Forward logistics refers to moving supplies and products through the production chain to get to the customer. But this aspect only reflects half of the overall logistics field. The other half, reverse logistics, is less well-known, and few businesses consider its importance. With effective processes to move goods back from the consumer, businesses can benefit in multiple ways and gain an edge over the competition and foster future growth. Discover more about this aspect of your company with this guide to reverse logistics.
What Is Reverse Logistics?
Reverse logistics refers to moving products from the customer back to the seller or to various aftermarket users who break down the goods into their components. A customer returning items to a business is the most basic form of reverse logistics. This field also includes sending products for reusing, repairing, recycling, remanufacturing or breaking down into raw materials.
Another view of reverse logistics is anything that occurs following the sale. Tens of vendors could handle a product as it moves through the many steps of this process. These vendors include the seller the customer may return the product to, shippers, storage facilities, recycling or refurbishing companies and many others.
Reverse logistics plays a vital role in providing recycled components and refurbished products to the economy. These goods and materials reduce overall waste and provide customers or businesses with lower-cost, restored products. The process of reverse logistics has several aspects, including the following:
Returning and Evaluating
First, the customer returns the product. This return may require repairs of the product per a warranty, a product replacement or refund. Items that need repairs or maintenance go to a provider of that service. Some companies offer in-house repairs while others outsource it. Products returned for refunds or replacements undergo evaluation to determine their next step in the reverse logistics process.
Repairing or Refurbishing
Repairing products and returning them to customers is one aspect of the repairing and refurbishing stage. Some customers return products to request a replacement or refund due to a fault with the purchased item. The company may be able to repair or refurbish the good for resale, depending on the issue. This option allows the manufacturer to recover at least some profits from the item, though it won’t be able to sell the refurbished or repaired product at full price.
Repackaging or Reselling
Reselling products takes returns that do not come from product defaults but customers who changed their minds. These goods may go to other selling outlets or liquidators. Refurbished goods may undergo repackaging before reselling to meet requirements for restored products.
Reusing or Recycling
Some goods will not go through reselling. Instead, manufacturers may seek to recover components for reuse to cut down on supply costs. In some cases when parts are not salvageable or intact, the product may undergo a complete breakdown into its raw materials for recycling. The company may use those recycled components or send them off to another company.
How Reverse Logistics Works
Reverse logistics coordinates movement from the customer back to another location of products. Unlike forward logistics that starts at the manufacturer and delivers products to individuals, this process begins with separate customers and returns products to the manufacturer or point of origin. Once returned, the goods may undergo processing to recover raw materials, refurbish them for resale or repair them for use. The alternative term for reverse logistics, aftermarket services, illustrates the vastness of potential uses for goods after they leave the customer.
For effective reverse logistics, the shipping process must efficiently collect goods from customers and return them in a timely manner. Moving products quickly and efficiently through the various stages of returns is the hallmark of a quality aftermarket services process. Optimized logistics requires effort and careful coordination among the many vendors who handle products throughout the process.
What Is the Importance of Reverse Logistics?
Facilitating the returns process and reusing or recycling products helps both the economy and the planet. Individual businesses gain boosts in customer sales and satisfaction, benefiting them and the economy on a larger scale. Reverse logistics also helps the environment by cutting down waste as companies reuse products and components after customers return them.
Businesses with aftermarket services can better cater to the needs of their customers who want to make returns or have warranty-covered repairs fulfilled. In fact, some consumers will only shop with retailers who have good return policies.
With the rise of internet-based sales, the number of product returns also has increased. For instance, when buying from a store in person, shoppers typically return only 5% to 10% of products. But online purchases typically have return rates of 15% to 40%, increasing the need for online companies to have quality return policies and efficient reverse logistics services.
The returned products also need to have a path that can permit their reuse or resale. Currently, 25% of returns end up in landfills, amounting to 5 billion pounds of trash. Companies with a coordinated way of using returns reduce the amount of waste they generate, helping to cut down on pollution and filling landfill space.
Reverse logistics is vital to help companies outshine the competition and protect the planet from waste.
What Are the Benefits of Reverse Logistics?
Reverse logistics is both important and beneficial. Businesses today cannot remain competitive without a clear return policy. Plus, those businesses must know what to do with the products after the customers send them back. Businesses that want to benefit from better customer experience, more customer retention and reduced losses should bolster their reverse logistics methods.
Improves Customer Experience
Customers actively look at the return policies of where they shop. Fees for returns keep two-thirds of customers from shopping at a specific retailer. The customer experience does not only include getting products to them. It also involves the stages of the reverse logistics process and getting returns back from customers.
For returns, customers want a quick process to quickly get their return or refund. Customer satisfaction with the company then ties directly to returns management. The same quickness of service applies to repairs or maintenance on products that customers send back to the manufacturer. A quick turnaround keeps customers happy.
