Reverse logistics involves returning goods from the consumers to the retailers or manufacturers and handling those items accordingly. People increasingly realize there are valid reasons for reverse logistics as they assess how to improve their supply chain network. Failing to account for it could result in significant gaps that make companies less resilient and able to adapt to customers’ needs.
Here are some compelling reasons reverse logistics is necessary for the modern supply chain.
Many people love the convenience of shopping online. They can do it on their schedules and spend as long as they’d like browsing without the interruption of a salesperson. Plus, getting assistance is often as accessible as clicking a button to launch a live chat.
However, people familiar with the matter see the direct connection between the rise in e-commerce shopping and higher return rates. As Mehmet Sekip Altug, an associate business professor at George Mason University, explained, “As online sales increase, the return rate has also increased significantly, and I don’t think it’s a secondary problem anymore.”
He was commenting as part of a CNBC story that included statistics from the National Retail Federation. They clarified that the average return rate for all purchases was 16.6% in 2021. However, it was higher — 20.8% — for things bought online. That’s problematic because many of these items go back to distribution centers. Those facilities typically don’t have the resources to process returns.
Plus, many retailers specifically tempt shoppers by making returns easy and complimentary. Consumers appreciate it, too. Thus, one of the prominent reasons for reverse logistics is that being able to accommodate returns could attract more buyers.
Research from 2021 revealed that 76% of people considered the availability of free returns an important consideration when shopping online. That survey also suggested that the items retailers sell could significantly impact their likelihood of receiving returns. For example, 88% of people said clothes were the items they most frequently sent back.
Today’s manufacturers want to help current and potential buyers feel confident about their purchases. One of the ways they do that is to provide aftermarket services that allow customers to get replacements and repairs of faulty products that remain under warranties or those sold with lifetime guarantees.
Such options were once most common with big-ticket items, like automobiles or home appliances. However, that’s not necessarily true now. Consider that OtterBox, the company known for phone accessories, has a lifetime warranty on its screen protectors and cases. However, the company also recently expanded its program to provide up to $150 of coverage to people whose iPhones break despite having certain protectors.
Warehouses are often highly visual spaces. They feature signs to designate specific areas or remind people of safety requirements. Some facilities feature colored tape on the floor to show safe travel zones and ensure people don’t get too close to the equipment.
However, when a company uses a building to ship items out and accept products that need repair or replacement, it’s vital to have dedicated areas for each task. Once decision-makers convince themselves of the reasons for reverse logistics, they can easily convert certain sections of a facility to handle it, using other visual cues to help people stay oriented as they move between the different areas.
The supply chain network must also accommodate shoppers who are not in positions to buy certain products. Such services allow people to rent designer clothing for special events or get temporary use of furniture during weddings or other large gatherings. Some individuals also simply like how renting lets them try products without making the commitment a purchase requires.
Brook Furniture Rental, based in Illinois, which offers housewares, furniture and decor through a lease structure, takes the option of renting to another level. The company often serves corporate customers, such as human resources professionals who need to provide housing for relocated employees or insurance customers who set up policyholders in temporary accommodation after disasters. It also caters to consumers who prefer renting their furniture to buying it.
Instead of just delivering the rented items to the doorstep of wherever the customers will use them, company representatives bring the products inside and place them where needed. The business maintains 12 warehouses and leases a fleet of 26-foot box trucks to provide this convenience for its target audience.
Reverse logistics come into the picture when a customer’s lease ends. Someone from Brook Furniture Rental picks up the items. They reportedly get reused for other customers four to six times and go through a dedicated process to prepare them for the next person. Repairs and refurbishments happen when necessary, and cleaning and sanitization always occur.
Renting something is usually significantly more affordable than budgeting for the full purchase price. Some companies that include the option of renting in their supply chain network also let customers transition their rentals into purchases. That’s usually more economical than buying the items outright. Business representatives can cater to a larger set of customer needs through situations like these.
Recalls are a sometimes-overlooked aspect of reverse logistics. Manufacturers that learn products are faulty or dangerous instruct consumers to stop using those items. Moreover, they often ask them to send them back to a dedicated address or bring them to the places of purchase.
In any case, logistics professionals must plan for recalls before they happen. For example, once a manufacturer or retailer receives the problematic items, where do they go from there? Is it best to send them to an external service provider with the resources to process those goods? The nature of the recall also dictates what can happen to the merchandise once the original consumers no longer have it. Some products might get resold after refurbishment or repackaging.
Once leaders understand the reasons for reverse logistics and take the time to create smooth and effective processes, they can often generate value from products deemed unsuitable for use. That’s only possible if specific changes make those products fully safe for the new owners.
Recalls are often prohibitively costly and damaging to a company’s reputation. However, the adverse effects are less likely to happen if the affected businesses have a streamlined system for dealing with the items and making things right for customers as much as possible.
The four areas explored here highlight why the supply chain network of any successful company should not leave out reverse logistics. Customers will need to return items for various reasons, and many brands specifically promote how easy it is to do that. Developing a reverse logistics strategy and keeping it current will help companies stay responsive to changing needs.
Emily Newton is the Editor-in-Chief of Revolutionized. She regularly covers trends in the industrial sector.