Do you know that 30% of e-commerce orders are returned, but only a fraction are utilized for recycling or reuse? The rest ends up in waste and even pollutes the environment. This is where the importance of reverse logistics comes in.
Reverse logistics focus on returning and reselling goods if the product is not damaged. If the product is badly damaged, it is discarded in a way that will not pollute the environment.
What Is Reverse Logistics?
Reverse logistics, also known as return management, is a process where logistics companies handle return product logistics. Reverse logistics means moving goods or products from the end user to the retailer or supplier warehouse. The reverse logistics process involves several steps, from collecting the package from the customer to preparing the product for resale.
Let’s discuss this with an example. A customer orders a product from an e-commerce company. The order is delivered on time.
However, the customer doesn’t like the product because of its improper quality or simply changes his mind and wants another product from the e-commerce store. So, he places a return request. The product is returned to the Company, and this process is known as reverse logistics.
Reverse logistics even covers recycling, repurposing, and resale of goods and products. Most consumers today check for a return policy while buying a product. Customers don’t buy that product if it doesn’t have a return policy. So reverse logistics even grows sales in businesses.
Distinction From Forward Logistics
Forward logistics involves the movement of goods from the manufacturer to the end customer. The manufacturer produces goods, provides them to the Company, and then stores them in warehouses.
When the customer orders a product, the warehouse staff picks it from the shelf. It is then packaged, labeled, and delivered to the customer’s doorstep.
Reverse logistics flows in the backward direction of the supply chain operations. Here, goods move from customers to the business.
Role In The Circular Economy And Sustainability
In reverse logistics, old or damaged products are reutilized and made into something new. Repairing or recycling can save businesses money and be good for the environment.
The Three R’s Of Reverse Logistics
1. Recycling
Recycling involves restoring all the valuable materials from a used product and using them to make a new product. For example, you can recover all the metals from an old electronic device and use them in other devices. These processes can conserve natural resources, reduce energy, and be good for the environment.
2. Repair
Sometimes, the customer returns the product because of defects. The business should identify, repair, and resell the defects on the e-commerce site or return them to the customer. This process reduces wastage and saves resources for a business.
3. Reduce
In reverse logistics, reduction means a business should use only smart and efficient materials during packaging or production to minimize waste. Reducing wastage helps to improve the environment.
Types Of Reverse Logistics
1. Green Reverse Logistics
Customers return a product for various reasons, such as malfunctioning or low quality. The business should manage green reverse logistics to make it environmentally beneficial.
It should do recycling, i.e., restoring metals or glass from a product and utilizing them in other products. The Company can even repair the damaged item if possible to reduce wastage.
Again, if the product is badly damaged and cannot be reused or recycled, then the Company should discard it in a way that will not harm the environment.
2. Reverse Return Logistics
Imagine a customer ordering a pair of shoes from an e-commerce company. But the boots delivered are the wrong size.
The customer then returns the shoe pair. The e-commerce business owner can now restock that shoe pair for reselling purposes. The business doesn’t have to process, reuse, or recycle the products.
So, reverse return logistics is a process that handles simple returns for reselling purposes.
Reverse Logistics Process – How it Works
1. Collection Of Goods
When a customer doesn’t like a product, he requests a return through an app or website. The business processes the return request and asks the customer why the product is returned. It then schedules a day for return shipments. The product is collected on the scheduled day and returned to the Company.
2. Sorting And Classification
The returned products are sorted based on repair, recycling, or disposal. For example, if a customer returns clothes in good condition, they are placed in the reselling category. But if they are torn or badly damaged, they are placed in either the repair or damaged category.
3. Transportation Back To Origin
The business sent the recycling products category to the manufacturer or recycling facility. Efficient logistics solutions are utilized to transport the products to their origin.
4. Recycling Or Disposal
The manufacturer recovers all the valuable materials from a product and utilizes them in other products. If a product is discarded, the manufacturer disposes of it so that it will not cause any harm to the environment.
5. Documentation And Follow Up
Both documentation and follow-up ensure transparency in the reverse logistics process. Documentation involves an accurate record of each step in the logistics operation, like the date the return request is processed and collected from the customer, the steps taken after the product is collected, and many more.
The Company even notifies customers about the return process and the status of their refund.
Benefits Of Returns Management
1. Environmental Care
The goal of reverse logistics is also to reduce the wastage and/or recycling of various materials. During returns management, the Company optimizes transportation routes, which reduces carbon emissions for the environment.
In short, reverse logistics reduces pollution and wastage and conserves natural resources.
2. Inventory Optimization
Reverse logistics plays a significant role in inventory optimization. For example, if the returned products are in good condition, the Company restocks them so they can be sold again. Returns management also identifies dead stock and recycles it.
Efficient returning handling can prevent clutter or unnecessary products from filling warehouse space, freeing up space for more demanding products.
3. Customer Experience
Most businesses offer a hassle-free return process. They refund the entire value within one or two business days of receiving the product from the customer.
This makes customers feel confident when buying from the e-commerce site. They are also assured that the return will be handled properly. A seamless return process increases brand reputation in the market.
4. Cost Savings
Reverse logistics removes valuable materials from dead stock or returned products, which the e-commerce company utilizes to make other products. It avoids the necessity of buying new raw materials and thus saves the business money.
Challenges In Reverse Logistics
1. Complex Logistics
Managing reverse logistics efficiently is quite challenging compared to forward logistics. People return products for diverse reasons, like defective products or warranty claims. Each reason will require a separate handling procedure, like recycling, discarding, or reselling, which is quite challenging for an e-commerce business.
Again, people return products from various locations. Managing various transportation routes can be quite costly for an e-commerce business.
2. Cost Of Implementation
Managing reverse logistics can be quite difficult for a new business. Setting up recycling plants or repair stations can be quite expensive. Again, various transportation routes for handling returns can raise costs. Handling returns even requires trained technicians, which increases labor costs.
3. Lack Of Awareness
The next challenge in returns management is customers’ and businesses’ lack of awareness. Many customers don’t have any idea about returning availability. For example, they throw their old smartphones away instead of returning them to the manufacturing facility.Â
Some customers are still not aware of the correct return process. For instance, they may be unaware that they are returning products with proper packaging. Some businesses are not even aware of the benefits of returns management. They discard items instead of repairing or recycling them.
4. Data Management
Reverse logistics involves a lot of data, and managing them effectively can be challenging for an e-commerce business.
Future Of Returns Management
1. Emerging Technologies In Return Management
Technologies like AI can drastically change reverse logistics. AI inspects the returned items and then chooses the next step: recycling, repairing, or reselling the product.
Again, it can determine the most efficient transportation route for handling returns, which reduces fuel costs. Blockchain can increase transparency and traceability in the reverse logistics process.
2. Trends In Sustainable Supply Chain
Using eco-friendly transportation methods like electric vehicles for handling returns can reduce environmental carbon emissions.
Conclusion
Reverse logistics is no longer restricted to handling returns management. It even promotes the recycling and reuse of various valuable materials, which is highly beneficial to the environment. Now, various e-commerce companies are adapting advanced technology like AI and blockchain to enhance the efficiency of returns management.
AAJ Supply Chain Management
