When you’re in the eCommerce business, there will be problems when customers decide that they don’t want your product anymore. Your product is in the ecosystem, and you must return it in a resellable condition. This movement of goods from end customers to the manufacturer or merchants is called reverse logistics. This system is opposite to logistics, where things begin from the users and return their way to the manufacturer for reselling, refurbishment or disposal.
An effective return management system is as important as logistics in the supply chain to avoid losses. Generally, customers do not want too much hassle in returning the product. Therefore it’s the retailer’s responsibility to make their return process as simple as possible. Let’s dive deep into what reverse logistics is and how an effective return shipping strategy helps avoid losses and achieve supply chain resilience.
What is Reverse Logistics?
The meaning is in the name itself. Reverse logistics is the supply chain management process of bringing the product back from the customers to the manufacturer or retailer. The reverse logistics occurs when the customers want to return the product. The process is usually divided into two parts: first, return management, and second, remanufacturing or refurbishing.
Customers are more likely to buy products from a company whose return policy is easy and flexible. Therefore, an efficient reverse logistics system is important for minimizing losses that a company may incur from a high return rate.
Kohl’s reverse supply chain is a great example of a streamlined reverse logistics system. Customers who want to return products can send Amazon returns to Kohl, screen them, and accept them in a single shipment. It helps customers to return the product without going into multiple processes.
How Reverse Logistics Works
-
Return Process
The reverse logistics process starts with customers requesting product return to the company. Customers state the reason for returning the product, which should be according to the return policy. The request also includes whether they want a refund or replacement of the product.
The return request goes to the return authority or management of the company, and they take the process forward and schedule return shipment, refund, and replace faulty goods.
-
Dealing with return
Once the return shipment is completed, the product is back at the warehouse or factory. Identify the default in the product and determine its return category. The product is then sorted into scrap, refurbished, resold as new, and resold as a replacement.
-
Refurbishing and remanufacturing
After reviewing and sorting the product into different return categories, the product is forwarded to the repair area for refurbishing and remanufacturing.
Benefits of Efficient Reverse Logistics Strategy
Lowers the risk of supply chain losses
When a customer does not want your product and wants to return it, this is a loss to the company, and no eCommerce seller wants a high return rate. An optimized reverse logistics system reduces the impact of product returns on sales by refurbishing and reselling the product. Therefore, a returned product is turned into a sellable item reducing losses.
Increase brand reputation
New eCommerce sellers may not recognize this, but customers do notice the return policy of a store, and it has an influence on their purchase decision. Customers want to avoid struggling with too many processes if they desire to return some products. Even though it is a loss for you, you should offer a hassle-free return to your customer. It will add a point to your brand reputation.
Increase customer satisfaction
Customers love to buy again and again from the brand they’ve prior good experience with. You know it is more rewarding to have a loyal customer than to have a new customer. Therefore, a business should have a concise return policy and reverse logistics process for nothing but providing a great experience to the customer. If you focus on customer satisfaction, customers will gradually start believing your brand and will buy again and again.
Reduce waste
Fragmented reverse logistics means a delay in getting the product back from the customer, not remanufacturing it for a second launch. This creates a waste of returned products and unsatisfied customers also. Having efficient reverse logistics reduces the waste of returned products by directly sending them to the factory for recognizing the default, putting them into a category, repairing, and reselling them to the customers back.
Increase profits
Optimized reverse logistics impacts the efficiency of the company’s supply chain, increasing profits and ROI. Customers often choose to buy from a brand because they believe if there’s any wrong delivery, like the wrong color or size, they’ll get returns easily and quickly. This will increase customer retention and loyalty, resulting in higher profits.
Encourage last-mile
If you have an efficient reverse logistics process, you can claim fast returns with a simple and streamlined return policy. Last-mile returns of products will always reflect on customer retention and sales.
5 R’s of Reverse Logistics
Return and exchange
Managing product return exchange is the first R or first task to deal with in reverse logistics. The way to handle product returns and exchanges is to offer high-quality products, avoid shipping mistakes, and create engaging product pages so that customers do not ask for an exchange. In addition, you must offer a pain-free return process to customers depending on your operations. In the backend, the goal should be to inspect, repair, and resell the returned product rather than throw it into junk.
