Reverse Logistics in e-commerce: Everything you need to know!

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There are numerous products in an e-commerce business that are shipped every day through various online stores. Hence, different logistics are strategically important to manage the flow of these products. the regular shipment not only allows the different business to function smoothly but also helps in balancing the economy. Reverse logistics and regular logistics is now an integral part of business and marketing strategies.

What is reverse logistics?

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Reverse logistics is referred to reusing of all products and materials in an e-commerce business. With this process, every product is checked thoroughly before it reaches its final destination. It is often used to get all the products properly disposed of. It is used to handle the return of any product from your customer.

The products that are returned by the customers are often repaired and refurbished. They are Restocked, resold and even disposed of if the product exceeds its shelf life. An optimal logistics strategy can ensure long- term benefits for any company. It can also help a manufacturing company to spend less revenue on return and recall of any product. The process is very much connected with the reverse supply chain process.

There are different types of reverse logistics and  some of the common reasons for the process are as follows

  • Destruction of expired and damaged food products, pharmaceuticals, drugstore beauty products, gadgets, etc.
  • Return of rejected goods to the producers and suppliers
  • Even distribution of oversupplied goods from one place to another
  • taking away containers packagings from a certain area
  • Removing of products and capital equipment to the next area of response

Difference between reverse and regular logistics

There is quite an amount of difference between regular logistics and reverse logistics. Regular logistics is also called forward logistics. It is referred to as the process of transporting the product from the seller to the customer. At the same time, reverse logistics is the process of transportation of the product from the customer to the seller.  There are certain differences between these two types of logistics. They are listed down below.

  • In reverse distribution products are returned to the manufacturer or suppliers for repair, recalling or returning. In regular logistics, products are sent to customers from the manufacturer or supplier.
  • Forecasting is usually straightforward in nature whereas, in reverse logistics forecasting is more complicated and difficult.
  • In reverse distribution, many products from different points to only one point. But, in regular logistics, many products are shipped to various destinations from one core destination.
  • In reverse logistics, product packaging is often damaged or done in the wrong way but in regular logistics, the product packaging is uniform and correct.
  • In reverse distribution, the destination or router is unclear but those are clear in regular logistics.
  • The cost for reverse distribution is not directly visible but it is clearly visible in regular logistics.
  • In reverse logistics, inventory management strategies may not work properly but this type of management strategies work fine and properly in regular logistics.
  • The marketing process is not compulsory in reverse logistics but that is very much well known in regular logistics.
  • The reverse logistics process is less transparent but regular logistics process is visible and transparent.
  • Speed of shipment is not important in reverse logistics but it is the top priority in regular logistics.

Importance of reverse logistics

Reverse logistics is very much important in an e-commerce business. Not only does it ensures product reuse but also holds a lot of other benefits for an e-commerce business.  It ensures efficient

  • Supply chain and asset recovery.
  • It often helps to extract the maximum shelf life of a product.
  • It also opens the possibilities of recycling, refurbishing, repairing of any product.
  • It is very much important in asset recovery. This strategy also decreases the expenses of returned products. These expenses include shipping charges, warranty expenses, repairing cost, etc. It may also include a refund to customers in case of defective products.
  • This type of logistics process increases in customer loyalty. A company can find about the defects and problems in returned products. This can, in turn, make a certain product better. Therefore, the company can have a better return and distribution also increases the chance of recycling and reusing of products. In the case of electronics recycling and reusing means less data breach and more security.

How does it work?

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It is a multiple-stage process. This process very much easy to understand. There are six steps that any reverse logistics company uses to manage the process-

Product packaging and retrieval

This is the first step in this process. The logistics company picks the returned or unused products from customer or warehouse.

Shipping of returned products

After the pickup, the products are collected in one spot. Then the products are arranged for shipping to the manufacturer. A speedy return ensures customer satisfaction and loyalty.

Repairing, recycling, refurbishing or fixing

This is the fourth step. The returned products have now reached the manufacturer.

They repair or fix defected products.

