March 12, 2019

Reverse Logistics: Quick Start Guide

Most businesses concentrate the bulk of their efforts on getting a product off the shelves, out the door, and into customers’ hands. This makes good business sense. After all, you can’t make money without selling. However, what happens when a customer is dissatisfied with a product? Whether it’s the wrong size, not what the customer expected or just no longer needed, how does a business handle returns? How does it ensure customer satisfaction even when the buyer’s experience took a bad turn?

This is where reverse logistics comes in.

If you think of a product supply chain as moving forward from the producer to the retailer and eventually to the end-user, reverse logistics is the process of the product making its way back to the manufacturer, seller, or supplier. In other words, the forward momentum reverses course.

For example, if you purchase a shirt, and then get it home only to discover it doesn’t fit, you'll likely return it to the store. What happens after that — including the various possible processes for the seller to recoup as much value as possible — falls under the umbrella of reverse logistics.   

When should a company adopt reverse logistics?

Just as it makes good business sense for a company to work hard at selling, it’s also smart for businesses to incorporate reverse logistics into their operations.

Here are four situations in which having a reverse logistics strategy makes sense:

  • When you want to cut costs – Returns can be expensive. Return shipping, restocking, repairs, and customer support can quickly eat into your bottom line. Having a plan in place can help you manage these costs and minimize the effort and resources you need to put into the logistics process.

  • When you want to deliver faster service – In today’s world of ecommerce, customers expect a prompt response and a lightning fast resolution. If reverse logistics isn’t part of your everyday operations, you risk dropping the ball — and compromising customer satisfaction. And in the world of today, customer retention and thus satisfaction is a key factor for business success, especially in the long run.

  • When you want to keep customers – Modern consumers may be demanding, but they can also be incredibly loyal. A business that responds quickly to customer concerns and does whatever it can to make things right can usually count on repeat business. Building a brand image that is associated with excellent customer service from start to finish helps you both attract and keep your customers.

  • When you want to recoup losses – Not every product can be a success. Reverse logistics helps a business weather flops and failures by reusing or repurposing as much as possible. While many industries may not have obvious ways to reuse failed products, even the tiniest bit of creativity can help turn the cost of reverse logistics to a zero-sum game instead of an additional expense.

Taking these factors together, it’s easy to see how a robust reverse logistics operation can boost a company’s reputation and its bottom line.  

Steps for implementing reverse logistics

Convinced that reverse logistics might be beneficial for you and ready to start moving backwards? Each business is different, and what works for one company may not suit another. However, a good reverse logistics operation will generally include the following steps:

Step 1: Customer service

The first step is making sure customers have an easy way to get in touch. Depending on the product, it may be worthwhile to have a customer service representative who can offer assistance with troubleshooting.

Step 2: return shipping or replacement

If the customer chooses to return the product, reverse logistics can help businesses decide whether it’s more economical to simply ship out a new product rather than cover the cost of return shipping and sending out a replacement. Can you reuse or repurpose the product, or perhaps even sell it again if it is in a good condition, or is the cost of the return shipping higher than the price of an individual item?

Additionally, data logging and monitoring processes can help businesses define the conditions a product is in. Monitoring the return operations also allows you to keep track of “repeat returners” — customers who make a habit of repeatedly making returns or expressing unhappiness with a product — and recognize possible flaws in the product or in the behaviour of the customer.

Step 3: intake and inspection

Once a product is back in the business’s hands, the product’s condition and potential reusability should be assessed by the company. While many products won’t come back in pristine condition, they might still be suitable for the resale market. Using data logging in shipments provides the chance to monitor the condition of the products when they reach their destination, and assess whether it makes sense to ship out the replace item instead of having the customer return the initially delivered product.

Step 4: scrap, repair or refurbish

Every business should also have a process in place for determining whether a product can be repaired, refurbished, or scrapped.

In some cases, a product’s reusability can open up a whole new secondary market. For example, there is a thriving online marketplace for refurbished electronics and household appliances.

Most businesses hope they never have to deal with a return. However, the reality is that a certain percentage of products will inevitably make their way back to the seller one way or the other. Reverse logistics helps businesses reduce the cost of returns and make the most of a product’s reusability, further combating the losses associated with returns. And hey, it makes the customer happy, it must be worth it, right? A happy customer tends to be a returning customer.

Did you like what you read? Take a look at our blog posts Four Ways Technology Will Boost Warehouse Efficiency, Take a Step Forward With Reverse Logistics and Tech Innovations in Supply Chains.