Reverse Logistics Explained: Why They Matter For Your Enterprise 

shipsy

Created on July 26, 2022

The ease of getting goods delivered at your doorstep from anywhere across the world has spawned some of the costliest challenges for the logistics ecosystem. Reverse logistics is one such challenge that tends to become costlier with each leg of the journey back to the origin. 

With the rapid growth of e-commerce, consumers have come to expect no-fuss return policies while placing an order. Therefore, there has been an increase in demand for reverse logistics in the last few years. 

Nearly 30% of items ordered online are returned. Hence, it becomes critical to have a robust reverse logistics strategy in place for companies to reduce expenses and refurbish and resell items. Reverse logistics services are implemented in various forms by enterprises of all sizes to extract value from returned or damaged goods. 

The global reverse logistics market is estimated to be valued at $958.3 billion in 2028.

In this write-up, we explore the reverse logistics ecosystem and its challenges at length and find how to manage reverse logistics in a profitable manner.

Reverse Logistics: When, How, and Why?      

Reverse logistics begins at the customer’s end and moves back along the supply chain to the seller or the manufacturer. Goods, perishable or not, need to be refurbished in case of defects found by the customer after delivery. The rationale for reverse logistics lies in the potential opportunities for extracting values from the returned items and retaining customers after a sub-optimal experience. 

Here are a few situations where reversed logistics are required: 

1. A Customer Places a Return Order   

Suppose the customer does not like the delivered product or finds the product to be defective. They will initiate the process of returning the item. For a seamless and cost-effective upstream order movement from the customer to the seller, it is important to have a robust reverse logistics system in place.   

According to Statista, 68% of customers in the US prefer to order online if free returns are available. Hence, having a robust and optimized reverse logistics system in place is rapidly becoming a business must-have. 

2. Failure in Delivery     

A driver might not be able to complete the delivery despite multiple attempts. The reasons might vary, from the customer not being present to incorrect addresses or untraceable locations.    

In such instances, the driver initiates the return proceedings after confirmation with the customer. 

3. Return of Partly Damaged Order     

It is possible for goods to get damaged during transit, which calls for RTO requests. In a survey, 52% of respondents were frustrated with damaged goods while returning items. With the increased adoption of digital shopping, customers can initiate such requests right at the time of delivery and send the damaged goods along with the delivery person. 

Reverse logistics is generally associated with simply handling returns, But as supply chains become complex, reverse logistics management can be optimized by ensuring adherence to the principle of the five R’s.  

A Glimpse into the 5 R’s of Reverse Logistics      

For efficient reverse supply chain operations, businesses cannot afford to ignore the five R’s of reverse logistics.

1. Return     

Returns can be a significant pain point for organizations. Also, with the rise of eCommerce platforms, consumers increasingly look for hassle-free return policies as 67% of shoppers check the returns page before completing the purchase. 

Therefore, businesses must offer a smooth return process in case of customer dissatisfaction. At the same time, they need a system that allows the processing and transporting of returned products in an efficient and timely manner. 

E-commerce platforms today enable consumers to initiate product returns at the click of a button. Moreover, there is a huge cost incurred by companies in exchanges and returns claimed by the customers.      

2. Reselling of Returned Products     

Just because a return process was initiated, it doesn’t mean the product has issues or defects. For example, the customer might not have liked the product’s color, or there was confusion regarding the size. 

Instead of sending every returned item back to its origin, it can be instantly updated in the system for resale. The products can be easily re-routed for another purchase, even during transit. With an intelligent reverse logistics system in place, companies can get greater visibility over the entire process for uninterrupted reselling. 

3. Repairs      

At times, customers might be interested in having the damaged goods repaired instead of replacing them. In case the consumer wants to return the order, the items can undergo required repairs and be sold as refurbished products. 

So, the overall cost of returns can be lowered by making on-site repairs instead of shipping it back to the point of origin. 

Companies can set up field repair operations centers to quickly inspect, fix and send back items into circulation. Moreover, products with flaws can be marketed and sold at discounted rates. 

