The reverse logistics process has become a key component of any successful, streamlined supply chain. To help you get started, here’s everything you should know about reverse logistics.
Reverse logistics has been a part of retailing for over 100 years when retailers like Sears Roebuck and Montgomery Ward began delivering goods by railroad. In the past few years, e-commerce has led to an explosion of reverse logistics — or, shipping goods from the consumer back to the retailer.
Consumers have come to expect no-fuss return policies; that’s why returns on e-commerce orders are three to four times higher than brick and mortar purchases, according to the Reverse Logistics Association. That means reverse logistics is a fact of life for most companies.
To help you get a handle on your challenges, here’s a look at the top 45 things you should know about reverse logistics and the reverse logistics process.
- What is reverse logistics?
Reverse logistics is the opposite of the standard supply chain. The goods move from the end user back to the seller or manufacturer. It can include returns from e-commerce and retail, as well as components for refurbishing and remanufacturing. The products may be resold or disposed of permanently.
- What is returns management?
Returns management is the supply chain management process companies use for all activities associated with returns, reverse logistics, gatekeeping, and avoidance within the firm and across all elements of the supply chain. It’s the equivalent of managing outbound shipments.
- When is reverse logistics used?
Reverse logistics is used when goods are moved from their final destination to another location to recapture value or for final disposal. The product may be returned because it doesn’t fit the customer’s needs or it has reached the end of its service life.
- What are the types of reverse logistics?
Reverse logistics can relate to any of the following activities after the initial purchase:
- Returns avoidance
- Unsold goods
- Delivery Failure
- Rentals & leasing
- Repairs & maintenance
- What is meant by integrated logistics?
Integrated logistics support (ILS) relates to the life cycle of a system or product. The system or product is designed to last longer with less support and the cost of support is considered in the product design. An Integrated logistics system is designed for reliability, availability, maintainability and testability, as well as safety.
- What is inbound and outbound logistics?
Inbound logistics refers to the transport, storage, and delivery of goods coming into a business. Outbound logistics refers to the shipment of products to end users or distribution centers. It is associated with the concept of supply chain management, as managers work to maximize the efficiency of distribution networks while minimizing transport and storage costs.
- What is reverse flow in the supply chain?
Reverse flow is another term for reverse logistics in the supply chain. This includes planning, implementing and controlling the efficient inbound flow, as well as the storage of goods and related information to recover value or proper disposal.
- What is reverse supply chain vs. reverse logistics?
Reverse supply chain refers to the movement of goods from customer to vendor or at least one step backward up the supply chain. Returning an electric motor from a commercial supply house back to the manufacturer because of a packaging defect is an example of reverse logistics that doesn’t involve the end user. This is the reverse of the traditional supply chain movement of products from the vendor to the customer. Reverse logistics is a higher level perspective that includes the overall process of planning, implementing and controlling the inbound flow and storage of secondary goods and their related information.
- How does reverse logistics impact supply chain management?
Companies must plan and execute strategies to manage products beyond manufacturing and the final sale. These processes can include repair, warranty recovery, redistribution, value recovery, end-of-life recycling or any combination of these activities. Depending on the volume, a separate reverse supply chain may be established.
- How can reverse logistics improve supply chain efficiency?
Creating a reverse logistics strategy allows outbound and reverse logistics to function as efficiently as possible. Trying to shoehorn reverse logistics into the traditional supply chain framework can lead to bottlenecks and customer dissatisfaction.
- What is a closed-loop supply chain?
A closed-loop supply chain is one that generates zero waste. All materials are entirely reused, recycled, or composted. The term includes corporate take-back programs, where producers of a product also take responsibility for its disposal.
- What is the difference between a closed-loop supply chain and reverse logistics?
A closed loop supply chain is when you recover a product from a customer in exchange for value and recycle the product for later use. This is common in automotive components such as starter or alternator cores, which are then refurbished and resold. The repair shop also receives a financial incentive for turning in the core. Reverse logistics may include a closed loop system, but it is also the return of items from consumers or product overstocks as well as the collection of recyclable materials to eliminate waste.
