The role of reverse logistics in supply chains is not to be underestimated. Approximately £1.5 billion of Christmas orders were returned in the period following the holiday season which is 25% more than the previous year.
Reverse logistics has been a big part of retailing for many years but with the recent rapid growth in ecommerce it has become even more significant. Online shopping has increased so much that stores do not hold as much stock as before, which then pushes consumers to shop even more online for more choice. However, the disadvantage of online shopping particularly in clothes is that you are unable to try the items on. This leads to higher returns and costs.
Consumers have come to expect no-fuss return policies and free of charge in many cases which means reverse logistics is a fact of life for most companies. According to ParcelLab, 84% of retailers charge for returns, 87% of retailers do not offer paperless returns and only 24.5% send some form of communication during the returns process.
How does reverse logistics impact supply chain management?
Companies must have processes and strategies in place 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 strategy may be required.
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 incorporate reverse logistics into the traditional supply chain framework can lead to bottlenecks and customer dissatisfaction.
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, maintain or improve customer service and create a more sustainable supply chain. Return policies can be used as a competitive differentiator.
Other key areas to focus your reverse logistics strategy on
- Getting returned (saleable) products back up for sale – this is a critical area and should be one of your main KPIs. Processes need to be in place for repackaging and inventory management in order to have it available for orders to be placed against it.
- Checks for valid returns – speed and efficiency in this area will support your relationship with your customer
- Speed to claim back on your suppliers if quality related – a returns policy with your key suppliers will provide options for the returned products and support cash flow and supplier relationships
- Packaging and Environment – we are all trying to minimise this and make reverse logistics as environmentally friendly as we can
- Systems -to handle Reverse Logistics – get this wrong and you will be in a whole lot of trouble in either inventory management, upset customers and lack of opportunities
- Seasonality (some returns are no longer on sale) – for those companies where seasonal items are affected then you will need to take into consideration the impact of bringing back into stock items that are now out of season.
- Returns policy – having a clear policy with both your customers and suppliers will prove highly beneficial.
- Products on promotion that are returned – Pricing – you will need to take this into account within your returns policy and how you manage them when bringing back into stock.
An easy, efficient returns process will improve your standing with customers, gain good reviews and create repeat business. Efficient reverse logistics operations can help save energy and resources. It also helps companies reduce their environmental impact by recycling waste materials and disposing of hazardous waste properly.
Technology has made reverse logistics much more efficient in recent years. When designing new warehouses it is important to consider the returns process particularly if automating an operation.
It is important to try and reduce returns especially with logistics costs rising due to higher fuel and energy costs. Many companies have recently changed their returns policies to discourage people, for example Amazon has just introduced a new policy, which has recently come into effect, changing the way in which returns costs are handled for sellers not using the Fulfilment by Amazon (FBA) service.
Bisham Consulting have vast experience in helping with logistics challenges from outsourcing services like reverse logistics to designing warehouses to incorporate efficient returns processes. To see all our services visit https://www.bishamconsulting.com/services/