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A Guide to Reverse Logistics in Supply Chain Operations

Online returns are now increasing at a rate faster than ecommerce sales are growing, according to Forbes. Companies need to set up strong reverse logistics plans to avoid high costs and ensure customer satisfaction. This guide will help you do that.

What Is Reverse Logistics in Supply Chain Management?

When you think of traditional logistics, you think of forward processes — getting products from the factory to the consumer. Reverse logistics in a supply chain focuses on recapturing the value of products, parts, and materials that the end consumer returns, or the reverse flows. The main methods it uses to accrue value are:

  • Getting these pieces back into the marketplace efficiently 
  • Properly disposing of them

Ret logistics impacts your business two key areas: customer experience and net profits.  As online return rates rise, customers increasingly expect you to have a simple, seamless customer service and returns process. Companies that meet this expectation earn their customer loyalty, increasing retention. Companies with strong reverse logistics processes can also maximize their asset recovery rates to cut costs.

Types of Reverse Logistics and the Five Rs

It’s easy to think reverse logistics just focuses on returns. However, there are many other components to reverse operations that help you recapture value from returned items and raise your brand image.

Returns: Exploring the Consumer-Facing Side

The first action in any process of reverse logistics is the return, when the customer sends a product back to your business. Some common reasons why this may happen include:

  • The product was defective when the customer received it
  • The product was damaged or missing pieces when the customer received it
  • The product didn’t meet the customer’s expectations or didn’t do what it claimed to

The first step to setting up your returns process is to make a concrete returns policy. For example, can customers only return defective products, or can they also return products that didn’t meet their expectations?

Then, you can plan the customer-facing side of the returns process. The best way to optimize this side is to set up a return material authorization (RMA) verification to let customers return their products. They fill out an RMA form that gives them a unique identifying number to include on their return and describes your return policy. It also includes shipping instructions for them to follow.

You also need to ensure consumers have easy access to return shipping labels, drop-off points, and tracking. With all these in place, your returns will offer a user-friendly experience that raises customer satisfaction and business outcomes.

On your end, set up your transportation logistics to easily receive returned items, reducing delivery failures and speeding up delivery time. You should also design a process to test returned products and confirm if you can place them back into the marketplace. You will also need a disposal process for items that you can’t repair, resell, or recycle.

Repairs: Repurposing Damaged Goods

In some cases, you can fix a damaged product and return it to the original customer. This is a repair, which saves you money on refunding purchases.

A good repairs process uses an efficient tracking system with carefully picked performance indicators and dedicates a part of the returns management team to repairing and refurbishing (returning products to like-new conditions to sell again in the marketplace) products.

Reselling: Adding to the Bottom Line

The global secondary market was worth over $130 billion in 2023. The second-most common reason for returning a product is because it didn’t fit the customer’s needs, not because there is something wrong with the item. If you can resell a returned item, you can still capture value from the product instead of producing a new one to sell.

The challenge is that you need to know the problem with the item before you can resell it. So the first step to reselling a returned product is to tag it and insert it back into the system. Then, you can test, repackage, and return the item to inventory for resale.

Some companies create a “digital passport” for their products, which shows you the item’s full lifecycle, including:

  • How it was made
  • How to repair or clean it
  • The item’s past locations

That way, you retailers can just scan a QR code on the item to learn a lot of the information that you might otherwise get only with investments in testing and researching its history.

Reusable packaging can also inform you about where the package came from. This additional insight into both the package’s reverse journey and the item itself gives you more opportunity for reselling, because you have more information to assure you are safe reshelving a returned item.

Replacements: Understanding the Logistics

Sometimes, consumers like the product they got but want a different version. This is common in clothes ecommerce businesses, where they may have gotten a shirt that was too tight or a shade that they don’t like as much in person.

Giving customers seamless return-and-exchange options improves the customer experience and boosts retention rates. One way sellers like Kohl’s do this is by making it simple to print pre-paid return labels simple. They provide a QR code that customers can show at a Kohl’s store, and the company handles the rest of the process.

Another approach companies like Amazon take is to ship the customer’s replacement as soon as they receive a notification that the customer has shipped their returned item. A robust solution like a warehouse management system can help you keep track of incoming and outgoing inventory to manage this process.

Recycling: Building a Sustainable Supply Chain

You should also figure out ways to make your products more sustainable, so you can recycle or environmentally dispose of them when their service lives are over.

Most businesses establish green supply chain management by working with recycling firms to ensure any waste gets correctly collected and disposed. If you sell technological devices, for instance, a recycling firm can salvage the rare earth metals and return them to your business to use in future products. This saves your business money in the long run by reducing the cost of acquiring some materials.

Many customers today want companies to be sustainable. Showing that you have a solid recycling plan lets these customers be involved in the final step of closing the circular economy loop, raising their opinion of your brand.

Benefits of Implementing a Reverse Logistics Plan and Process

Setting up this plan can be a lot of work. If you feel like you’re losing sight of the reason why you’re doing it, here are the key benefits:

  • Lower costs. Implementing an optimized plan reduces your operational costs for returns, repairs, and warranties, significantly saving costs on the back end.
  • Better brand reputation. A 2023 DHL survey shows that 40% of online shoppers want simple, cheap returns processes, and over 70% value sustainability. A clear recycling plan and process improves your brand image with them.
  • Happier customers. Hassle-free return and replacement options make customers happier and more likely to order from you again.
  • Improved sustainability. A reverse logistics plan that facilitates proper disposal, recycling and reuse of products helps overall sustainability, reducing your carbon footprint and raising your reputation with customers.
  • Higher profits. Strong reselling and recycling processes help you earn more from the same quantity of supply.

Discover Surgere’s Reverse Supply Chain Technology

A lot of processes are necessary for a capable reverse logistics plan. With the right tech and platform strategies, you can simplify these to optimize your operations management and boost customer retention and customer satisfaction.

Partnering with the right software-as-a-service (SaaS) company that can help you integrate internet of things (IoT) technology into your reverse logistics processes will help you stay ahead of your competition. Contact Surgere for a demo to learn how we can help you build a more resilient supply chain ecosystem, armed with IoT technology, RFID, Bluetooth, and WiFi with hardware to drive optimal operational decisions.

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