What is Reverse Logistics?

The concept of logistics within supply chain management is something most people are familiar with, but what is reverse logistics and why is it important?

What is reverse logistics?

Reverse logistics concerns the movement of goods from customers or retailers back to sellers or manufacturers. 

Often, reverse logistics are required to process a return when the customer does not want the product. They are also used in situations where sellers have not been able to sell the product, for product end-of-life procedures, or where the customer is responsible for the final disposal of the product.

Reverse logistics can be considered one part of the circular supply chain – it isn’t just about physically moving the goods back to the manufacturer, but also about what happens to those goods once they have been returned.

When are reverse logistics required?

Reverse logistics are required for several different scenarios, such as:

• Managing returns when the customer does not want the product, the product is faulty, or the wrong items have been delivered.
• When unsold goods need to be returned from retailers and distributors back to the manufacturer.
• Managing the refurbishment, repair and redeployment of rented or leased equipment.
• When a delivery fails and the product needs to be returned to the manufacturer via a postal sorting centre. 
• When a product has reached the end of its life and can no longer be sold.
• When packaging materials can be reused.

What are the steps of reverse logistics?

1. Process the return with the aid of smart software that identifies and assesses the product and its condition, as well as authorising the product’s move back into the supply chain.
2. Ship the goods back to the manufacturer.
3. Approve the refund or product replacement for the customer.
4. Determine the next steps for the product – can it be resold and does it need to be repaired/refurbished first? If not, can it be recycled or does it need to be disposed of?

What can happen to goods once they are returned to the manufacturer?

Effective reverse logistics management doesn’t only focus on getting the products back to the manufacturer in a timely manner that is easy and convenient for the customer. Instead, reverse logistics should focus on how returns can be used to help rather than harm the business.

This could include recycling, repurposing or reselling the product, effectively reducing the cost of waste and creating a more sustainable business model. Some product sale agreements may also include a clause that allows for the repair, maintenance, or refurbishment of a product, which will also require reverse logistics. 

Why is reverse logistics important?

With an increased emphasis worldwide on sustainability and limiting environmental impact, reverse logistics is no longer an afterthought for manufacturers and must be a core part of any supply chain management strategy. Thankfully, having a reverse logistics system in place comes with a few benefits.

Reduced costs 

Due to online shopping, there are more returns than ever, and not having a structured returns system in place can make the process costly for the business.

Faster returns service

Having a reverse logistics system in place means that goods can be returned more quickly, and any next steps such as refurbishment, repair or recycling can happen with less downtime. 

Better customer retention/satisfaction

A customer returning an item isn’t often detrimental to the relationship, but a poor or complicated returns process can be. Having a streamlined process with little customer effort required will help to build trust.

Reduced losses

If a product can be refurbished, repaired, or recycled for use in other products, then it will often be more profitable for the business than just disposing of the items.

Increased sustainability

Reverse logistics helps to reduce unnecessary waste, increase the value of products and enhance a business’s reputation because of a commitment to sustainability.

Now that you know what reverse logistics is, do you think it might be time to employ a reverse logistics system in your supply chain? If so, then you can read about our reverse logistics services here.