What is reverse logistics? The term encompasses all the practices used to return items from the final customer back to the company. A typical example is seen in e-commerce businesses, which often offer generous return policies to customers.
Companies that receive products back from customers might re-sell them, as is often the case in retail settings. They might instead refurbish or remanufacture them. Certain types of products must be disposed of, though.
If you want to remember how reverse logistics work, just think about what logistics is: the process of moving goods toward an end customer. Reverse logistics, then, is simply logistics working in the other direction. It still is concerned with moving physical items and may use similar technologies to do so.
When Are Reverse Logistics Used?
Another way to think of reverse logistics is as any interaction a company has with a product after it has been delivered to the end user. If the company has to touch the product after the end user gets it, it is probably reverse logistics.
Reverse logistics is often used when:
- The customer finds a product to be defective.
- The customer realized it didn’t satisfy their needs.
- A distributor didn’t sell a product and returns it to a manufacturer, according to their previous agreement.
- An older product is getting refurbished.
- A product is sent to a facility for maintenance or repairs.
- Products don’t sell well in one market and are sent to a different market.
Some companies seek to get maximum value out of reverse logistics. They might have a testing center to find out the causes of defects. They might repair and resell products or dismantle them and use them for parts. As an alternative, they might recycle them to preserve the natural environment.
What Are the Benefits of Reverse Logistics?
When young entrepreneurs think up their big business ideas, they probably don’t dream of excellent reverse logistics. But doing well in this area can help your overall business success. Here are some benefits you can get from reverse logistics:
- Fewer Losses: If your reverse logistics practices preserve your products through careful handling, you may be able to resell them to avoid some revenue loss.
- More Revenue: You could set up systems for capturing value from returned products, such as repairing them, refurbishing them, selling parts or raw material, or recycling them.
- Better Reputation: If your reverse logistics practices benefit customers (by giving them future discounts, for example) and/or the environment, your reputation can improve.
- Business Data: A process that examines defective or unsatisfactory products can yield data and insights into improving your products.
- Lower Expenses: There are opportunities within reverse logistics to be more efficient by improving the cost of transportation, labor, storage, and fraud.
Improving in one or more of these areas can also enhance the overall customer experience associated with your brand. It may benefit your business to examine the list above and pick an area you can quickly improve. Choose a KPI to measure it, pick a strategy, and start working on it.
Another simple way to reduce problems with reverse logistics is to outsource that function. Elite OPS has more than 25 years of experience in every aspect of supply chain management, including reverse logistics. Contact us to get a free quote customized for your unique needs.