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As many retailers continue to put e-commerce strategy and sustainability initiatives at the center of their business, the need to improve reverse logistics processes becomes more apparent than ever before.
Reverse logistics is the process of handling returned or unwanted goods from customers. It involves the flow of goods from the customer back to the manufacturer, distributor or retailer. A heightened focus on reverse logistics can help boost customer loyalty, eliminate waste and reduce markdowns. Here are 10 things you should know about reverse logistics as you are evaluating and evolving your strategy.
Reverse logistics is a critical part of the supply chain, and companies need to understand the process and develop effective strategies for managing returned products. Reverse logistics includes returns management, refurbishment and recycling. It can also be used to manage the recall of defective products, which can be a significant risk for manufacturers.
The growth of e-commerce has increased the demand for efficient reverse logistics processes, as online shoppers tend to return products at a rate of more than two times that of in-store shoppers.
The reverse logistics process can be complex and costly, requiring careful planning and execution. It typically involves multiple stakeholders, including customers, retailers, manufacturers and logistics providers. For the average return, the cost of reverse logistics (including related transportation, handling and processing costs) lingers around 59% of the original sales price of the item.
The goals of an effective reverse logistics process are: to reduce waste, minimize the environmental impact of returned products, boost customer loyalty with a seamless returns process and recoup the maximum value from returned goods.
Reverse logistics starts with returns management, which includes receiving, sorting and processing returned products. Returned products are typically refurbished, repaired, or sorted and repackaged for resale, or they may be recycled or disposed of.
Refurbishment involves restoring a product to its original (or close-to-original) condition, including repairs and upgrades, and then reselling the product at a discounted price. If an item cannot be repaired or resold, recycling is the next best option. This may involve the disassembly of the product in full or in part in order to reuse as many components as possible.
Disposal should be a last resort for returned products that cannot be repaired, refurbished or recycled. Each year, the disposal of returned goods generates nearly 6 billion pounds of landfill waste and 16 million metric tons of carbon dioxide emissions. To put that in perspective, it is equivalent to the waste produced by 3.3 million Americans in a year. Unsustainable practices can have a grave impact on a company’s reputation, particularly if products are mishandled or disposed of improperly.
The cost of reverse logistics can be offset by recapturing value from returned products through resale, refurbishment or recycling, but speed and efficiency are critical to minimizing the overall cost of returns. Technology can play a significant role in optimizing the reverse logistics process to recoup the maximum value, including warehouse automation for tracking and managing returns, inventory and refurbishment.
The complexity of the reverse logistics process can vary depending on industry, product and customer type. Reverse logistics is particularly important in industries with high product returns, such as retail and consumer electronics.
In consumer electronics, as well as automotive parts, appliances and some other sustainability-focused retailer sectors, reverse logistics also includes the end-of-life recycling and disposal of products. The pharmaceutical industry also relies heavily on reverse logistics to manage expired or unused products.
Today’s consumers have much higher expectations than ever before, especially when it comes to fast, free and seamless returns. For retailers that use automation to enable easy and efficient returns and refurbishment services, reverse logistics can be an opportunity to build customer loyalty.
Reverse logistics can be challenging for small businesses with limited resources, but outsourcing the process to a third-party logistics provider (3PL) can be a cost-effective solution. As the growth engine of the fulfillment business, 3PLs can offer a vast network of fulfillment centers, enhanced transportation and carrier capabilities, and facilities featuring state-of-the-art technology and automation.
In conclusion, reverse logistics is an important part of the supply chain and can provide an opportunity for companies to recapture value from returned products while minimizing waste and reducing the environmental impact of returns. Automation can help companies execute an effective reverse logistics strategy in order to remain competitive and meet the growing demand for sustainable practices in business today.