No development in the world of business has been as noteworthy as the rise of e-commerce over the last 20+ years. Most people need to only look at their own spending habits to see how so many of us have been more than happy to embrace the convenience and other appealing aspects of shopping online. But most of us don’t run a business that is operating in the e-commerce space, and if you are you know just how essential they are these days. A brick and mortar storefront is fine, but you better have a virtual storefront too and you need to be receptive to the online evolution of standard practises. They are changing all the time.
One new business reality that has been created by the rise in e-commerce is the way it has changed return policies and the way inventory is handled as it comes back for whatever reason. But it’s not just a change in policies and procedures, it’s also the sheer volume of inventory that needs to be handled because of the overall boost in business that selling online has made possible for owners. That’s something they’re pleased about to be sure, but it does come with challenges and new operational realities.
Reverse logistics is one of them, and it’s now a very prominent part of the supply chain for a lot of businesses. It is the process of dealing with the return of any supplied goods to inventory, including products returned by end users, inward disposal of packaging material, or recycling of sold product. As mentioned, the sheer size and volume of returned goods has many companies struggling to accommodate it and process it effectively, responsibly, and in a timely manner so that it doesn’t become too much of an expense. In the USA, retail returns went up to16.6% in 2021 from 10.6% in 2020.
Businesses need to constantly be evaluating their operations in comparison to all sorts of new logistical realities, and this is just one of many. However, maximizing reverse logistics is going to be more important for certain businesses and particularly those who are doing any type of online retail.
Differing from Traditional Logistics
Reverse logistics is markedly different from traditional logistics, although with both the supplier has no choice but to be the one taking the initiative. Let’s look at the basic differences between the two.
- Shipping to distribution centres, with numbers based primarily on sales forecasts
- Shipments to retail stores
- Supplying end users with products, services, or support
- Accepting and processing returns for end users
- Having responsible department approving /rejecting returns
- Returns to the physical store
- Returns to distribution centre
Traditional logistics involves the planning, implementation, and efficient / cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of origin to point of consumption. All the while conforming to customer requirements.
Reverse logistics is different in that the end-user plays an immediate role in logistics activity, and their action is the impetus towards forcing the business to make decisions on how returned products are handled. Products may be resold, refurbished, or they may need to be disposed of or handled in an entirely different way. Being knowledgeable about reverse logistics is what allows companies to establish the right protocols, but it is likely that many of them are going through a trial-and-error period right now in determining how to best move forward with this new business need.
Information Collection is Key
Reverse Logistics suffer when information is improperly collected and / or processed. Improving information collection is a key part of having better logistics when an increasing number of products are coming back to you in increasingly specific use case scenarios attached to them. In the bigger picture it is all connected to profits being maximized, waste being minimized, and – perhaps most importantly – customer satisfaction and experience is positive.
95% of consumers stated they would not buy from a brand if they had a negative return experience, and this has to be front and centre for any business owner who needs to understand the importance of reverse logistics.
So how do decision makers optimize their business’ reverse logistics?
Start with review, revision, and optimization of return policies and vendor agreement. This can reduce instances of overstocking, overstock returns, and added costs related to either. Plus, revising any of these points can reduce the number of customers deliberately over ordering freight. Overly liberal return polices can directly promote this type of overordering.
Outsourcing your reverse logistics is one other consideration, and it can be a much more cost-effective strategy than you might think. However, some companies will not want to relinquish the quality control they have with regards to customer service.
Another suggestion is to increase warehouse automation where it is expanded to handle reverse logistics, and there have been plenty of success stories here where companies have improved return response times, forecasting, labour costs, and reduced fraudulent returns. Centralized return centres are also something to investigate for larger businesses and having them handle returns exclusively means nothing is taken away from the initial – and preferable – stages of the supply chain.