- 7th August 2017
- Posted by: rpadmin
- Category: Retail
In today’s world, the logistical support goes beyond the typical forward logistics and includes product recall, product disposal, and product recycling too. All the remanufacturing and refurbishing activities can be incorporated in the definition of reverse logistics.
Reverse logistics management covers the procedures which are associated with the return, maintenance, repair, dismantling and even recycling of products and their materials. It includes the reversal of the running products through the supply chain so that maximum value can be attained.
In 1992, James R. Stock for the very first time used the term reverse logistics in a white paper titled with the same name. It was in 1998 when the concept was further explained and refined by him in the book “Development and Implementation of Reverse Logistics Programs”.
Since then, reverse logistics management has not only been considered an attractive process for businesses to follow but a necessity. Especially as sectors such as online retail grows and the fact that customers are now budget-conscious and will return products they aren’t happy with.
Usually, logistics deals with the events which bring the product to the customers whereas, in reverse logistics, the resource or the product need to go back at least one step to reach the client. It is important to note that even if the product has to go back only one step, there can be many processes involved to make that happen.
Processes of Reverse Logistics Management
There are numerous aftermarket processes through which a product goes in reverse logistics. These include:
The product is rebuilt by using parts which are either repaired, reused, or can be new too. This is done to provide an enhanced life to the product.
The resale of a product which has been repaired and is now in a condition as good as new comes under refurbishment.
This is a comprehensive category and includes field service, customer service, and issuance of return merchandise authorisation for product returns in it.
When the products are returned because of any issue or defect, they are taken care of through this process.
When a product reaches its life or becomes defected due to any reason then instead of just disposing of it, the materials can be utilised for the development of another product.
When the products in warranty are returned due to any minor or major defect, the warranty is managed through reverse logistics. The flaw is fixed, and the product is returned to the customer, or in some severe cases, replaced with a new product.
The management of the warehouse where all the remanufacturing and repairing takes place is also carried out under reverse logistics management. As seamless reverse logistics management process will also create a well-organised and ordered warehouse, which works seamlessly to offer goods out, goods in and goods under review, repair, re-testing and repackaging.
Importance of Reverse Logistics
The most important question here is why is it important for retailers to deal with reverse logistics? This is because this helps them in improving their customer service and provide better response times to them. The manufacturers are able to reduce their environmental impact and bring a positive change to the overall corporate environment.
In a system where logistics is used, it is vital that reverse logistics is incorporated into the planning and process creation, as without reverse logistics, you can’t have an effective, operational logistics program.
Here are the benefits which organisations can reap through reverse logistics management:
Profitable and Efficient Business
Through better planning, effective management, and skilled execution, the process of reverse logistics tends to become profitable for the businesses. Because of generous return policies, the retailers might order a greater stock, and in the same way, customers will be buying more products too. This is because retailers know that the company will help them if there is something wrong with the product or if they are not comfortable using it.
Good Image for the Customers
If a company is ready to offer return and exchange policy, then this means that they care about their clients and are willing to take responsibility for any kind of fault. This shows that their ultimate goal is the satisfaction of the customers instead of making huge profits. A caring reverse logistics strategy can make the customers choose a particular company out of the entire lot and in turn, this benefits the retailers too with higher sales.
Proper Disposal of Products
Through reverse logistics, the companies follow proper disposal of goods which keeps them in line with the environmental compliances. This not only helps them in reducing their footprint on the planet but creates their philanthropist image in front of the customers too. Moreover, the materials and products can be reutilized which are in a perfectly fine and resellable condition.
Strategies for Success
As customers are becoming extremely sophisticated in their purchasing decisions with the environmental laws taking a forefront too, the companies are looking to redefine their return and exchange policies. The goal is to increase value amongst the customers and to build strong loyalty.
Some of the most effective strategies for reverse logistics which are being used by leading multinationals including Hewlett-Packard, Eastman Kodak are:
- Reducing the amount of waste in the environment which also leads to lower operating costs and compliance with the laws.
- Recovering the costs which are associated with collecting raw materials, manufacturing, packaging, and waste disposal.
- Realising the importance of user-friendliness for any product and investing in the user manuals to make them easily comprehensible.
- Retailers, vendors, and logistics companies working together to control the number of returned products.
- Conducting spot audits helps in reducing discrepancies and thus, controls the number of claims made.
Challenges of Reverse Logistics Management
Reverse logistics comes with its own share of problems which can be overcome when the entire team of vendors, retailers, and logistics companies come together to face them.
Difference in Pricing
Depending on the type of product, the prices might fluctuate speedily so it is imperative that the merchandise which is put into the return mode must be handled expeditiously. The returns should be processed rapidly by the retailers and the vendors before it becomes too expensive for them.
Performing All the Retailing Tasks Again
The entire responsibility of shortening the time relies on many processes and often many providers in the steps between return origination up until the reselling of the product. They are involved in collecting, scanning, invoicing, and dispositioning of the products and need to make sure that the return is done within the given time while ensuring the ultimate satisfaction of the customers.
With this in mind, it is vital that the entire reverse logistics management is well thought out and implemented. With so much at stake, from customer satisfaction to the bottom line your reverse logistics management needs to be robust and comprehensive managing all risks and possible scenarios.
In many cases, leaving your entire reverse logistics management to one provider often allows businesses to have a more manageable trail, ensuring that there will not be a breakdown in the chain of processes. It can also help to make sure that the act of completing the same transactions again from the start can be met with ease rather than complications.
There is immense competition in the retail industry and to stay ahead in it, the retailers rely on their return policies as a competitive weapon. In the modern times, these retailers have become more powerful than the manufacturers, and if any manufacturer doesn’t offer a return policy, the chances are high that the retailer will not take their product.
It is the same for consumers who have the power and command over the retailer, without a returns policy, customers will choose your competitor who offers a better service.
All in all, staying competitive means making reverse logistics management as important as forwarding logistics management.