Why Reverse Logistics Plays A Big Role In Supply Chains

Why Reverse Logistics Plays A Big Role In Supply Chains

  • Best Inc. by Best Inc.
  • May 3, 2020

Though it may not seem so on first impression, reverse logistics are in fact a critical component in supply chains. With the availability of reverse logistics, companies can improve customer satisfaction, reduce losses, and even have a positive environmental impact.

Why-Reverse-Logistics-Plays-A-Big-Role-In-Supply-Chains

Reverse logistics refer to the monitoring of the life-cycle of your products after they arrive at the end consumer. This could involve how your product may be potentially reused or recycled, how it should be properly disposed of after use (especially single-use items), and any other ways in which your expired product can create value.

Furthermore, it is crucial in retail businesses to implement reverse logistics, so as to be able to receive returned items from customers as well. For example, if your customer has received an incomplete or inaccurate order, or they dispute the item they received claiming it does not match the product description, or even simply if they changed their mind.

The Process Of Returns

Returning items is not a simple process. There are several steps involved, namely:

  • Physically shipping the returned product
  • Quality testing the returned item to identify the flaw, or check for any other issues
  • Documenting any problems with the returned item
  • Disassembling / repairing / repacking / recycling / restocking the returned item

Having an effective reverse logistics system in place will not only allow the process to run smoothly, but also help you avoid making the same mistake in future, as well as allow you to reutilize as many components of your product as possible.

The Flow Of Reverse Logistics

There are four key supply chain analytics to help you understand the flow of returned products entering your supply chain:

  • Volume: If a large number of items are being returned, there may be a possibility of a defective batch, and your company may wish to consider a recall, as well as a closer inspection of the production process.
  • Percentage of sales: According to  a study by the Aberdeen Group, the average manufacturing company will spend 9% - 15% of total revenue on the returns process. Monitoring this percentage helps with managing returns.
  • Condition of returned product: Doing tests on the returned product to identify the flaws or errors will help determine any patterns of failure among the returned items, which feeds back into your quality assurance processes.
  • Financial value: Electronics sold in secondary markets can also bring great financial value to your company. Without any means of collecting returned items, the company would be unable to repair them and resell them for further profits.

Benefits Of Reverse Logistics

Some of the benefits of having an efficient reverse logistics system include:

  • Lowered costs due to the gathering of relevant data on the products, and hence the ability to plan ahead to prevent future losses
  • Faster service, and quickly refunding or replacing goods, can help restore a customer’s faith in a brand
  • Customer retention, as you can make an unhappy customer satisfied with your response process
  • Reduced losses and unplanned profits, where products that are returned can turn into revenue from a secondary market instead of having to be written off completely as losses

Be sure that your business has a reliable supply chain company to work with which understands the importance of reverse logistics. For enquiries into reverse logistics services, contact Best Inc. today.