location with access to retail fulfillment.
Production logistics and management oversees the stages of integrating the distributed supplies into a product. This can involve manufacturing or assembling at a plant or warehouse. The logistics of production might also involve finding space for production to occur, staging materials for production and more.
Reverse logistics and product return are the only backward-moving type of logistics. It involves reclaiming materials from the assembly or production process. Think about a construction project: reverse logistics would involve sending back any extra materials and allowing the supplier to return the unused materials to their stock. Reverse logistics could also apply when a military group withdraws from an area. A common application of reverse logistics is when returned merchandise goes back to a warehouse for repair, recycling or reshipment.
Formulating a reverse logistics process that makes strategic and economic sense is paramount to being successful in your overall objective of achieving profitability. This is especially true when staring at the cold, hard reality of how much it could cost even if it’s done correctly.
According to statista.com, returned deliveries from e-commerce alone in 2018 was a $381 billion cost to online retailers and it’s only going to keep going up as it’s projected to rise to $550 billion by 2020.
Some things retailers have done as a countermeasure is charge customers for returns for either the delivery itself or as a “restocking fee”. However, these measures have proven to be extremely disliked by customers, leading most retailers to either never adopt or abandon the practice altogether.
Retailers could look into limiting online returns in the future but Amazon, the world’s largest retailer, accepts returns on most items within 30 days. Wal-Mart will take back nearly any item with a receipt within 90 days but does limit the amount of items that can be brought back without proof of purchase. It’s really about striking a balance between earning a customer’s trust and spending power, and setting forth a solid business plan in regard to reverse logistics.
Now that’s it’s been spelled out how some retailers help out consumers, let’s see how manufacturers and wholesalers in the supply chain network is affected by a returned item:
If you’re a manufacturer — If retail products put out by the manufacturer are considered to be defective, the manufacturer would most likely apologize, take responsibility for the defect (even if it is to be determined later if the products are actually faulty) and issue a credit or new product to the customer.
It behooves a maker of consumer goods to make it as uncomplicated and easy as possible for a customer. It not only engenders goodwill, it gives the consumer a sense that if they receive a product that doesn’t work as intended, they will be properly taken care of.
If you’re a wholesaler — In this scenario, the wholesaler isn’t taking back clearly defective products that need to be fixed but still needs to offer a great solution nonetheless.
The most likely reasons a product would be returned to a wholesaler is:
Once the return is initiated, it’s really similar to being the manufacturer in the sense that a new product or credit/refund should be issued ASAP and every reasonable step to support the customer should be made.
Regardless of which link in the supply chain you are, it’s a fact of life that there will not be 100% efficiency in making or selling items to consumers. How a company chooses to deal with the imperfect times, though, can make all the difference between happy and upset customers.
With so many complex components and engineering involved to make electronics for consumers, these types of products are basically their own category in reverse logistics.
The fragility of most electronics paired with their mostly high value and sometimes complicated features unfortunately combine to make them a very prevalent consumer good that has to be returned.
Because of the nature of some electronics, a return for a full refund might not be offered but in nearly any case, an exchange for a defective product is usually readily available. However, unlike a t-shirt being the wrong size, a customer might be asked to prove that the electronics in question don’t work properly.
On a consumer level, restrictions on electronics returns have smaller windows than other types of items. Most major retailers (think Amazon, Walmart, Best Buy) will accept an electronics return with a receipt within 15 days of purchase. Electronics are also the most likely kind of item to have a restocking fee.
Best Buy is a good instance to use here because there is at least one location in all 50 states, the District of Columbia and Puerto Rico and they deal exclusively with electronics. If an opened cell phone is returned, there is a $45 restocking fee. On other items such as drones, DSLR cameras and lenses, camcorders, projectors and projector screens, it is 15% of the item’s original purchase price to restock the item.
But outside of those 15 days on purchases, if there is something defective with your product, the customer will be encouraged to refer to the manufacturer’s warranty (which varies greatly by product) in order to get a repair or replacement.
In fact, warranties can be valuable enough on expensive electronics that you can buy extended warranties that will offer free or discounted repair or replacement on your products after the manufacturer’s warranty runs out.
A prime example of electronics insurance that helps out a company’s reverse logistics is buying AppleCare+ for various electronics made by Apple, especially its ubiquitous cell phones. For a flat upfront fee, your iPhone is covered against screen damage and other kinds of accidental damage at vastly reduced repair costs and also adds 24/7 customer and technical support.
With a brand new iPhone now $1,000 or more, AppleCare+ is an example of insurance that protects both sides of the logistics. Apple can help keep customers happy by providing stellar repairs where the items usually come back in “brand-new” condition and also provides a profit stream for the tech giant. Customers get the peace of mind that if their pricey device fails for any reason, they can essentially replace it without shelling out the full cost of another phone.
This affects the reverse flow of logistics as well. Both manufacturers and wholesalers have to be set up to receive damaged or defective and either repair or replace it for the consumer. Then the original seller or maker will possibly resell the repair item or return it to the consumer, try to reclaim salvageable parts to build a refurbished product or just throw the broken equipment into the trash. More on this will be covered in the next section.
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There are a number of things that could happen to your product after it is returned. Many of these options depend on the condition of the product.
