When businesses think about logistics, most are thinking about an item’s journey from manufacturer to customer. Reverse logistics, on the other hand, is about the journey of an item from customer back to the supplier, manufacturer, or warehouse.
Although customers return billions of dollars worth of items every year, reverse logistics isn’t obsessed about quite as much as other supply chain processes. But given how often returns happen, it’s in eCommerce business’ best interests to create a returns logistics process that is convenient, cost-effective, and eco-friendly.
Today, we’re taking a look at what we mean by reverse logistics, the returns logistics process, and highlighting some core elements that make up this process.
In this article
What is reverse logistics?
Reverse logistics is the process of a customer returning an item back to the retailer or manufacturer for resale, disposal, or investigation.
It’s a multi-step process, the steps of which will depend on a number of factors such as the validity of a return, the type of item being returned, a business’ returns policy, the returns logistics strategy in place, and much more.
In today’s increasingly competitive world, online retailers often offer a generous returns policy to help eliminate the risks associated with a purchase. Customers return products for all sorts of reasons.
Perhaps an item turned up broken, or maybe the wrong item all together was delivered. Some people simply change their minds when the item arrives, whereas others might find a better deal elsewhere.
Whatever the reason for a return, the moment a customer decides to return a product is when the reverse logistics strategy comes into effect.
Why is reverse logistics important?
Reverse logistics is important because it allows businesses to offer a good level of service to customers while keeping operating costs to a minimum. Furthermore, it ensures that the value of the goods being returned can be retained, and that goods can be re-sold where possible. Finally, reverse logistics is important because businesses can make sure any defective items and materials can be recycled or otherwise disposed of responsibly.
The reverse logistics process
While reverse logistics will look slightly different for every company, the core steps of the process will remain fairly similar in most cases.
Return is requested
In the first instance, a customer requests to make a return. This is usually done either through a website, via email, or over the phone. Customers should detail their reasons for wanting to make a return, as the suitability of a return can be identified at this stage.
Return is transported
Once the business has verified and approved the returns request, they or the customer will arrange for the item to be returned. Depending on the nature of the return, it might be sent to the manufacturer for repairs, or to a warehouse for further processing.
Some businesses put the responsibility of returning a product on the customer, and in these cases the customer will need to pay for packaging and shipping themselves.
Conversely, some businesses send return bags and shipping labels out with the order in anticipation of returns further down the line.
In some cases – particularly for bulkier items such as furniture – the retailer will arrange collection from the customer’s home.
Return is processed
This portion of the returns logistics process will depend on the type of return. Most consumer goods will be returned to the retailer’s warehouse or fulfilment centre where final checks will take place.
Returns that can be resold will be repackaged and placed into storage, whereas broken or unusable items will be recycled or sent to landfill.
Returns that need to be repaired will have repair work completed before shipping the fixed product back to the customer.
Elements of reverse logistics
As we’ve seen already, there’s many components that make up the reverse logistics process. Not every business will need a plan for every component, but in this section we’re going to take a look at the most common components of a returns logistics process, and offer a few best practice tips for each.
All eCommerce businesses should have a detailed returns policy on their website (even if you don’t offer returns). It should cover criteria for valid and invalid returns, as well as a detailed overview of the returns process.
Doing so provides customers with all the necessary information required to make an informed purchase decision, while preventing disagreements from happening further down the line.
Returns management covers quite a bit of ground, including how customers initiate a return, how they transport it back to you, and how you process and handle returns on-site. The goal of returns management is to make the whole process as cost-effective as possible, while providing a good service to the customer.
Additionally, a good returns management strategy will include details on how the return-rate can be reduced. This might include additional QA checks before shipping, more detailed product pages, better tracking information, a stricter returns policy, and more.
Preparing for resale
Where possible, returns should be placed back into storage as quickly as possible for resale. Inspections should take place to ensure the condition of both the item and the original packaging remains good.
Some items may need to be placed into new packaging, which should be identical to the original. Customers who rebuy the item are likely to notice if a box has been opened, so it’s vital that the packaging appears new.
An item that is damaged but still usable may be able to be resold at a discounted rate. Many customers will likely jump on a great deal or be happy to save an item from landfill.
To make reverse logistics more cost-effective, environmentally friendly, and convenient to the customer, reusable packaging is a worthwhile investment. It allows customers to retain the packaging and reuse it in the case of a return, rather than throwing away.
Reusable packaging is sturdy and cleverly designed so that items inside can survive two journeys instead of one. Customers should be informed that the packaging is reusable, both on the packaging itself and at point of purchase.
Another hot topic in regards to reverse logistics is waste management. As the eCommerce industry continues to grow, it’s our responsibility to dispose of waste responsibly if we want to preserve our planet for future generations.
Companies who do not have the capabilities to manage waste responsibly in-house should look at outsourcing it to somebody else. While most companies have the capacity to create sustainable packaging and recycle some waste, working with experts can reduce the amount of waste that’s sent to landfills.
Want to discuss reverse logistics? Get in touch with James and James
James and James can help you create a fantastic reverse logistics process by taking on the responsibility of returns management for you. Managing returns can be frustrating in-house, as they take up the time and resources of you and your staff when you could be doing more productive and profitable work.
With our returns management service, customers will ship their products back to one of our fulfilment centres, where we’ll carefully check the validity of the return, before placing valid returns safely back into storage to be sold again.
Thanks to our award-winning inventory management platform, ControlPort, both you and the customer are able to track the status of returns in real-time, ensuring both of you are always in the loop.
Reverse logistics FAQs
What are the 5 ‘R’s of reverse logistics?
The 5 ‘R’s of reverse logistics stand for the different forms reverse logistics can take. They are:
- Return – Item is returned to the warehouse or distribution centre, where it is processed. Returns are verified and inspected, and a decision is made on how to proceed with the item.
- Repair – Damaged items may be able to be repaired. This might involve ordering spare parts, outsourcing repair work to contractors, or handling all repairs in-house.
- Refurbish – Sometimes items may not be damaged but are in need of a bit of love. It usually involves cleaning or polishing, and then repackaging.
- Recycle – Items that can not be resold are sent to the nearest recycling centre.
- Remarket – Products are put back on the shelf, ready to be resold.
When is reverse logistics used?
Reverse logistics is used by companies wishing to provide a returns service to their customers or partners. The goal of reverse logistics is to maintain the worth of a product by putting it up for re-sale, or to dispose of the product responsibly if it’s not in a condition to be resold.
How big in the reverse logistics industry?
In 2021, the worldwide reverse logistics industry was estimated to be worth 555 billion USD. By 2030, this figure is predicted to reach 830 billion USD.