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In the world of order fulfillment and supply chain management, reverse logistics is an undervalued and little discussed topic, and one that many ecommerce businesses need to consider. Reverse logistics systems are integral to a healthy supply chain, imperative for customer satisfaction, and can boost your bottom line.
What is Reverse Logistics?
When most people think of logistics they picture the process of moving a product from a seller to a customer—all the steps along the way to get goods to consumers. What isn’t obvious at first is what happens when those items need to be returned. This is reverse logistics—any time products are sent to a final destination but need to be returned for any number of reasons—and it is a huge aspect of logistics that is as intricate as it is important. A secondary aspect of reverse logistics involves how products are dealt with once returned: reused, refurbished, disposed of, recycled, etc. Because reverse logistics can be a very time consuming and costly aspect of doing business, many companies choose to partner with a third-party logistics provider (3PL) to handle both the supply chain process and help handle the returned products as well.
In any ecommerce business it is inevitable that you will have to deal with your products being returned to you by your customers. The item might not match the description listed on your website, it could be the wrong size, or they could simply change their mind and no longer want the product they ordered. In all these cases, you need reverse logistics systems in place in order to manage those returns quickly and cost-effectively. There are many different phases that a product must go through once a customer has initiated a return. These can include the following:
- Initiating the customers return request via call, email, or chat.
- Shipping the returned product back to your fulfillment center.
- Processing the return, shipping a different product or issuing a refund.
- Documenting why the product was returned.
- Testing the product for issues that potentially led to the return.
- Repairing, recycling or restocking the returned item.
Managing the reverse logistics of your product smoothly can help you avoid the same issue that led to the return in the first place. It will also allow you to reuse as much of the products that were returned, so that it is not a total sunk cost.
Reverse Logistic Considerations
There are four key aspects of reverse logistics that can help you understand the flow of products that are returned. If you track these categories well, they will inform your bottom line, product inventory, and impact the rest of your business. Plus by keeping tabs on your returns it’s likely that you won’t experience as much recurrence of the issue that led to the product being returned.
Are the same items being returned over and over? Is this happening in large volumes? Answer yes to either of these questions and you’ve probably got a larger problem than just a few faulty units. You may need to consider a recall, or an overhaul of your production process. A 3PL will be able to help you report on the number of returns, and even specify in which batch they came from.
Percent of Sales
What percentage of your sales are lost to product returns? And how many of these products can be reincorporated into your supply chain via reverse logistics? What can you do to minimize these losses of revenue? 3PLs who specialize in consumer electronics will likely have the tools and systems to repackage refurbished items for new shippments.
Condition of Returned Product
Is the product failing after a specific operation? Can you determine any patterns of failure among the returned product? This is where quality assurance (QA) is important. You want to figure out what went wrong so you can adapt and correct the problem before it happens again. Some 3PLs have QA teams that can help you work on your product as a value added service.
Without monitoring and managing your reverse logistics, your company could be losing millions of dollars in potential value. It is important to be able to assess the value of a product that is returned and see what if any part can be refurbished, reused or provide value back into your company. All 3PLs should help you report on the number of returned or lost items, which you can then use to track the total profit those returns cost you.
Benefits of Reverse Logistics
Because reverse logistics involves the same steps as traditional “forward” logistics (customer service, transportation, inventory management, etc.), it requires similar efficiencies. By streamlining the way products move back through your supply chain, you will see benefits such as cost savings, happier customers, and improved sustainability.
Better Profit Margins
There are several ways to cut costs with reverse logistics, from reducing transportation spend, to reselling items that would have been a complete loss if disposed of upon return. If value is being regained from recycled and resold items, and the rest of the system is operating efficiently, your profit margins will improve.
Increased Customer Satisfaction
The way your business handles returns could directly affect how customers feel about your brand. Dealing with errors is just as important as making sales. If a customer had a bad experience with your product, you have to make it right. By offering options to your customers who wish to return items that make it easier for them, it can go a long way to boost customer satisfaction. These can include providing a full refund no matter the reason for the return, not requiring the original receipt if being returned to a brick and mortar store, not requiring the original packaging, among others.
If you have a streamlined process in place for customers to return products and then receive replacement products quickly, you’ll have huge customer satisfaction. It can also help to speed up the process that products are repaired, refurbished, or reused which will cut down on the need to purchase new products.
Reverse logistics can help you identify ways to reuse, resell or recycle materials that would otherwise end up in a landfill. This not only helps profit margins, but it also helps improve your brand’s reputation for social and environmental responsibility.
Reverse logistics are an integral aspect of any ecommerce business. If you put the proper systems and processes in place it can improve customer service as well as help to boost your profits by repurposing products that are returned. It can be overwhelming to get a reverse logistics system in place, so you might want to partner with a 3PL to help. They are experts at managing all types of logistics and can take the burden of implementing and managing all of the various processes yourself.
Click here to learn about DCL’s turnkey reverse logistics services. Send us a note to connect about how DCL Logistics can help your company. You can read DCL’s list of services to learn more, or check out the many companies we work with.