What is Reverse Logistics?
In the traditional logistics system, the goods move from the manufacturer or supplier to the customer. However, in this case, the products make a step backward at least once, going back to the distributor, for instance, from the customer. Reverse logistics makes reference to all the operations meant to minimize loss by reusing or repurposing materials and products. For example, refurbishing or remanufacturing can be seen as a reverse logistics process. It is meant to reduce costs regarding the flow of raw materials by controlling them in a more effective manner, making better use of available inventory, and recapturing the value of used goods and materials or disposing of them in an adequate manner.
A good example is the case of a broken product. The defective product will have to go all the way from the customer to the manufacturer. The manufacturer will have to take action to ship the product, test it, dismantle it if it can’t be fixed, recycle the parts, and dispose of it in a proper manner. This is a typical flow.
Benefits of Reverse Logistics:
It is a process of moving products from suppliers to customers by reversing the usual “sales” and “manufacturing” flow. This can be done through centralized facilities or through the use of distribution centers located closer to end-users. Its key benefits include:
A) REDUCED TIME:
It reduces the time it takes to move products from origin to destination, potentially saving both companies time and money.
B) REDUCED COST:
With centralized storage and efficient routing, reverse logistics management can help reduce transportation costs while preserving product quality.
C) INCREASED PRODUCTIVITY:
By reducing delays in shipping, RL can boost employee productivity—resulting in cost savings for businesses as well as higher morale among employees working within them
D) LOWER SHIPPING COST:
It can result in significant savings when comparing traditional shipping methods.
E) REDUCED ENVIRONMENTAL IMPACT:
By using less energy and reducing the number of shipments, it can have a lesser environmental impact than traditional shipping methods.
F) SPEEDUP DELIVERY TIME:
It can speed up delivery times by eliminating the need to wait for conventional shipments to arrive at their destination before proceeding with the next order fulfillment step.
G) IMPROVED CUSTOMER SERVICE:
Customers usually receive better quality products when using reverse logistic management solutions compared to traditional shipping methods which often results in orders being fulfilled on time or even early, saving customers money and time overall
H) HIGHER EFFICIENCY LEVELS:
In comparison to other forms of supply chains, such as direct shipment from manufacturer to end user, RL tends to be more efficient due not only carrying less inventory but also transferring goods directly from one supplier’s warehouse to another without having first gone through a distribution channel
What is Inverse Logistics?
Similar to RL, inverse logistics also refers to taking back products from the user and sending them to the manufacturer or seller. But this process is about taking products that are damaged, defective, unwanted, or out-of-use products. The main idea is to prevent these items from having a negative impact on the environment, by being disposed of in improper ways. As discussed earlier, it is about regaining the value of a product, if possible, if not its proper disposal will complete the process.
How to Manage Reverse Logistics?
1. Reverse Logistics System:
The reverse logistics system encompasses all the operations connected to the reuse of materials and products from the logistics flow. It can be seen as the process that takes back goods from their final destination, which is the customer in most cases, with the purpose of getting back their value, partially or entirely, or for disposing of them adequately. There are situations in which the destination of the products or materials is represented by stocks. Thus, items or materials from overstocks can also enter the system so that they don’t become waste.
2. Reverse Logistics Process:
The process starts after an item has been sold. This item can be returned, refurbished, remanufactured, or at the end of its life, entering this way the RL system. However, items that are unsold, are leased or rented or are sent for maintenance operations and service, all go through schemes. As the name suggests, the reverse logistics process takes the product from the customer and moves it across the RL in a reverse manner so that it reaches the manufacturer or provider.
3. Reverse Logistics Management:
Proper management will help manufacturers and suppliers minimize loss, cut costs, and make better use of their inventories. To improve management, several steps need to be covered. To start, there’s the need for improved policies regarding the return and repair of products. Then the communication and collaboration with retailers should also be improved, as they are responsible for the sale and return of goods. Processes should be optimized, by using data more effectively and the transportation and logistics part of the scheme should be reconsidered.
Many fundamental and advanced areas in supply chain management can be studied in MDSCM, which is among the best diplomas in supply chain management or CSCE (which includes supply chain management online training courses), offered by AIMS.
4. Reverse Logistics Components:
RL focuses on returns management and returns policies and procedures (RPP) and unsold goods, packaging, and delivery problems. Leases, repairs, and product retirement are also part of reverse logistics. The effect of effective inventory forecasting is clear:
- Less money is invested in inventory,
- Stock is maintained at a realistic level, and
- Ordering becomes a lot more precise.
5. Rs of Reverse Logistics:
Companies measure performance on each of the Rs of reverse logistics, returns, reselling, repairing, and repackaging, to determine improvement and success. Your company’s RL processes may be streamlined by looking at the Five Rs.
6. Examples of Reverse Logistics Management:
Companies are changing the way they handle waste, and the supply chain is a key part of that process. These examples focus on returns, exchanges, and recycling. Companies can increase the likelihood of repeat purchases by making it as easy as possible to get a refund and lowering the likelihood of a customer becoming dissatisfied in the first place. For example:
A) HOME DEPOT:
The company has a reverse logistics service available online. Customers may send damaged and misplaced items to Home Depot RL centers for processing by printing a shipping label or dropping them off.
