Introduction to Reverse Logistics
18th June 2020
The reverse logistics process has become a vital element of any thriving, smooth supply chain. To help you get started, here is all you should know about reverse logistics.
What is Reverse Logistics?
James R. Stock first minted the term Reverse Logistics in 1992. You may be familiar with the terms such as Repair, Recycling, Reuse, Reclamation, and Salvage, but Reverse Logistics seems an odd phrase.
The Reverse Logistics Association (RLA) defines it as "All activity associated with a product/service AFTER the point of sale." Reverse logistics refers to monitoring the life-cycle of the products after they arrive at the consumer. This includes how the product could be reused, how it could be correctly disposed of, or any other way the product could create value.
The activities related to reverse logistics:
Rentals & leasing
Repairs & maintenance
In short, Reverse Logistics is managing the journey of a product from the consumer back to the service provider or manufacturer.
Why are the products returned?
The product returns might happen due to a variety of reasons:
The consumer is unhappy with the product.
The product is defective upon arrival.
The item has over out lived its service.
End of the product contract/lease
In all the above cases, the product is fit for reverse logistics. The returned products then go different phases at the company. This could include:
Documentation of any defaults in the returned item
Shipping of the returned item
Disassembling, repairing, recycling, and restocking of the returned product
All these processes require the product to travel in reverse through the supply chain network.
What are the benefits of implementing reverse logistics?
Implementing reverse logistics benefits not only the customers but also the manufacturers. It can act as an asset recovery process for the manufacturers, extract as much value, and provide the second ROI. The most important reason is the profit increase the companies could make by reducing material costs. Reverse logistics also has an environmental benefit for the companies by making sure appropriate disposal policies are followed. This could get tax credits plus the appreciation of doing their part to the proper disposition of the products and not ending up in landfills.
The accelerated growth in the volume of returns causes enormous contingencies around reverse logistics and puts pressure on supply chains to accurately manage and implement product returns. For that reason, you should plan and improve your reverse logistics carefully. There are measurement maps you can use to monitor reverse flow in your supply chain. They include:
Volume of returns
Condition & Type of the returned product
Percent of sales
An in-depth report of these mappings can help you identify problem areas and turn the menace of returns into an opportunity for improving your business. The advantages of applying a reverse logistics approach surpass the cost of implementing it.