Reverse Logistics is the opposite of the traditional or forward supply chain which manufactures and distributes goods delivered to end-users. Reverse Logistics is the need to send products back from their end-user to the distributor, retailer, or manufacturer. You can think about the “R”s of Reverse Logistics: returns, recalls, repairs, repackaging, recycling, and recovery through recommerce.
With an increased interest in sustainability practices and the growing popularity of online shopping, managing returns is becoming increasingly vital; businesses without a well-developed reverse process can lose more than 50% of returned inventory value.
So what does this really mean? How can improving the process create value for your business?
Let’s start with why products get returned.
Why are products returned?
There are a wide variety of instances where products are reintroduced into the supply chain, it’s not just about consumers returning products that don’t fit or are the wrong color:
- A customer returns a purchase for any reason in like-new condition
- Unsold goods are returned by the distributor
- Damaged goods need repairing
- Used goods can be refurbished
- Recycling or final disposal of goods
- Delivery failure
- Rental/leasing products or services
In each case, the product must be collected from its original endpoint, processed, and transported to a new end-point – whether a factory, warehouse, back into inventory, recycling plant, or disposal unit. And like the forward supply chain, managing and optimizing the reverse flow of goods presents several challenges for modern businesses.
Five Reverse Logistics challenges
1. Process efficiency
The Reverse Logistics process can be complex and messy, involving multiple touchpoints for products potentially without appropriate packaging, and requiring numerous stakeholders to coordinate effectively. Costs and inventory can balloon and create cascading problems throughout the entire reverse supply chain.
In many instances, the rigidity of legacy processes can decrease efficiency. Integrating cutting-edge Reverse Logistics software to achieve clear visibility of the reverse supply chain, increasing flexibility, and making better use of data can be a real differentiator
2. Financial management
From transport to remanufacturing, Reverse Logistics can be costly. There are two challenges here: managing cash flow so that payments can be made on time, and keeping reverse supply chain costs down.The volume of returns – like consumer demand – inevitably fluctuates, and this means budgeting for Reverse Logistics can be tough. As the move to online shopping makes returns more common, many retailers are struggling to ensure their business stays profitable.
3. Customer experience
Customer expectations for convenience and service quality have grown in recent years. Today, businesses have to provide return options that are easy.And given that experts project that 13 billion units (worth $573 billion) will be returned annually by 2022, developing more customer-friendly ways of processing and collecting returns is a pressing concern for many brands.
4. Compliance risk
Many elements of the Reverse Logistics process present compliance risks. Whether handling customers’ data or ensuring disposals adhere to environmental regulations, failure to comply with regulations can lead to significant financial and reputational damages.
Different territories have different laws, and regulations are continually changing. Ultimately, this means ensuring compliance is not a simple task – it is an ongoing risk management process.
5. Third-party risk
Reverse logistics often involves third-party contractors – whether in transport, storage, or even repairs and manufacturing. This creates a variety of risks, from fraud to poor quality service.
Businesses must therefore ensure their reverse supply chain is populated with trusted partners that can provide consistent quality and make the process as smooth and efficient as possible.
Three ways Reverse Logistics can create value
1. Building customer relationships
The impact of Reverse Logistics on brand reputation and customer relationships has grown immensely in recent years. By managing returns well and providing fast, efficient repair services, brands can not only avoid dissatisfied customers but actively build loyalty and trust. 78% of consumers say that free returns would lead them to buy more from a retailer over time.
2. Recovering assets
By remanufacturing, repairing, donating, or recycling products, Reverse Logistics allows businesses to make use of assets that would otherwise be lost or worthless. The net effect is to make far more effective use of resources and improve the business’s overall sustainability.
3. Increasing bottom line revenue
A well-oiled reverse supply chain can increase the profitability of a business, by producing savings and winning business through a positive customer experience.
Returns, repairs, and delivery failures are inevitable – particularly in e-Commerce, where returns are more than three times more common than physical store retail. But by responding effectively and providing fast, efficient service, businesses can turn their Reverse Logistics into a serious competitive advantage.
Ready to solve your reverse logistics puzzle?
Partner with G2 Reverse Logistics
No matter what your reverse logistics needs are, G2 provides a 360° solution for every stage of the returns management lifecycle. We have built a highly configurable, flexible solution that lets you onboard your returns process without the need for complicated IT infrastructure or spend.
G2 team can transform returns from an inevitable cost of operations to a powerful driver of profitability and brand loyalty. Our approach is to combine data, automation, and operations to provide end-to-end returns management including software solution and operational support.
Whether you’re a fast-growing brand or an established company with a large brick and mortar footprint, we can take care of your returns so you can focus on what you do best- growing your business.