B) LEVI STRAUSS:
The company uses it to promote sustainability in textiles by reusing jeans or recycling and repurposing their fibers to produce new ones. By collaborating with other firms, Levi Strauss can produce reused jeans at a higher expense.
C) KOHL:
As a leading brick-and-mortar retailer with more than 1,000 locations, Kohl’s is a good example of the reverse supply chain in action. Customers can send Amazon returns to Kohl’s via Amazon, screen and accept them in one shipment. This partnership helps customers save time by returning products in person, while Kohl’s attracts customers who might not otherwise visit its stores. Kohl’s also sells some Amazon products and can simply send them back if they don’t sell.
D) UNILEVER and PROCTOR & GAMBLE:
Some big firms are also relying on reverse logistics management to deal with waste. Proctor & Gamble, PepsiCo, and Unilever are implementing reusable packaging that consumers may return. The companies will clean and reuse the containers. Packaging and logistics are changing as these corporations move their operations. Transportation and delivery systems will collect the packaging when items are dropped off.
E) GE HEALTHCARE and CISCO:
Companies such as GE Healthcare and Cisco, specialize in refurbishing, repairing, and remanufacturing damaged or outdated goods for consumers. Cisco refurbishes electronic devices, such as phones, routers, and switches. GE Healthcare remanufactures imaging devices and ultrasound machines.
F) MICROSOFT:
For Microsoft, dealing with the end of life for devices, batteries, and packaging is a global challenge. Microsoft’s product packaging is 100% recyclable, and it has a program for refurbishing and reusing personal computers.
G) FACTORY OUTLETS:
Like factory outlets, off-price and discount stores, and online auction sites, some organizations resell overstocked goods to the secondary market. Consumers can purchase these overstock items at a discounted price from TJX Companies (TJ Maxx, Marshalls, and HomeGoods).
Why Is Reverse Logistics Used?
E-commerce has led to an increase in the volume of returns, which have an economic value of almost a trillion dollars each year worldwide. Goods moving from their final destination back through the supply chain to the seller can be used to regain value or to get rid of the products. Companies using reverse logistics aim to recoup value and retain customers by ensuring that every in-store purchase is returned. Less than 10% of in-store purchases are returned, whereas about 25% of online purchases are. Companies using it build customer loyalty and increase repeat business by minimizing returns losses.
Reverse Logistics VS Traditional Logistics:
The difference between Reverse Logistics and Traditional Logistics is that logistics management is a process of moving products from their production location to their final destination, while the latter is a process of moving finished products from their final destination to their production location.
- In the traditional product flow, suppliers start and then get to the factory or distributor. From there, the goods move to retailers and customers. With reverse logistics management, consumers begin and finish the supply chain flow, moving in the opposite direction. More on supply chain may be understood from the lecture What is a Supply Chain? – Definition, Models, and Best Practices.
- Well-designed supply chains are able to handle some RL requirements and are responsive to changes. Products can be returned one step back in the chain or returned to the original supplier. Returned products can even be sent back to regular sales or discount channels (like liquidators).
7. Role of Reverse Logistics in Different Industries:
A) PHARMACEUTICAL:
Pharmaceutical firms use it to keep medicine waste out of landfills and waters (handled through third-party and distributor intermediaries). Products are returned and disposed of through third parties and distributors.
B) SERVICE INDUSTRY:
In the service industry, it helps address repairs more quickly by refunding, undertaking warranty work, or giving credit. These policies keep customers happy.
C) MANUFACTURING:
The service and manufacturing industries are different from others since their goods and services are non-standard, therefore the returns aren’t. When a company fixes the service or manufacturing component, the reverse logistics management process begins.
Manufacturers sell fixed parts as refurbished items. These parts go through a different supply chain and have a lower value. Warranty work, credit, or work refunds can be provided by service firms.
E-COMMERCE:
Ecommerce companies should combine returns with deliveries to make returns a low-cost transaction. They should also consider working with third parties. To identify the root causes of problems and develop strategies to reduce them, e-commerce businesses should analyze the factors that caused the issues.
The Importance of Reverse Logistics to Your Business
- Maintaining an efficient flow of goods through reverse logistics is critical because it reduces costs, creates value, lowers risk, and completes the product life cycle. According to Gartner Research, about 75% of businesses plan to invest in the “circular economy.” This economy, which is similar to traditional logistics, follows traditional logistics and then continues around through what Gartner calls a “closed-loop supply chain.”
- Companies are joining the recovery, repair, and recycling systems with this strategy. Disposed products are now being used for new purposes, thanks to recovery, repair, and recycling. Materials once considered waste can now be used again.
- Many countries implement a policy requiring “producers” to develop more sustainable business practices by establishing a circular economy. The guidelines outline waste prevention subsidies, research and development subsidies, and recycling. Other nations’ waste policies include restricting landfills, requiring waste collection and processing, and penalizing certain waste behaviors.