Importance of Reverse Logistics in Supply Chain
In e-commerce, reverse logistics is the process of coordinating returns. All operations related to how the returned product is shipped by the customer, where it’s shipped to, and how it’s processed when it gets there involves reverse logistics. It is the set of activities that are conducted after the sale of a product to recapture value and end the product’s lifecycle.
It is a higher level perspective that includes the overall process of planning, implementing and controlling the inbound flow and storage of secondary goods and their related information.
The Process and Challenges of Reverse Logistics:
In a warehouse setting, it involves the process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.
In reverse logistics, goods move from the end consumer back to the seller or manufacturer. The most common example is when a consumer returns a purchased item for a refund. The returned products may be resold or disposed of permanently.
The processes that a product can undergo include:
- Remanufacturing – rebuilding the product with reused, repaired or new parts
- Refurbishment – resale of a returned product that has been repaired or verified to be in good condition
- Servicing – a broad category that includes customer service, field service and product returns, such as the issuance of return merchandise authorizations
- Returns management
- Recycling and waste management
- Warranty management
- Warehouse management
Challenges of Reverse Logistics:
It comes with a lot of challenges. One of the most common is tracking the profitability of the reverse logistics process. Depending on the items, it’s not always profitable to ship products back to a distribution centre because the value of a product may be less than the cost of shipping.
Another common challenge is having the necessary infrastructure to track an item’s warranty status. It’s also important to ensure any repair process is cost-effective.
Why is Reverse Logistics Important?
The traditional product cycle ends when the end customer makes their purchase. However, now, the product’s life cycle has been expanded to include dissolution of the product after the end-user has extracted its maximum use or value. Logistics, either forward or reverse, can have a significant impact on the asset recovery of the business.
The most important reason to adopt strategies is because of its profitability. All of these other aspects of asset recovery lead to the same place, decreased expenses and increased revenues. It will improve every step of the supply chain which will have a rippling effect on the rest of the business. The trend of reusing and recycling is gaining momentum. This will encourage new forms of competition within the industry.
Benefits of Reverse Logistics:
Setting up reverse logistics provides companies with the following benefits:
- Minimize environmental impact. Reuse of materials in manufacturing processes helps stave off the misuse of unprocessed raw materials and requires less power. This practice will directly benefit society as a whole.
- Improve the corporate image and customer satisfaction. There are significant competitive benefits for businesses using reverse logistics. More and more customers are interested in doing business with companies who are committed to environmental issues.
- Discover new ways of reworking materials. Recouping the monetary value of items that were rejected can open up new business opportunities. Outlets are a prime example, specializing in selling last season’s products or those with small flaws at a lower than usual prices.
- Stock control. Reverse logistics means the better stock organization, which stops the housing of obsolete products and minimizes possible errors.
- All these advantages have a positive effect, likewise, on cutting costs and boosting revenue.
- Can help meet requirements where products /parts are ‘end of life’ and reduce the cost of procuring new replacement inventory.
Reverse logistics is becoming more relevant throughout the business world. Even though these practices contribute to a cleaner environment, they are also a clear business opportunity thanks to savings from salvaged products.
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