Picking, packing, and dispatching inventory items for sale is an easy task with few businesses experiencing problems. The same can’t be said for reverse logistics. With the growth of online shopping, this process has become a headache for many business owners.
Reverse logistics is essential to most businesses. Unless business owners set up efficient systems to deal with returns, costs may escalate and customers move on.
Reverse logistics management can help your business reduce costs and improve the customer experience. Happy customers will return, enhancing your profits and ensuring the growth of your business.
What Is Reverse Logistics?
Also known as return shipping, reverse logistics is the flow of goods from your customers back into your inventory or, in some instances, all the way back to the manufacturer. The aim is to recover value from the item returned and retain customers.
Like traditional supply chain management, reverse logistics isn’t just about the flow of goods. It includes ensuring the items come back into stock and are inspected and refurbished. Then, someone must make a decision on the final disposal of the product.
Why Does Reverse Logistics and Returns Matter?
An acceptable returns policy and slick reverse logistics can make or break your business. In a recent survey, the eCommerce management platform, Narvar, found that 95% of consumers would buy from a brand again if they had a satisfactory return experience.
A forgiving returns policy can have the following impacts:
- Customer Experience – Unless your customers can return a product that doesn’t work for them, it is unlikely they’ll buy from you again.
- Brand Perception – How your company manages its returns policy can have a major impact on brand perception. For example, if the public knows that they can return packaging for recycling, they’ll understand that you care for the environment
- Turnover – Happy customers are more likely to return and spend more money on your products.
Inefficient returns hurt companies twice over. It affects profits and an unpleasant experience with the returns process may leave you with unhappy customers.
What Can Companies Do with Returned Items?
What you decide to do with returned items will often depend on the product that you have and the condition in which it’s received.
Here are your options:
- Return To Stock: A product that is still in good condition may be returned to stock for resale.
- Return To OEM: If the product has a defect, you may have to return it to the original manufacturer for credit or replacement.
- Repair and Reship: It may be possible to repair the item and return it to the customer or sell it at a lower price.
- Liquidate in Secondary Market: Many businesses have partners in the secondary market that buy a returned product and sell it at a reduced price.
- Use Spare Parts or Recycle: If you can’t resell your products, consider stripping the product for spare components. Recycle the parts that can’t be reused.
- Destroy: If the product has no resale value and it is irreparable, you may have to dispose of it.
Can Companies Profit from Reverse Logistics?
The straight answer is yes! Companies can profit from return logistics. They may, for example, use return logistics to address waste by changing to returnable packaging.
By reusing the packaging, they save money and reduce their environmental impact. Businesses that earn a reputation for environmental care attract more customers, improving the bottom line.
Example of Reverse Logistics
To understand reverse logistics at its best, we can learn from one of the world leaders in returns and reverse logistics, that world leader being IKEA. As part of its sustainability strategy, IKEA allows its customers to return all of their products’ parts from plastics to batteries and lightbulbs to furniture.
Everything returned is resold or recycled. IKEA is currently investigating reusing many of the returned components in new products. They see this as an opportunity to connect with their customers on an ongoing basis and reduce their environmental footprint.
Impact of Reverse Logistics and Returns
An effective reverse logistics policy can have a major impact on many aspects of your business, saving costs, and enhancing profits.
Reducing Costs
An effective reverse logistics system can help a business to save costs. Instead of discarding returned items, you can decide to repair, refurbish, or resell the items. From there, you can reduce waste as well as the costs to manufacture the goods again.
Customer Loyalty
Giving your customer the opportunity to return a product for replacement or repair gives them the assurance that your business cares about them even after the sale. This is how you build customer trust and loyalty.
Product Loss Reduction
When you set up well-designed reverse logistics procedures, you’ll consider various disposal options. You’ll reduce product losses through appropriate packaging and storage. You may even set up a refurbishment center to prepare the product for resale.
Waste Reduction
In formulating a reverse logistics policy, you’ll decide on the appropriate resale, reuse, and recycling of your product. In this way, you’ll save costs on waste removal and disposal.
How To Improve Your Reverse Logistics
Since returns and reverse logistics are here to stay, it is imperative to ensure that you have an effective procedures in place. There are several easy steps that you can take to improve your reverse logistics systems.
- Understand the Reasons For the Returns – Customers will return items that are not what they expected. If you sell online make sure that your images and descriptions are clear. Perhaps your customer doesn’t know how to use your product. Clear instruction manuals may reduce returns.
- Carefully Analyze Returns – Understand what is returned and why.
- Implement a Clear Return Policy – Set up standard operating procedures so that all employees know what to do.
- Partner With a Logistics Provider That You Can Trust – The handling and transport of your products should be an essential part of your reverse logistics management.
Benefit from Reverse Logistics Management
The 2019 UPS Pulse of the Online Shopper reported that 73% of consumers say that the seller’s returns affected their decision on whether to continue with their purchase. Customers today expect to have the option of returning any bought item. Unless you can meet this challenge head-on and still run efficiently, your business could fail. Having an effective reverse logistics management system is critical to the success of your business!
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