Why companies must pay attention to reverse logistics?

Why companies must pay attention to reverse logistics?

May 29, 2018 Off By Aval Sethi

Reverse Logistics or the process of moving products from their typical final destination for either proper disposal or capturing value is an integral part of business activities. The process comprises return of sold goods from end users or unsold goods from retailers to producers or manufacturers. These processes can be repair, redistribution, refurbishment, recycling, resale or recovery.

It is considered that reverse logistics is difficult but is unavoidable. It is necessary for the stakeholders to find ways to optimise and standardise the process, rather than putting it in the backseat and focussing on forward logistics. Research studies point to the importance of both reverse and forward logistics in order to reduce costs, reduce repair and maintenance requirements and improve customer satisfaction. A research by Aberdeen Group in 2010 said that 9-15 per cent of the revenues of manufacturing organisations are spent on returns. But the 2014 study by the same group on reverse logistics hinted towards costs associated with returns as a key concern. The customer demand for fast turnaround of repairs was listed as another concern by 39 per cent companies. Therefore, reverse logistics provided a competitive edge and helped improve customer satisfaction. The data gathered from associated posts, analysing data on returns, customer complaints and customer retention helped companies to improve the processes in production.

Third-party logistics (3PL) providers are engaged by companies to assist them with technology, transportation, regulatory environment and in taking appropriate action of refurbishing, repackaging or disposal of the returned goods.

It is important to collect crucial data to optimise reverse logistics. Every product needs to be analysed for improvement whether unsold products or damaged due to packaging issues. The performance can be improvised through packaging, manufacturing or other areas of supply chain.

The next move consists of recovering maximum value from returned assets. Environmental laws are taken in to consideration when a product is disposed, and assessed to understand how a product would be returned, repackaged or repaired for sale. Such a process is followed by Sears Holdings and PC-maker Dell.

Companies can develop metrics to measure the recoverable value from disposal at the point of sale which can help save costs in transportation with elimination of initial transfer to distribution centres and warehouses.

Reverse logistics can increase profitability by helping drive down costs. While designing products, most companies have started taking end-of-life processes. Companies must emphasise on maximising the value of disposal of goods and minimising returns to defected and unsold products. Companies, therefore, need to focus on technological capabilities, expertise and supply chain operations.

  1. Improvement of supply chain through increase in use of data from reverse logistics

Real-time information can help companies gauge status of products or services and locations and reduce time and efforts.

  1. Return procedures should be standardised

Companies are trying to improve customer satisfaction by simplifying complicated procedures. These include standardisation of service, disposal, resale and returned products.

  1. Use of 3PLs on the rise

Amid logistics scale and complexities, use of 3PLs is increasing which provide technology, expertise and infrastructure to customers that value such attributes.

Since product returns will only continue, companies need to take measures to improve reverse logistics to gain an upper hand and improve customer satisfaction through a customer-centric approach and by using the above mentioned methods.