4. Replacement     

Processing a quick replacement request is critical for ensuring a great customer experience when the original order was not per the customer’s requirements. In addition, providing your customers with great exchange offers helps significantly improve the retention rate.

A replacement order is generally shipped once the return order is on its way to the warehouse. In such situations, it becomes essential to have a smart reverse logistics platform that keeps track of incoming and outgoing deliveries, thus managing them effectively.  

5. Recycling   

Companies can significantly reduce the Total Cost of Ownership (TCO) by reusing or recycling materials instead of purchasing new raw materials. Moreover, the lifecycle of raw materials that cannot be manufactured also increases.

Many businesses now offer sustainable packaging, which the customers can return for reuse. While completing the delivery, the logistics provider can pick up the packaging and send it back to the warehouse. A robust reverse logistics platform enables companies to keep real-time tracking of all returned packaging for efficient operations. 

Now let us explore some core operational challenges businesses face while operating reverse logistics operations.  

Major Challenges in Handling Reverse Logistics     

1. Executing the Reverse Supply Chain      

Understanding the functioning of reverse supply chains can be tricky, especially for new businesses. The multiple coordination points and processes involved make it a complex process. Some functions include picking up items from the consumer and returning to the warehouse, checking damage status, making a decision on recycling, RTO, and much more. 

Lack of seamless integration and real-time visibility causes lapses, resulting in inefficient operation. Moreover, having a dedicated space inside the warehouse and workforce is crucial to optimize the reverse logistics process for business profit. 

In such instances, reverse logistics platforms can help you bring varying processes under one roof and execute better control over them. 

2. Managing RMA      

RMA refers to Return Merchandise Authorization. RMA is the first step of an order getting replaced, returned, or its value getting refunded to the customer.      

The seller and customer in the reverse supply chain face connecting challenges since several processes separate them. This can lead to an RMA not being provided as return order requests can come from multiple communication channels such as call, text, mail, etc.  

Reverse logistics automation can overcome this problem by automating data centralization for return requests, thereby improving efficiency.      

3. Varying Customer Expectations     

Customers today have multiple options to choose from when shopping online. Brand loyalties are being tested, and there is no guarantee that a customer would stick to one company unless they are offered an exceptional customer experience. A critical component of that experience is the easy return of products. Any lapse in the process may result in customer dissatisfaction and lead them straight to your competitor.  

With reverse logistics mechanisms, you can complete return requests faster and efficiently, providing your buyer with a better shopping experience. 

4. Incorrect Product Descriptions 

As per a study, nearly 65% of customers say they will return an order if it does not match the description. Therefore, manufacturers must be careful about the product details as it can lead to needless returns of fully working products. 

Retailers can handle this by providing extensive information and quick-to-read guides to keep the customer informed about the purchase they are going to make. With this approach, companies can significantly prevent unintentional purchases and cut down the volume of returns.      

5. Scaling of Operations      

The pandemic has changed the way customers shop. Specific categories, such as pharmacy, electronics, etc., have seen a surge in demand. But without a proper reverse logistics system, it can be tough to scale operations and match rising customer expectations. Problems can also arise if quality checks on returning products are outsourced to third-party vendors.      

6. Abiding by International Laws When Sending Goods Overseas    

Companies in different countries have their own methods for handling returned goods. For example, requesting a return on orders shipped from overseas can be arduous due to the law of the land and the company’s ability to reach out to the customer. Investing in a smart reverse logistics platform enables international brands to participate in efficient cross-border business. 

These problems allow us to understand how crucial it is to have an efficient and resilient reverse logistics platform. We now explore some of the essential aspects of a reverse logistics management platform. 

Here’s How You Can Successfully Manage Reverse Logistics    

Business leaders need to adopt reverse logistics platforms relevant to their enterprise needs. Below we discuss some of the crucial steps to optimize your reverse logistics process.