Customers also appreciate access to shipping supplies like bags, boxes and shipping labels instead of needing to get or print their own. Over half of shoppers report having to print their own return label, and almost 20% had to find another package to send the return in. A streamlined reverse logistics process that includes quality shipping supplies and adds return labels to packages lets your company stand out above others. You should also have a means of tracking returns and refunds and make that information readily accessible to the consumer.
Increases Customer Retention
Customer experience plays a role in whether those shoppers will remain loyal to a business. Among consumers surveyed, 70% reported easy returns processes. Among those, 96% would continue to remain customers of that company based on their return experience. Offering easy returns with your reverse logistics process is a simple way for businesses to retain existing customers.
Reduces Risk of Loss and Saves Money
A clear process for reverse logistics that tracks returns throughout the process can prevent losses for your company. Knowing where products are and when they will arrive at different steps in the process optimizes the entire system of aftermarket services. Think of how your company applies a forward logistics process — you need to know when supplies will arrive to plan production and how those products will get to stores or customers. You need similar data about returned products with reverse logistics.
Companies that reuse components or recycle returned products can save on the costs of raw materials for manufacturing, as well. Additionally, they can make money from some returns through refurbishment and reselling, also reducing product and profit losses.
How to Improve Reverse Logistics
To get the most from a reverse logistics process, companies must carefully examine the methods they use and find ways to optimize them. A streamlined process saves time and money while moving products from the customer through aftermarket services.
Identify Room for Optimization
Carefully examine your existing processes for returns. How do you request customers make returns? Do they have to mail the product, or will a shipping carrier pick it up? In 2018, 63% of consumers shipped their returns back to the retailer, while 11% scheduled a carrier pickup. Only 13% returned goods to a store, while another 13% never returned the product but still got a refund. What method does your company use? How does it allow you to track the customer’s return and refund?
Use data to quantify the impact of reverse logistics on your business. For instance, you can track:The number of returns you process
- The cost per return to your company
- How many returns you can sell without repairs
- How much repairs and refurbishment cost
- How many returns end up as scrap
These data pieces will help you allocate funds, effort and employees to different stages of the reverse logistics process.
When monetarily feasible, outsource to a third-party logistics provider, such as ExpressIt Delivery. With a third-party provider, you have an expert in logistics to assist your company in improving your aftermarket services.
Become More Transparent to All Parties
Customers appreciate transparency about their returns and refunds. Others in the aftermarket flow also need to know where parts and products are so they can make plans. Keep careful track of where returns are in the process and communicate this information to all affected parties.
Once the customer gets their refund or replacement, they no longer need to know the status of their returned item. But those refurbishing or reusing the product do need to know where it is. Integrating blockchain tracking, a futuristic method taking hold today, is one way to keep tabs on all products throughout the process and protect the information about their locations.
What Does the Future Hold for Reverse Logistics?
As online retailers continue to try to find footholds in a competitive market, offering easy returns will become a selling point for many. But with more e-commerce, returns will increase, bringing a higher demand for reverse logistics services from shippers and other vendors. Companies that want to stay relevant in the future need to plan now to create a reverse logistics process that will grow with business and industry changes.
Automation is a system you can use today to improve your reverse logistics processes. As returns become more common in the future, automation will make aftermarket services easier and faster. Warehouse robots, for instance, can move products back to shelves for reselling. They can also organize products to send for reuse or recycling. Automation can reduce the efforts required by human workers while keeping the reverse logistics process moving forward.
Customers will continue to need attention, and to stay competitive, companies need to take a more customer-focused approach. Consider implementing ways to meet customers’ needs through easy, free returns and tracking of refunds and returns to improve with future changes.
Circular Supply Chains
Manufacturing products from reused materials or recycled goods saves money and connects the reverse logistics movement to forward logistics, creating a circular supply chain. This type of chain cuts down on raw material costs. It also appeals to consumers who appreciate more environmentally friendly alternatives to using virgin resources for manufacturing.
With greater demand for recycled or reused components, returns and their movement will become even more critical in the future. Companies can respond to this by optimizing reverse logistics processes today.
More Effective Reverse Logistics Tracking With Blockchain Technology
Using blockchain technology is an option for tracking supplies and products in the forward logistics supply chain. This technology may become a more commonly used tool in the future for reverse logistics. Blockchain is the technology used behind cryptocurrency that prevents unauthorized changing of the information in it. Having greater security when tracking returned products reduces losses for companies.
Get Help With Optimized Reverse Logistics Solutions
Customers today need ways to get products back to the seller as easily as they purchased them. When you offer reverse logistics options for your customers to facilitate returns and more, you give yourself a competitive edge. Having reverse logistics solutions will only go so far toward providing your business the advantages it needs. You also need effective strategies to make the most of this process. Start by finding a reverse logistics provider who can assist you in setting up and creating a highly efficient system.
Partner with our experts in delivery. At ExpressIt Delivery, we operate a woman-owned business that takes charge in pushing the industry to the future. To find out more about how you can benefit from working with our professionals, contact us today. We have the means to partner with you to establish and optimize delivery services for your business.