How to handle returns and reverse logistics

What Is Reverse Logistics?

Reverse logistics is a type of supply chain management that moves goods from customers back to the sellers or manufacturers. Once a customer receives a product, processes such as returns or recycling require reverse logistics.

Reverse logistics start at the end consumer, moving backward through the supply chain to the distributor or from the distributor to the manufacturer. Reverse logistics can also include processes where the end consumer is responsible for the final disposal of the product, including recycling, refurbishing or resale.

The Reverse Logistics Process

The reverse logistics process involves managing returns and buying surplus goods and materials. The process is also responsible for dealing with any leases or refurbishments. Reverse logistics vary across different industries, and there are different economic incentives for improving reverse logistics management.

For example, in the beverage industry, the reverse logistics process uses empty tap containers. Beverage production companies want to recapture the value of their containers by reusing them. This requires planning transportation, managing shipping loads and cleaning the containers.

In the construction industry, reverse logistics moves and recycles salvaged materials to new sites. As the construction industry adopts more sustainable practices to reduce waste, there is an opportunity for cost savings by using reverse logistics.

In the food industry, reverse logistics is responsible for returning packaging materials and pallets. Companies also must deal with rejected food shipments. Rejections can create logistical challenges due to delays that lead to food spoilage and concerns over tampering. The Reverse Logistics Association(opens in new tab) is developing secure, quick, reliable, login (SQRL) codes on packaging to provide detailed product information and address these logistical challenges.

Generally, the reverse logistics process follows these five steps:

1. Process the Return
   The return process starts when the consumer signals they want to return a product. This step should include return authorization and identify the product’s condition. This process also involves scheduling return shipments, approving refunds and replacing faulty goods.
2. Identify the Return
   Once a returned product arrives at your location or centralized processing center, inspect it and determine its return category. (Note: If you have optimized reverse logistics, you should know where the product should go before it arrives.) Sort products into the disposition options: fix, resell as new, resell as a return, recycle, scrap or refurbish.
3. Keep the Return in Motion
   The less time any returned items spend in limbo, the more efficient and cost-effective reverse logistics will be. That means setting up the process so that the return is in constant motion toward its next stop. Products in need of repair should be sent straight to that department, for example, and those that can be recycled should be shuttled to the proper place. Moving returned items from point to point as quickly as possible maximizes capacity and reduces waste and wasted time.
4. Repair
   Once the returned item or equipment is reviewed and deemed fixable, it can move to the repair department. If the product is not repairable, the company can sell any usable parts.
5. Recycle
   Finally, parts or products that cannot be repaired, reused or resold should be assessed for recycling instead. Sustainability is a front-and-center priority for most organizations, so ensuring the proper recycling or disposal of caustic or otherwise potentially harmful parts (e.g., batteries and computer screens) will go a long way toward demonstrating environmental responsibility. Manufacturers and retailers can set up partnerships with recycling and disposal companies to handle this step in the process.

7 Strategies to Optimize Reverse Logistics

To optimize reverse logistics, companies need cohesive strategies that account for speed, efficiency and cost. When taking action, consider policies, partners, data, capacity, logistics and transportation.

Here are seven strategies to optimize reverse logistics operations:

1. Evaluate relevant policies and agreements: Review and revise the procedures related to your company’s returns and repairs. These policies should be clear and consider the root causes of returns and repairs. The way a company deals with returns and repairs can be competitive differentiators.
2. Collaborate with suppliers: Close collaboration with suppliers can help ensure a smooth, integrated experience for customers, not a disjointed one they will struggle to navigate.
3. Use data to optimize processes: By collecting data on product returns, you can understand why customers may be returning products. Then, you can make adjustments in sales, product design and forward logistics processes accordingly.
4. Track products forward and backwards: Linking raw materials to the finished good and the customer order allows you to trace ingredients in the event that you need to process recalls—instead of issuing them for entire lines, you can find the issue and selectively issue recalls.
5. Centralize return centers: With a centralized return center, you can better sort products and identify the best next step for each of them. With a center, businesses can more efficiently determine how best to reclaim product value. If your company lacks the resources to have a separate returns center, consider dedicating a portion of your warehouse or factory to returns.
6. Examine logistics and transportation: Regularly review the processes for forward and reverse logistics and transportation. Determine if it is feasible to integrate some of these processes and transit. For example, if your delivery drivers can pick up empty pallets as they drop off full pallets, you save trips, time and money.
7. Automate: Use cloud-based logistics software to help streamline operations. For example, a software system can track asset recovery, manage refurbishment and provide business intelligence analytics.

How to handle returns and reverse logistics