1. Digitizing the Supply Chain Process 

Digitization improves the execution of processes and makes the overall operation more efficient. This is crucial as online retailers expect almost 17% of the orders to be returned.   

With digitization, customers can simply submit the return request on the shopping website/apps. Similarly, retailers can manage, monitor, track, plan, and control the order movement in a more streamlined manner. This enables real-time tracking and alerts for the return process, making the entire process more transparent.  

2. Including On-Demand Returns      

A smart reverse logistics solution allows you to add return orders impromptu to a list of pre-decided pickups. In addition, the system provides optimal routing to the pickup agents with the option of adding multiple stops if required. 

This way, you can enhance the customer experience by expediting returns. Also, you can reduce the operational costs by scheduling the pickups with deliveries and vice versa. 

3. Using an App to Track Status of Return Requests     

Reasons for failed delivery attempts may vary- from the customer not being present, incorrect address, customer dissatisfaction with the product, damaged items, etc. Riders should be able to update the information for failed attempts in the same app used for managing the delivery workflows. 

In this manner, the journey becomes easier for pickup agents, and they can also reschedule pickups in case of failed first attempts. 

The pickup agents can quickly notify the reasons and reschedule a fresh return attempt. Riders also receive a digitized proof of return, making the subsequent reconciliation process smoother. 

4. Connecting Via Order Numbers     

One of the major pain points with return deliveries is keeping a tab on the items once they reach the warehouse. Providing each package with a unique order number enhances transparency in locating the products. 

Such tags will make it easy to monitor the order throughout the various stages of the reverse supply chain.  

5. Streamlined Cross-Border Purchase Experience 

With the increased demand for cross-border e-commerce, companies are reaching out to customers across domestic borders. Customers might wish to try out multiple products to make their choice (nearly 30% of shoppers over-purchase and subsequently return items). 

An estimated 25% of all online purchases end up with a returned or exchanged item. Brands need to have a seamless reverse logistics strategy in place to ease customer pain points. Return policies differ across markets and borders due to local regulations. 

Therefore, customers need greater transparency regarding which items can or cannot be returned. A smart reverse logistics platform would be the perfect answer to ease your customer’s worries. It would clearly communicate the steps and costs, if any, involved in availing return facility. 

The system also allows access to web-based return processes, which include the mode of exchange, self-service shipping labels, and commercial invoices.   

6. Preventing the Need for Returns     

While eliminating the need for reverse logistics is nearly impossible, it can, however, be reduced to a great extent. Almost 65% of shoppers return items as they feel it doesn’t match the product description. The responsibility falls on brands to provide adequate product information for customers to make informed decisions while purchasing online. 

Besides better product descriptions, multiple photos and localized sizing charts provide greater customer transparency. An intuitive reverse logistics platform analyzes customer data to alert them if they select the size for an item they returned before and suggests a more accurate measurement. 

Reverse Logistics: Enhance Customer Experience with Ease and Speed 

Brands resell, reuse, and recycle returned products, enabling economic disposition options for returned items. With well-laid reverse logistics strategies, brands can recapture the value of the returned products and reduce losses.  

Having a robust reverse logistics system also ensures a hassle-free return procedure, increasing customer retention. Partner with Shipsy to ensure a seamless reverse logistics process and turn the returned products into profit. 

Streamline Your Reverse Logistics Operations with Shipsy     

Shipsy’s AI-powered platform effectively connects cross-border and local logistics. Alongside the mobility suite, this allows automated operations and ensures intelligent 3PL management. Real-time customer communication regarding order deliveries and status helps reduce shipment returns by 4%.  

As a trusted and leading SaaS-based logistics software suite provider, our platform allows efficient logistics operations with the following features:

  • Real-time tracking
  • Integration with your existing ERP
  • Digitized proof of delivery collection
  •  Dedicated app for riders to manage pickup requests and check for new ones
  • Smart order allocation

To know more and to get started with a smart logistics management platform, please get in touch with our experts and schedule a custom demo today.

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