Reverse logistics is the set of activities that is conducted after the sale of a product to recapture value and end the product’s lifecycle. It typically involves returning a product to the manufacturer or distributor or forwarding it on for servicing, refurbishment or recycling. Reverse logistics is sometimes called aftermarket supply chain, aftermarket logistics or retrogistics.
The aftermarket processes that a product can undergo in reverse logistics are numerous and include:
- Remanufacturing – rebuilding the product with reused, repaired or new parts
- Refurbishment – resale of a returned product that has been repaired or verified to be in good condition
- Servicing – a broad category that includes customer service, field service and product returns, such as issuance of return merchandise authorizations
- Returns management
- Recycling and waste management
- Warranty management
- Warehouse management
Here are 5 reasons organisations should implement their own Reverse Logistics Strategies:
- Allows a trader to receive products back from the consumer or send unsold merchandise back to the manufacturer to be taken apart, sorted, reassembled or recycled; minimising overall costs for an organisation.
- Reverse logistics can be valuable in increasing product lifecycles, supply chain complexity, maintainable practices and consumer preferences; which have to be improved on to maintain productivity and growth.
- Gains can include; increasing speed of production, reducing costs (transportation, administrative, and aftermarket maintenance, repair and replacement), retaining customers by improving service goals and meeting sustainability goals.
- More value can be extracted from used/returned goods instead of wasting manpower, time and costs of raw materials involved in the original supply chain.
- Improved customer satisfaction and loyalty by paying more attention to faulty goods, and repairs of merchandise. Reverse logistics can include gaining feedback to make improvements and to improve the understanding of real reasons for product returns
From looking at the advantages and importance of reverse logistics; we can now see reverse logistics can play an important part in the growth of an organisation; having many financial, environmental and societal gains. It is important not to overlook reverse logistics as organisations can markedly improve their customer service and response times along with environmental sustainability and company social responsibility.
Reverse logistics are the means to having an efficient supply chain and, therefore, efficient asset recovery. Here are a few reasons why reverse logistics are so crucial to business:
- Reverse logistics provide a way to extract the maximum value from products at the end of their life cycle. This includes the ideas of recycling where possible, repairing when it is plausible, among other ideas to extend the product’s lifecycle.
- Reverse logistics serves as a function of asset recovery by decreasing expenses of returned products. These expenses include warranty expenses and shipping expenses of returning the product to the manufacturer. This could also include the refunds on defective merchandise.
- Reverse logistics also serves a branch of asset recovery by decreasing disposal costs of obsolete products. Parts and merchandise can be returned to the original manufacturer to have as much value extracted from them as possible before disposing of the parts that are no longer beneficiary.
- Reverse logistics is a branch of asset recovery also by increasing customer loyalty. When a company focuses more attention on the returned merchandise to figure out what the original problem was, customers will have a better experience.
- When a machine or piece of equipment reaches the end of its useful life, business owners can achieve a second return on investment. This is another way that asset recovery proves to be useful for business. If the business owner can sell the piece of equipment, he stands to gain a second return on investment.
- With all of the rhetoric and discussion and re-using and recycling of machinery, equipment, and other business materials, it shows that a company is conscious of the environment. A company that is environmentally conscious will gain favorable attention from the public. This is another way that asset recovery manifests in the idea of reverse logistics.
- The trend of reusing and recycling is gaining momentum. This will encourage new forms of competition within the industry. This increased competition will most likely lead to increased sales
- One industry with a high turnaround of items that were being discarded before awareness of proper disposal was electronics. When electronics started being reused and recycled this leads to a decreased risk of a data breach on these obsolete devices.
- Implementing a strategy of reverse logistics will drastically improve the operations of business. It will improve every step of the supply chain which will have a rippling effect on the rest of the business.
- . The most important reason to adapt strategies of reverse logistics is because of its profitability. All of these other aspects of asset recovery lead to the same place; decreased expenses and increased revenues.