Reselling returned products
To reduce losses from product returns, remanufacture it and sell it again. It is not obvious that if a customer rejects a product, it will not be treasured by anyone else. Many times customers return products not because there are specifications mistakes like getting the wrong color or size, not because the product needs to be fixed or the customer is unsatisfied. As a business, you must test, repackage and relaunch the product as new in the ecosystem.
Repair
Some companies offer field repair operation centers to manage repairs, where the product is quickly inspected, repaired, and returned to the market. Companies also offer on-site repair services if the issue is small and repaired at the customer’s place. In addition, products that have faults can be remanufactured and sold in the secondary market with discounts.
Replacement
More than half of customers, when asking for the product return, meant the replacement of the current item. They just want products with different specs. Like different colors, sizes, or versions.
Recycling and disposal
Today customers are prioritizing sustainability. One out of four customers focuses on environmental issues while purchasing, according to McKinsey & Company. If the returned product is non-repairable, a more sustainable approach is to recycle it and mold it into a new product.
Strategies for Building an Effective Reverse Logistics System
Identify the reason for product return
To build an optimized and streamlined reverse logistics process, know why customers return products. Analyze whether the current return policy is working, whether customers are facing issues, or whether shipping is safely executed to the customer’s doorstep. To bring efficiency in reverse logistics, know the loopholes and fix them as soon as possible.
Technologies in the reverse logistics process
The demand for quick returns puts stress on the supply chain, which often disrupts the process ending up as a bad consumer experience. To tackle this challenge, companies shift to technology to automate the process. Brands of all scales use software and modern robots to complete time-consuming manual tasks efficiently.
Efficient warehouse management system
To keep up with fast delivery demand, eCommerce brands use modern warehouses and WMS, which are equipped with technologies like the Internet of Things (IoT), Augmented Reality, drones for inventory management, and robots for picking, sorting, and handling. These modern warehouses made last-mile delivery possible and quick product returns.
Offer a simple and concise return policy
One-click purchases and fast delivery have made eCommerce a new normal. As an outcome, people expect the same ease in returning the products as they experience in order. Customers expect a clear return policy, so they do not struggle to return if they get a faulty order. Brands observe high customer satisfaction when they have a simplified return policy.
Use data and software to optimize the process
By tracking data on product returns, you can identify the reason for high returns and make changes in the quality and design of products. In addition, companies use tracking software and CRMs to optimize processes and point out loopholes.
Establish centralized hubs for quick turnaround
For quick product returns, brands have centralized return hubs. These centers have resources for quick repair or inspect the issue in the products. In addition, you can have a dedicated area in warehouses or factories that works as a center for managing returns and reclaiming product value.
Conclusion
A well-oiled reverse logistics process is crucial for an eCommerce brand’s bottom line and reputation. A supply chain does not end at just delivering orders to the customer. Still, in reverse logistics, companies reduce costs, losses, and waste significantly by efficiently putting off the process.
Now understanding the importance of reverse logistics in supply chain management, finding a reliable partner who can pull off the whole logistics process efficiently is another heavy duty. That’s why show your trust in logistics aggregators like NimbusPost, who solves every logistics-related issue with their immersive platform.
FAQs
What is a logistic cycle?
The logistic cycle is the complete process of different activities in the supply chain, from procurement of goods to inventory management to last-mile delivery to the customers and managing returns.
What is a procurement cycle?
The procurement cycle takes place at the beginning of a supply chain. It is the wheel of selecting and vetting a supplier and buying from it. The procurement process looks like shortlisting suppliers, vetting the suppliers, negotiating and creating the contract, receiving goods, and checking the quality.
What are the 7 Rs of supply chain management?
Supply chain management is the backbone of an eCommerce brand. The efficiency in a company’s supply chain reflects customer satisfaction, sales, and ROI. A company should focus on these 7 R’s of supply chain management to build an efficient supply chain.
- The Right Product
- The Right Customer
- The Right Location
- The Right Price
- The Right Time
- The Right Quality
- The Right Quantity
