Reverse logistics have been around for quite some time now yet not everyone is still familiar with how it works and what makes it so important in the supply chain networks. Having a reverse logistics platform for your business, whether it’s brick-and-mortar or online, has several advantages. Let’s take a closer look at this service and why it is important.
What is Reverse Logistics?
By definition, reverse logistics is the process of moving goods in a backward flow, from the consumer back to its point of origin for reuse, remanufacture, or recapture of value. It also includes the process of customers returning products due to the following reasons:
- The wrong product was bought.
- The product was damaged upon delivery.
- The wrong product was delivered.
- The customer changed his or her mind about the product and no longer wants it.
Other reasons why products go through the reverse logistics system are:
- There were quality control issues with the product such as errors in installation.
- The processing of the order was faulty.
- There is a substantial overstock in the retail outlet.
- The manufacturer has recalled the products.
How Does it Work?
The usual flow in the supply chain network involves the product moving from the point of origin, from suppliers to the end customers. Reverse logistics work similarly, only in reverse and much more meticulous. Reports indicate that the process of returns involves more steps compared to outbound logistics.
The additional steps include:
- Repairing the items.
- Repackaging them.
- Relabeling each item.
- Restocking them in storage and warehouses.
- Reselling them.
- Refurbishing for distribution.
Why is it Important?
Reverse logistics have several advantages such as financial gain, positive environmental impact, and societal benefits. Here are a few reasons why companies should start considering and implementing their own reverse logistics systems and strategies:
- The process lets the trader or retailer to send back retrieve unwanted items from a customer and send it back to the manufacturer to be taken apart, sorted, assembled, and reused. This process minimizes an organization’s overall costs.
- Reverse logistics increases the lifecycles of products, the complexities of the supply chain, consumers’ preferences, and maintainable practices. These areas have to be consistently improved for greater productivity and growth.
- It also increases production speed, reduces costs and expenses (transportation, repair & replacement, and administrative & aftermarket maintenance), and retains customers by meeting sustainability goals and improving service goals.
- The system helps extract more value from returned goods as opposed to wasting other valuable resources (manpower, time, energy, raw materials) originally involved in the supply chain from the point of origin.
- The strategy gives companies and organizations the opportunity to improve customer satisfaction and consumer loyalty by giving more careful attention to the quality of products and the repair of goods. For this reason, a reverse logistics platform should include an avenue for feedback that will help improve the way things are run and better understand the real reasons why customers return products.
Looking at the different advantages that reverse logistics offers, it is easy to understand why it is a valuable part of any growing organization. The environmental, societal, and financial gains from the process are not to be undermined as they contribute not just to the company’s growth, but also have positive impacts on the environment and to society.