Supply chain costs can rise significantly when dealing with the thorny issue of reverse logistics. Often costs rise due to mismanagement and these can be avoided if a reverse logistics management process is integrated into the supply chain.
This brief article looks at the problems of reverse logistics and the benefits of investing in a well-managed returns process.
The Council of Supply Chain Management Professionals define reverse logistics in their Supply Chain Management Terms and Glossary (August 2013) as follows: “A specialised segment of logistics focusing on the movement and management of products and resources after the sale and after delivery to the customer. Includes product returns for repair and/or credit.”
In addition, reverse logistics can include activities such as prevention strategies to avoid products being returned, and the reduction of materials in the forward logistics process so that less waste needs to be dealt with in the returns process. Prevention activities include the collection of accurate data from the customer at the point of return. Analysis of this data should reveal why products are being returned and reduce future returns. The recovery of unwanted, damaged or faulty goods can include recycling, repackaging, refurbishment and returns made to the supplier or to stock.
There are many seemingly small problems encountered in the forward logistics process which contribute to the amount of products that are returned. These can include inaccuracy in the counting of products being loaded, loading onto the wrong vehicle, mistakes in the administration of paperwork or some impairment or damage to the product during loading or shipping. Integrating the returns management process with the overall supply chain process can start to solve these problems, delivering greater efficiencies by introducing a coherent approach to the entire supply chain cycle.
Another key element to the reverse logistics management process that it’s important to consider is risk management. For example, risk management processes are essential in the returns of dangerous or out of date products. These products increase the difficulty of the returns process due to the increase in regulation and the potential for harm. The education of processing staff is necessary to avoid contravention of specific regulations and thus to avoid damaging the reputation of the company and the payment of fines.
Inevitably, the reverse logistics process is more of a challenge than the forward logistics process. It is unpredictable, including a higher level of unknown factors which can be tricky to forecast. For example, predicting which products will have a greater than normal return or fail rate can be very difficult. However, there are clear benefits to investing in a properly managed process which leads to increased profitability and further develops sustainability.
A well-managed reverse logistics process can deliver profitability from increased efficiencies in the forward supply chain, reduction in the use of resources and better customer satisfaction from the analysis of returns data. The reduction of costs can also contribute to the sustainability of the supply chain; recycling old equipment will gain some if not all of the return on the original investment.
The benefits of sustainability also include better adherence to data protection, as data is wiped during the recycling of equipment, and greater competition between manufacturers for limited resources due to the reuse of materials. Notwithstanding the boost to customer satisfaction rates gained from excellent environmental credentials. Getting control of product returns and integrating an efficient reverse logistics management process is an opportunity to reduce costs and enhance sustainability that shouldn’t be missed.