Reusing materials is not a new idea, in fact, waste paper recycling, soft drink recycling and scrap metal recycling has all been around for a long time. Reverse logistics however is a relatively new idea. It has only been around for a few decades but in that time has quickly become highly recognised as a practice.
The practice involves managing the return of products, and facilitating items going back their point of origin. It’s an important and necessary work flow for order fulfillment and involves a number of different components. The planning and implementation of the practice can be complicated. The process is basically there to ensure that products reach their original destination so that they can be reintegrated into the supply chain or disposed of in the correct way.
Activities often involved in the process include managing the remanufacture of goods, refurbishing of item or the redesign and reuse of items. It may also involve managing recycled goods, obsolete items and other issues. Returns processing is required for many reasons from inventory issues, damage, change of mind, it’s also used in recall or to remove old inventory.
There are many studies around the world that show reverse logistics has great potential to improve shipping performance and relationships with customers however it is unfortunately often overlooked.
Many companies unfortunately do not have reverse logistics in place and consequently miss out on all the potential benefits associated with the practice.
The growth of reverse logistics
Reverse logistics can be extremely challenging because of the cost associated with processing returns. Doing it effectively comes with a number of benefits including improve customer satisfaction; decreased costs associated with resources and reduced expenses when it comes to storage and distribution. The amount of products going backwards along the supply chain can be extremely high, so coming up with an effective and efficient solution is very important. Returns can also be many times more expensive then outbound shipping. Certain industries experience more returns than others, sometimes seeing returns as high as 30 to 50 percent. Getting reverse logistics right is an important opportunity for businesses to build better relationships with their customers and retailers.
There are two main components involved in reverse logistics which include returns management and remanufacturing or refurbishment.
Returns management operates in some ways similar to supply chain management and requires processes such as gatekeeping and logistics. Gatekeeping is the process of managing how many items enter the backwards flow of the supply chain – this helps to manage costs. Keeping return rates low without impacting on customer satisfaction is a good way to keep the system efficient. Usually, gatekeeping is managed at the point of entry and effective screening processes can keep things on track.
Avoidance works in a similar way by screening items entering the work flow and helps to minimise returns. Quality control, user friendly items and promotional materials are part of avoidance strategies.
The remanufacturing and refurbishment of products is also a part of the process, many of the items returned to workflow are sent back due to damage or inaccuracy. Sometimes the issues arise during transport and other times they are sent out because quality control has missed them. The refurbishment and remanufacturing process aims to repair items so that they can be reintegrated, or rebuild and reuse items or obsolete products. It also aims to improve old or out of date products to meet new manufacturing standards or to recover reusable elements to use in new products. Sometimes parts or components of items are also reclaimed for use in other products or to refurbish other products.