Here are a few typical final destinations for a product after it is returned:
Returns that don’t meet the above qualifications will have to be disposed of and considered a loss. Some locations have laws about how disposal of certain goods are handled. Check local regulations before disposing of any items.
Reverse logistics is an important part of distribution and fulfillment. Reverse fulfillment is the process of moving goods from the customer back to the warehouse or manufacturer. Though many businesses would prefer otherwise, reverse fulfillment is just a part of doing business. For some companies, reverse fulfillment can be costly. After the holidays, for example, are a busy time for reverse fulfillment. It is important to streamline processes to maximize efficiency. A streamlined returns process can help your business preserve profitability and reduce costs.
Reverse fulfillment is necessary for a number of reasons, as customers return products for many reasons. Maybe the item is the wrong size. It could be the wrong color. Maybe it arrived damaged. The reverse fulfillment process begins when the customer returns the item to a store or drops the item in the mail.
Have a solid reverse fulfillment strategy is especially important for ecommerce businesses. Brick-and-mortar retailers deal with inhouse returns on a daily basis. Reverse fulfillment and reverse logistics can give ecommerce businesses a competitive advantage. Many companies offer free returns and free return shipping. With no immediate returns costs and minimal hassle, customers are comfortable with making purchases.
But it is important that these returns don’t pile up in warehouses. A reverse fulfillment or reverse logistics process can help minimize operating costs associated with returned products.
Many companies set aside part of their supply chain for the reverse logistics process and reverse fulfillment. Warehouse space is essential for reverse fulfillment. Space is needed for inventory of returned product and repair or reassembly. A fulfillment and distribution partner is essential for reverse fulfillment. Let R+L Global meet your reverse logistics needs.
Implementing a reverse logistics process doesn’t have to be rocket science. When you set up policies and procedures for reverse logistics, it’s important to keep both your business and customers in mind.
Here are some ideas for effective reverse logistics for your ecommerce business.
Now that you understand what is reverse logistics and why implementing a reverse logistics process can benefit your business, it’s time to talk strategies. Growth in ecommerce and shifting customer expectations require businesses to improve the efficiency of their reverse logistics operations.
Many retailers, both ecommerce and brick and mortar, are adopting strategies to improve reverse logistics. Here are a few strategies some retailers are using to improve reverse logistics services.
Many retailers and ecommerce companies let third-party logistics (3PL) partners to process, sort and even resell/dispose of returned products. In many cases, these partners can perform reverse logistics services more cost-effectively than internal handling. Working with a partner who can process returns can allow you to focus on your business.
Many businesses and 3PLs use data and technology to streamline their reverse logistics processes. This technology and information can be used to keep an eye on products at 3PL warehouses, troubleshoot and repair returned items. In some cases, companies can even use data and tech to let customers troubleshoot at home. Hardware can be sent to the customer’s home to fix the issue and prevent another cog in the returns process.
Additionally, data can be useful in strategizing reverse logistics. You can track things like volume of returns, condition of products returned and the reason for the return. This data can help you predict and prepare for the flow of reverse logistics and the volume of coming returns.
When dealing with a flood of returns, you need to strategize. Using the data you gather can help you create more efficient policies. Some businesses accept all kinds of returns, no questions asked. Others, like Amazon, will shut down a user’s account if they make too many returns.
Some companies have policies in place that allow them to ship out new items rather than accepting a return of a broken item. You can analyze return volume data to help create more efficient policies that allow your company to handle returns in a way that best fits your needs and your customers’ needs.
More and more consumers are turning to ecommerce businesses to get the products they need. This means transportation costs are rising. Transporting and processing returns for large items like furniture, equipment and machinery and large electronics can be costly for manufacturers and retailers.
One strategy retailers and manufacturers are using is combining transportation services. Pickup and delivery can occur on the same trip. Combining services can increase efficiency.
Some companies are also opening centralized return centers. These centers can help improve efficiency in the logistics life cycle. Having all returns centralized and processed under one roof can make sure operations are optimized.
When thinking about reverse logistics, it is wise to consider your vendor agreements. Instead of looking at just price, also look at the vendor’s return policy. Manufacturers might not like processing returns, but neither do retailers. Taking a look at your vendor agreements can help you determine what to do with returned items.
Looking at vendor agreements is especially important if you are selling consumer electronics. Some electronics, including smartphones, have return rates up to 12 percent according to the Consumer Electronics Association. Returning the device to the manufacturer could make your reverse logistics process simpler.
Reverse logistics doesn’t have to be an operational challenge. With the right reverse logistics strategy in place, your business can meet the challenges associated with returns without hurting your bottom line.
Ways the right reverse logistics strategy can impact your bottom line include:
R+L Global Logistics knows that returns come in all shapes and sizes. Reverse logistics and reverse fulfillment services can help your business keep a leg up on the competition. Reverse logistics services include:
Need a solution for reverse logistics? Let R+L Global Logistics help. You’ll find a number of reasons why working with R+L Global is a good idea for your reverse and other logistics needs, including:
With so much to offer, why don’t you reach out to R+L Global today? Contact us, chat with us or give us a call. We understand what is reverse logistics and are able to help your business take advantage of this important process.
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