Reverse logistics | Reduce costs, improve supply chain

Have you ever thought about what happened to that pair of shoes you returned online? Or that old electronics you tossed out? That's where reverse logistics comes in.

As the name suggests, the term ‘Reverse logistics’ refers to the process of moving goods back through the supply chain. On the surface, reverse logistics appears to be a simple, no-brainer process.

But here is some food for thought: Almost every third fashion and footwear product is returned in online shopping and every sixth product is returned in all ecommerce businesses.

On average, $33 or 66% of the price of a $50 item goes for processing the return. Studies by NRF and Appriss Retail indicate that total returns resulted in $816 billion in lost sales for U.S. retailers in 2022. In the next few years, the amount of returns will touch one trillion U.S. dollars.

The numbers give a glimpse of how important reverse logistics is for a business. In a nutshell, optimising reverse logistics can be a detrimental factor for profitability for a company.

How to optimize reverse logistics?

To dive deep into the world of reverse logistics, let's first understand what is reverse logistics? and the entire process in detail.

The process of returns varies according to the type of the industry. An apparels store will have customers returning apparels while a coffee pod company will give recycling programs. In the case of breweries, the empty bags are reused.

The ideal 5-step reverse logistics process looks something like this:

Process the Return:
When a customer returns something, it marks the beginning of the reverse logistics process. It starts with authorizing the return, scheduling pick-ups, and issuing refunds.
Inspect & Categorize:
Once the item is returned from the customer, it needs to be inspected to understand the next course of action. Based on the inspection, we can decide whether to repair, resell, recycle, or dispose of the product.
Companies with efficient reverse logistics optimization can often categorize the return even before it arrives. It requires proactive planning and data analysis.
Keep it Moving :
Returned items sitting around is equivalent to more money being burnt. Products when sitting around, produce more waste. This ultimately increases maintenance costs. So it's important to quickly move them to the next step in the process (repair, recycling, etc.).
Repair & Refurbish :
If possible, repair the item and put it back into stock. If not, sell any usable parts.
Recycle & Dispose :
Anything that cannot be repaired or disposed of, arrives at the last stage. Here, the key is to use the most appropriate disposal method to recycle or dispose of the items.

Why to optimize reverse logistics

As mentioned earlier, an optimized reverse logistics process could be a difference between net loss or profitability for your business.

The advantages of reverse logistics are multifold. Optimizing reverse logistics reduces your costs, increases customer retention, enhances your brand reputation and keeps Mother Earth healthier.

Lower Costs:
Optimized reverse logistics helps in saving time. In turn this reduces transportation and disposal costs.
Happy Customers:
Easy and quick returns lead to loyal customers and positive reviews. 96% customers say they prefer buying from brands that offer seamless product-returns experience.
That’s why it is not a surprise that brands that can be referred to as good reverse logistics examples are also the most successful brands.
Faster Turnaround:
When you get returned items back into circulation faster, you get to start the selling process earlier. Thus opening up more sales opportunities.
Reduced Losses:
You can minimize product loss as you get to evaluate returned goods properly. Effective evaluation helps in executing proper refurbishment, returns, repairs, etc.
Sustainability:
Reducing waste generation ultimately helps in improving your environmental impact. It's good to live on a greener planet!

Optimizing reverse logistics: The smart way

There are numerous ways to streamline the reverse logistics process. It all starts by thinking of reverse logistics as an important aspect of your ecommerce business. The earlier you build a dedicated reverse logistics management platform, the better it is.

Establish Clear Policies:

Well begun is half done. Hence, optimizing reverse logistics begins with clearly establishing things at the start of the process itself.

Define clear return policies and procedures, including how returns are handled, why they occur, and how to address them consistently. Following these procedures stringently will make a big difference.
Prioritize Customer Convenience:

Make returns easy for customers by offering free shipping, hassle-free refunds, and flexible return options (e.g., no need to return original packaging).
Leverage Data Insights:

Use tech to analyze your return data. This will help you to identify trends, understand customer behavior and history of returns. The results will help in refining your return strategies to make them more efficient.
Gain Complete Visibility:

A problem is solved when a problem is seen. Hence, it's important to make your problem visible. Track all returned items and their history. This will shed light on the root causes of issues and will minimize unnecessary recalls.
Centralize Returns:

Establish a dedicated area (a centralized return center or a designated space within your warehouse) to efficiently process and evaluate returned items. Having a facility where all returned items are evaluated under one single roof helps in enhancing efficiency of reverse logistics.
Automate Processes:

Utilize cloud-based reverse logistics software to automate distribution, transportation, and omnichannel processes. This ensures your system can scale to meet demand and optimize your reverse logistics operations.

The future of Reverse logistics: Tech and more tech

The growth of ecommerce means the growth of reverse logistics. An ecommerce business cannot function without a hassle-free returns policy. Hence, the importance of efficient reverse logistics is only going to rise in the upcoming times.

It's a no-brainer that the future of reverse logistics is all about leveraging modern technology and implementing it to optimize the process.

For example, the RFID, or radio frequency identification technology could soon replace traditional barcodes. Barcodes have limitations such as they must be read individually and hold specific information.

However, RFID tags can be read automatically as products move in either direction. They store more information including product descriptions, dates, temperature, and more.

The future of reverse logistics can also see usage of blockchain technology as it records transactions without any errors.

The best part for small business is that optimizing reverse logistics won’t burn a hole in your wallet. There are several affordable tools available that help you streamline your reverse logistics system.

So be the smart one and start optimizing your reverse logistics system today. Remember, a stitch in time saves nine!