What is Reverse Logistics?
What is it?
As its name suggests, reverse logistics is the movement of a product from the end user back to the company that made or sold it. This can happen for many reasons and in many different ways. Many considerations come into play when crafting a comprehensive reverse logistics strategy. Let's look at the importance of a robust strategy, effective management of 4Rs, the key players in the strategy, and commonly overlooked factors.
Why is it important?
Reverse logistics are important because it typically is when a customer is having to deal with an issue. Products need to be returned or exchanged due to size or colour, or something must be repaired or replaced, these situations inconvenience customers. Ensuring a seamless process is crucial. Moreover, dealing with returned products usually incurs costs, so making it efficient is important to the bottom line of a company.
The 4Rs
While the 5R's are typically in the spotlight, the reality encompasses more than just five. Here, we focus on four common ones that should be at the forefront of any reverse logistics plan.
Returns - the most prevalent reason for reverse logistics, whether a sweater is the wrong colour or those boots were too small, returns are inevitable.
Recalls - both required and voluntary, sometimes recalling a product for health and safety reasons is necessary and just the right thing to do.
Repairs - encouraging repair over replacement is a much more sustainable practice, unlike planned obsolescence.
Recycling - end-of-life logistics is just as important as getting the product to your customers.
Who should be involved?
Developing and executing a reverse logistics strategy requires collaboration across various departments, including sales, marketing, operations, logistics, warehousing, and accounting. While returns, recalls, and repairs may be viewed as necessary evils by some companies, they provide an excellent opportunity to drive efficiencies and cultivate customer loyalty. How a return, recall, or repair is done can ensure whether a customer returns or becomes a loud critic. When you don’t have buy-in from all departments, there are likely to be breakdowns in the process. Is sales adequately advising customers of return policies and procedures? Does warehousing know what to do with a recalled item when it arrives? Does accounting know where the funds should be sent for a refund or how to reimburse shipping for a repair? These are all very important questions that need to be asked and addressed.
What factors are missed when planning a reverse logistics strategy?
A company’s vendor relations and communication around reverse logistics should be discussed during the sales process. If you have a great system for reverse logistics with your vendors then your process with your customers will be equally successful.
Communication is key. Effective communication is critical, whether it involves conveying return policies to customers during purchases or keeping the team informed about incoming recalls. Lack of information can lead to breakdowns in the process.
Resources vs reward, evaluating the resources required against the potential rewards is vital. Sometimes, the cost of repairing or returning an item may seem high, but rewards extend beyond monetary gains. Building brand loyalty can outweigh the invested resources.
Reverse logistics should be a carefully thought-out strategy for a company. Taking the time to ensure that customers are educated, that vendors are involved, and employees are informed can set your company up for success when dealing with the inevitable flow of items back to the company. Need to work on your reverse logistics strategy? Send us a message, we can help.