Recycling is done in this stage. Often packaging, part of one product are used to make a new product. This cuts the cost and also contributes to making our earth more pollution-free. Some products are often refurbished and made suitable for reuse.

Testing

In this step, the newly made products or the returned products or the repaired ones are tested and screened. This ensures the safety and grade of the product.

Processing of shipment

Here the fixed or refurbished or recycled products are sorted and prepared for shipment. This step is crucial for the supply chain management.

Discarding waste

This is the final step. It involves returning the repaired products to the customers, reselling refurbished or fixed or recycled products and disposing of the wastes securely.

Monitoring the flow of Reverse Logistics

Logistics companies use nine metrics to monitor the flow of reverse logistics. This metrics help to analyze the logistics systems performance and that in turn can be used to modify the strategies in need. You can also understand the monitoring process of reverse logistics using these metrics.

Amount of returned and resold products

The amount of resold or reclaimed products and returned products are very important in reverse statistics system.

Disposition of cycle time

Cycle time is an important metric to monitor reverse logistics. If the processes are standard and streamlined, the cycle time becomes shorter.

Percentage of recycled material

This metric is exclusive to track the use of recycled materials in a product manufacturing unit.

Handling cost per item

This metric can be easily calculated by dividing the total facility cost per month by the number of manufactured items. This can give a clear picture of the efficiencies of different facilities.

Cost recovery percentage

Cost recovery percentage in case of reverse logistics may give an idea about well-received and dumped products.

Distance

This is also an important metric to monitor reverse logistics. The distance often causes more spend.

Energy used in the total process

Often a large number of energies like fuel, electricity, manpower used in the return process. So, this factor in reverse logistics may be used to monitor the costing.

Total cost in case of ownership

The total cost of ownership often differs from the cost of the product.

How can reverse logistics be improved?

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It is an important part of supply chain management. It reduces cost, makes products better and increases customer loyalty. A retailer or manufacturer both need a well-planned logistics strategy to manage the flow of returned goods. There are ways to improve reverse logistics. These ways can be very helpful if implemented properly.

Creating a “Return and sorting area”

A  fast return of goods is the foundation of the reverse logistics system. It is advised to create a stock are for return items. These items need to be sorted into four classes as soon as they arrive. Returned products can be sorted in the following sections- restock. Repair, discard and priority. This way the products will be organized and the process will remain easy.

Restocking

The eligible products which can be restocked have to be restocked with priority. This helps you to attain an updated product catalog.

Having a transparent return policy

A transparent return policy often improves the process. Buyers often search for a reliable return policy before purchasing. Hence if you can convince the customer about a professionally handled return shipment they may trust you.

Sending return labels with shipment

It can be a good strategy. It means that you value your customer. The customer will be happy with this small gesture. This, in turn, will increase the chance of having a profit.

Durable packaging

Durable and easy to open package can really improve your reverse logistics system.  This ensures less damage.

Implementing Reverse Logistics

Reverse logistics is an important section of any e-commerce business.  This era of e-commerce websites and online business and start-up companies has made the implement of such logistics a very necessary thing.  There is a rising need for an efficient strategy regarding logistics in India.  This type of logistics offers sustainable growth and economic advantages. Here, we will discuss how to implement a strategy of reverse logistics in India and other parts of the world.

To implement a logistics system, a company must have a good return policy. Customers must be able to return a product within a certain time. The policy must also include a fast restocking and reselling of products. If retailers or start-up companies may ask for help from third-party logistics or 3PL to open a reverse logistics chain.  These companies will take care of the returns, reselling and restocking.

If you have an online business then allow the consumers to return your products. You have to think about an efficient tracking system to track the return shipment to ensure better service.

You need to have a dedicated distribution system and protocol channel to ensure the return of damaged goods and wrongly sent products.

Most of all you have to analyze the data carefully. This data will not only help you to to get a clear picture of your best product but also give you an idea about your worst product, and most favored product.

Conclusion

Hope this blog was helpful. In case you have any doubts feel free to ask in the comment section below.

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