- Why is reverse logistics important to implement?
The primary goal of reverse logistics is to recover value from assets to increase revenue and reduce expenses. Establishing a reverse logistics strategy can also boost the efficiency of a traditional supply chain by separating the operations.
- Why is reverse logistics needed?
Reverse logistics completes the product lifecycle to support reuse and repurposing of products and materials. You can recapture value by reselling items as is, refurbishing them or selling to a discount liquidator. Some materials can be recycled or sent for final disposal in an environmentally responsible manner.
- How does reverse logistics work?
The process depends on the business, but essentially reverse logistics involves any process or management after the sale of the product. It starts with a reason for a return, and the customer contacts the appropriate party to initiate the return. For many retail products, the manufacturer asks the end user to contact them directly rather than returning the product to the store. The responsible party arranges for transportation of the returned product, which could involved sending a shipping label for a parcel pickup, or arranging for truck pickup for larger items. The returned item should be have the same level of visibility that an outbound package has.
- What is the reverse logistics process?
The process will vary widely among industries. For example, retailers may bundle pallets of returned garments for shipment to a liquidator. A machine tool manufacturer may accept tools for re-sharpening and offer a core return discount. An e-commerce retailer may accept returned goods at a separate facility or specific docks for restocking or liquidation. Each item should be tracked with the same level of visibility and transparency as an outbound shipment.
- What is the difference between reverse logistics and forward logistics?
Forward logistics, or traditional logistics, is about getting your product to market and uses automated information systems to track items. The forward supply chain encompasses product development, manufacturing, distribution and fulfillment to end users. Reverse logistics is for all operations related to moving goods from the end user to recapture value from the products or for proper disposal.
- What are the components of reverse logistics?
The three components of reverse logistics management consist of Return Policy and Procedure (RPP), Remanufacturing or Refurbishment (ROR) and Waste disposal (WAD). RPP is the company’s approach to handling returns that is shared with customers and employees that covers aspects such as how long after purchase a return is accepted, who is responsible for shipping and whether there’s a restocking fee. ROR covers what happens to a return after it is accepted. Some products like automotive or manufacturing components are remanufactured and sold again. Some are simply refurbished, such as a product put into new packaging, or restocked on the shelves. For some products, WAD comes into play for disposal as the products are not suitable or not permitted to be resold after return.
- What is the cost of implementing a reverse logistics plan?
Reverse logistics varies depending on the scope of the program, the 3PL provider and the needs of the business. Each solution is customized based on the client’s needs. Without a reverse logistics strategy, a company will miss out on potential asset recovery revenue and customer satisfaction because it does not have a system in place for recycling, reusing, or safely disposing of returned products. A successful reverse logistics solution increases customer satisfaction and brand loyalty because customers are better able to make returns or get a replacement product within a reasonable time.
- What are the objectives of reverse logistics?
A well-planned, customized reverse logistics policy can reduce storage and distribution costs, improve a company’s reputation, satisfy customer needs and create a more sustainable supply chain. Many companies use their return policies as a competitive differentiator.
- What are the benefits of reverse logistics?
With a comprehensive reverse logistics strategy, you can reduce administrative, transportation and support costs while at the same time increasing product velocity. A robust reverse logistics program is a key factor in customer satisfaction, which leads to increased market share and improved retention levels. A supply chain will operate most efficiently when it’s optimized in both directions.
- How does reverse logistics reduce risk to the business?
A sustainable reverse logistics strategy provides a range of benefits, from eliminating fines from government organizations for improper disposal to improving the public perception of the company as well as recovering value from assets. A reverse logistics strategy should include plans to deal with end-of-life equipment, recalls, remanufacturing and equipment failures. With a system in place, the company can respond quickly, reducing the risk of litigation, regulatory action and customer dissatisfaction.