A guide to reverse logistics

Reverse logistics is crucial to customer experience and to recapturing the value of returned products. This article will explore the different types of reverse logistics, their 5 Rs, how it impacts your profits, and tips on enhancing customer experience through the reverse supply chain.

Returns are a component of the logistics process that e-commerce businesses cannot afford to ignore. What happens if a dress your customer purchased doesn’t fit? Or the grocery stroller comes with  defective wheels? Instead of making do with these products, customers may request for a refund after returning them or a replacement. And to facilitate the movement of products from the customer to your team, you’ll need a sound reverse logistics plan. 

A strong strategy in place can help your bottomline, and when not handled properly, these can eat into your profits.  After all, returns are worth trillions of dollars annually worldwide according to Tobin Moore, CEO and co-founder of reverse logistics technology company Optoro.

By offering a seamless returns process, companies can enhance customer experience and create maximum value from returned products. With the growth of e-commerce, businesses have seen a rise in the number of products ordered online that are returned (30%) compared to in-store purchases that are returned (10%). In this blog, we explain the ways in which you can use reverse logistics to make the most of these returns.

1. What is reverse logistics?

Reverse logistics involves recapturing the value of returned goods and products by moving them from the customers back to the sellers or manufacturers in the supply chain. Reverse logistics management works by picking up the products from the customers and moving them back any number of steps along the supply chain to the manufacturer or supplier, as opposed to forward logistics that work the other way.   

The process follows the 5Rs – returns, repairing, reselling, repackaging or recycling. These sustainable practices help reduce waste, creating an opportunity for cost savings for your business.

2. What are the different processes involved in reverse logistics?

Several types of processes make up reverse logistics in supply chain management. These are discussed below:

1. Returns management — This process involves dealing with products returned from customers. The process needs to be fast and smooth so that customers can feel satisfied with the service. 
2. Return policy and procedure (RPP) — The return policy provides customers with the terms, processes and costs involved in returning a product.
3. Remanufacturing or refurbishment — This process involves using the returned products and refurbishing them or making something new so you can resell them.
4. Packaging management — This is the process when old packaging materials are reused to reduce waste and cut back on costs.
5. Unsold goods — Retailers transport the goods that are not sold back to the manufacturer or distributor in this process.
6. End-of-life (EOL) — When a product reaches the end of its life, it is no longer useful as it cannot be repaired or refurbished for reuse. Manufacturers usually recycle these products or dispose of them to create sustainable choices.
7. Delivery failure — This process encompasses managing the products that the drivers failed to deliver to the customer due to either an incorrect address or a customer being uncontactable after multiple attempts. These failed deliveries are sent back to the sorting centres, from where they return the products to the origin point. From there, companies can decide whether to resend the product to the customer or put it up for resale at an outlet.
8. Rentals and leasing — This process involves managing the products or equipment which a company has leased to a business. When the lease ends, the owner takes back the equipment and can recycle, redeploy, or reuse it.
9. Repairs and maintenance — Companies can get a damaged product from the customer and repair it, after which they may resell it.