Reverse Logistics: Recapturing Value from Goods After Sale
Understand the need for reverse logistics, how it works and the systems needed to execute an efficient reverse logistics process.
Let's talk about reverse logistics. Say, you're an ecommerce company and you see that about 5% of your products are getting returned. This could be wrong sized items for fashion or damaged goods for furniture or when the customer no longer needs it because of you know, whatever reason. Reverse logistics is an emerging area of supply chain management that focuses on moving products from their final destination in order to capture value, or properly dispose of them. Whereas traditional supply chain management focuses on efficiently and effectively moving goods from suppliers to end customers, reverse logistics involves the opposite flow.
There are several motivations for companies to establish reverse logistics processes.
Products can often be repaired, refurbished, and resold at a profit. This represents a 'second bite of the apple' for companies to generate more revenue from sold goods.
Many goods require special handling at the end of life to avoid toxic materials entering landfills improperly. This includes electronics, batteries, lightbulbs and more. Proper reverse cycle handling ensures environmental sustainability.
The component materials of returned goods can often be reused while still maintaining quality. For example, metals, plastics, glass and paper from returned goods can provide resource efficiency.
An effective reverse logistics program can be a differentiator as expectations grow around corporate sustainability. It demonstrates reduced waste from an environmental perspective.
Whatever the reason maybe, reverse logistics is needed to get the goods back from the customer. Typically, the cost of returning the goods takes about 2X the cost of delivering them. This is just because of how the existing logistics infrastructure is setup for forward vs return logistics.
Let's talk about the key activities that are involved in reverse logistics.
Developing systems and visibility to track goods that are returned from customers or retailers. This includes transportation, tracking, verification and evaluation. Typically, ecommerce companies use 3PLs to pickup the goods from the destination and deliver.
Where possible and economically practical, returned goods are refurbished through repair or remanufacturing to either a specified quality standard or an 'as new' standard. This is applicable for high value goods like Furniture, electronics etc.
The sales and marketing required to sell refurbished goods through appropriate channels, often at a discounted price from the original sales price.
Environmentally-conscious disposal processes for goods that cannot be refurbished or resold. This may involve specialized waste or recycling streams.
As emphasis increases on sustainability and waste reduction, organizations stand to gain more from proactively managing reverse logistics in their finished goods supply chains. What was once seen as merely a cost center is now an opportunity for value recovery.
If you're an ecommerce company interested in setting up the reverse logistics flow, you need to optimize for visibility. Unless you have a really large setup, it is better to use a 3PL for reverse logistics. All you need is an internal portal to track the reverse logistics process end to end. Here are the steps involved.
First step is to provide a way for customers to create their return requests. This is typically a web portal or an email.
The next step is to initiate the reverse pick up using a 3PL portal. This can be done through an integration into your existing portal or by manually creating it in the 3PL's.
The main step here is to track the same. This needs an integration into your portal since tracking each pickup manually in 3PL's portal is near improbable. So have an internal ticket system that can capture the tracking information
Complete the ticket once the product reaches the destination.
If you're looking for your own reverse logistics system, setup a demo for ZORP ticketing. ZORP provides you everything from receiving customer request, triggering pickup in 3PL and tracking end to end.
