Reverse Logistics: 12 Things You Should Know About

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Reverse Logistics is a warehouse trend rising rapidly, particularly in companies with eCommerce sales.

Those companies report up to a 30% rise in shoppers returning their purchases. The impulse buyer and those buyers who purchase multiple sizes of the same item, returning the ones that don’t fit.

Reverse logistics has existed for over 100 years, with customers having the opportunity to return items. Today, consumers expect and use the nofuss return policies as part of their buying process. eCommerce orders being returned are three to four times higher than companies with brick-and-mortar stores. This means reverse logistics will remain a fact of life for most companies.

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To assist you in understanding what these returns will mean for your company, the following 12 points outline what it will mean for you.

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What is reverse logistics?

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What activities are included as reverse logistics?

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What is the difference between inbound and outbound logistics?

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Is there a difference between reverse logistics and reverse flow?

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Do companies require a reverse logistics strategy?

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What is the cost of implementing a strategy?

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What are the components of managing returns?

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What are the benefits of a sustainable reverse logistics strategy?

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When is reverse logistics not feasible?

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Can reverse logistics contribute to or erode a lean supply chain?

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Can reverse logistics increase customer satisfaction?

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How can we make reverse logistics work for our company?

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What is reverse logistics?

Reverse logistics is, as it sounds, the opposite of the standard supply chain where goods are shipped to customers. Things work in reverse, and the goods move from the customer back to the seller company or manufacturer. The process can include returns from eCommerce and retail and as components for refurbishing and remanufacturing. When received back, the products may be resold or disposed of permanently depending on the items.

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What activities are included as reverse logistics?

Reverse logistics occurs after the initial purchase, and any of the following activities can occur: • Goods Returned • Remanufacturing of a flawed item • Refurbishing of existing goods • Packaging • Unsold goods from an intermediary • End-of-life goods • Delivery Failure • Rentals & leasing • Repairs & maintenance

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What is the difference between inbound and outbound logistics?

Inbound logistics or Inward Goods refers to transporting, storing, and delivering goods coming into a company. Typically raw materials or goods built elsewhere are prepared for despatch to customers. Much of the stock is held on pallet racking systems to store goods and maximise efficiencies.

Outbound logistics is the delivery of products to customers or distribution centres.

It is supply chain management and where managers work to maximise the efficiency of distribution networks while minimising transport and storage costs.

These are the traditional logistic functions of companies shipping finished goods directly to customers or goods through distribution centres.

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Is there a difference between reverse logistics and reverse flow?

Reverse logistics is another reference term for reverse flow in the supply chain.

The reverse flow requires planning, implementing, and controlling for efficient inbound management and goods and related information storage.

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Do companies require a reverse logistics strategy?

Most companies require a strategy; the complexity of the strategy is based on how much of their sales become returns back to the business and how the companies will handle returns. The goal of a reverse logistics strategy is to recover value from assets coming back into the warehouse and reduce expenses. Where the items can be reused, the goal is to increase revenue by re-dispatching the items to other customers. In addition, the strategy should boost the efficiency of a traditional supply chain by separating the outbound and reverse logistics operations.

A successful reverse logistics strategy increases customer satisfaction and brand loyalty as customers can return purchases or get replacement goods within a reasonable time. A robust reverse logistics strategy can increase market share and provide a competitive advantage.

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What is the cost of implementing a strategy?

Implementing and operating a reverse logistics plan will have variable costs depending on the program’s scope and return rates and the process can vary widely among industries. For example, larger retailers may bundle boxes of returned apparel for shipment to a liquidator. An eCommerce retailer will consider either restocking or liquidation depending on the item.

A dedicated area is required in the warehouse to manage the returned items, and they should be separated from your inward/ outward goods functions. For larger volume return logistics, a separate dedicated facility may be required.

As many of the items are returning as small packages, not bulk goods, consideration should be given to the type of shelving and the configuration of that shelving enabling fast shelf stocking and no damage to items.

Thinking around a mezzanine floor area to create the required separation should be given as a great solution in some companies.

Your strategy program should ensure that each returned item is tracked with the same level of visibility and transparency as outbound goods.

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What are the components of managing returns?

The three components of returns management consist of: (1) Return Policy and Procedure (RPP) is a company’s approach to managing returns by publicising its information with customers and employees. The information includes details of how long after purchase a return is accepted, who is responsible for shipping costs and whether there’s a restocking fee.

(2) Remanufacturing (ROR) happens to return goods after they are accepted. For example, automotive or manufacturing components can often be remanufactured and sold again. Some are refurbished and put into new packaging or restocked on the shelves.

(3) Waste disposal (WAD) is for disposal when the products are unsuitable or not permitted to be resold after a return.

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What are the benefits of a sustainable reverse logistics strategy?

There are several benefits for a company when operating a sustainable reverse logistics strategy. These can vary from eliminating fines from government organisations related to improper disposal and importantly, improving the company’s public perception. In addition, companies can recover value from those assets.

The reverse logistics strategy should include plans to deal with remanufacturing and equipment failures, end-of-life equipment, and recalls. As a result, companies can respond quickly to these incidents, reducing the risk of regulatory action, potential litigation and customer dissatisfaction.

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When is reverse logistics not feasible?

Like all business functions, reverse logistics need to be profitable or breakeven.

Therefore, it is important to track the profitability and have a strategy for creating profit in the business unit. For some companies, it doesn’t make sense to ship products from the customer back to the distribution centre, a warehouse or point of origin, as the product’s value is lower than the cost of shipping.

In that situation, alternate proper disposal or repair processes will need to be developed potentially through dealers or distributors to manage returns. Again, the warranty and shipment status tracking will be important in ensuring the repair is as cost-effective as possible.

One of the best ways to manage the cost of returning items is to minimise returns in the first place, where practical.

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Can reverse logistics contribute to or erode a lean supply chain?

The objective of lean principles is to remove waste from your business operations.

The most effective lean solution is to design a product and deliver it to the customer so that they will not return it. This is achievable in some business models but will remain a challenge for eCommerce as buyers are returning items of shopping convenience, i.e. multiple sizes purchased.

Companies applying lean principles to the planning, implementing and controlling the efficient flow of goods and information from the customer back to the warehouse are most likely to increase their cost-effectiveness in managing the process.

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Can reverse logistics increase customer satisfaction?

With the rise of online shopping across many industries, experts say 30 percent or more of all items purchased will be returned. Today, returns are an expected part of commerce, and a lack of a comprehensive strategy will disappoint customers, leading to poor reviews and loss of market share.

Customers are more likely to purchase if they understand the return policy, even when they do not intend to return the product. A well-designed return process, backed by a reverse logistics system, gives customers peace of mind.

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How can we make reverse logistics work for our company?

Pivotal to the reserve logistics strategy is the correct warehouse or distribution centre facility capable of handling the volume of small, packaged items and minimising damage in the shipping and restocking of those items.

With a review of your current warehouse design and layout, discussions around your planning and projected volume of reverse logistics, Bowen Storage can assist you in installing the right shelving systems and space utilisation to maximise the efficiencies for your business.

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