Retailers and manufacturers spend so much time focusing on the outbound supply chain that they often neglect the fact that goods also have to travel backwards through the chain. Reverse logistics is often forgotten – a glaring oversight which can cause widespread cost when a large scale return of items occurs. Retailers and manufacturers need to start proactively managing the inbound supply chain in the same way that they manage the outbound one.
The issue of reverse logistics needs to be treated as an integral part of the business, especially as more and more companies will have to deal with increasing numbers of returns sooner rather than later. It is vital that businesses which rely on the supply chain have a clearly defined process in place when it comes to dealing with reverse logistics.
No matter what a product is, or how it is sold, businesses need to focus on managing the return supply chain if they are to maintain levels of customer satisfaction, keep costs to a minimum and garner the vital information that will help reduce returns in the future.
The issue of reverse logistics has always been there, but why is it all the more relevant and crucial for manufacturers operating in the current business climate? There are four main reasons why a reverse logistics strategy would be called into action – product recalls; business-to-business commercial returns; stock adjustments, and functional returns.
If these returned products are going to be resold, they need to be back in the retail domain as soon as possible, requiring a timely, effective reverse logistics plan to be in place. Due to the huge increase in online shopping over the past decade, the number of returns is also on the up due to the lack of a ‘try before you buy’ facility. According to a number of industry research firms, return rates for online sales are substantially higher than for traditional retailing – some reports claim return rates of more than 30% from online sales.
Businesses will not be able to escape increasing numbers of returns and, if mismanaged, returns and reverse logistics in general can prove to be a costly business. It is not merely a matter of reversing the outbound supply chain, as different factors need to be taken into account. For example, it could be relatively straightforward to identify what exactly you will be receiving back, but the crucial question is what should be done with the products when they reach the warehouse or factory?
Depending on the type of product, it might need to be destroyed, it could be resold or broken down and put back into the manufacturing process. The issue of transport also comes into play. What initially went out as a bulk order perhaps might be coming back in much smaller quantities, affecting haulage and storage costs, and proving much more difficult to administer.
In the past, due to the often high cost of implementing a reverse logistics strategy, handling returns has been viewed as an inconvenience rather than the business opportunity it can be. An efficient reverse logistics system can transform an increasingly costly and complex returns process into a competitive business advantage. Returns have the potential to be a fruitful source of business data, offering an immense amount of information about products and consumers, information that few manufacturers and retailers capture at the moment.
By examining the returns more closely, companies can track any trends in returns or frequent problems with particular products, and address these issues to perhaps decrease the total number of returns received.
Reverse logistics has been neglected in the past, or just considered as an exception to the rule of the forward going supply chain. However, as the desire to improve customer service intensifies, more importance has been given over to reverse logistics. There is an abundance of solutions available to get goods out the door but it is not so easy getting the goods back and then deciding what to do with them. Most companies do not have the personnel, space or resources to deal with returns or, in other words, managing returns can be a costly, logistical nightmare, creating a need for an inexpensive and effective reverse logistics solution.
The best way to implement an effective reverse logistics strategy is to work with existing processes within the business. For example, if a company has good traceability processes in place, this should mitigate any losses suffered during product recalls or general returns. An efficient traceability and quality management system will identify products quickly and correctly, outlining the specific characteristics of the particular products and therefore providing information about what should be done with the product when it is returned.
A traceability system will enable businesses to identify products easily and provide helpful information as to what should happen next. But the best way to manage the remainder of the reverse logistics process is through a tailored enterprise resource planning system (ERP).
Manual records are prone to error. A tailored ERP system can automatically give out customer returns numbers, identify when a product comes back, choose the best course of action to deal with the product, allocate resources to dealing with the product, and recognise any trends in returns in general. An existing ERP system, combined with robust processes, should be enough for any company to manage its reverse logistics strategy, negating the need for any further investment.
The other crucial aspect to ensuring successful reverse logistics management is the notion of collaboration. Reverse logistics works most efficiently where there is effective collaboration – it is necessary to have a synchronised effort from all supply chain partners for reverse logistics to be successful.
In order to create greater visibility, businesses must demand greater information sharing, supporting integrated decision making. Without a common vision, shared by retailers,