Reverse Logistics and Why They Matter
Most of, if not all, of us has been involved in reverse logistics whether on the consumer side or the logistical side of it. The constant evolution of technology mixed with increase demand in today’s e-commerce market has made it near impossible for retail companies not to adopt some type of reverse logistics procedure. Reducing waste and costs are just the start of the benefits of reverse logistics.
Reverse Logistics Explained
The easiest way to explain reverse logistics is the process and all the steps taken when you return an item purchased. When a consumer receives an item and they have realized, for whatever reason it may be, they need to return it they then notify the shipper and/or manufacturer that it needs to be returned. More times than not the party that is receiving the product back has a streamlined the process, so all the customer needs to do are a few simple tasks such as placing a stick on a box, making a call, or sending an email.
To the consumer this is easy enough and takes little to no time at all while their return will trigger a cascade of steps that are all interconnected and fine tuned to deliver the product back to the manufacturer. Reverse logistics systems have taken decades to get to where they are today with innovation and technology playing no small part. These days almost everything in the process is automated and needs little human intervention, if only to double check and stand by for quality assurance.
Reverse logistics first cam about in the late 1800’s, believe it or not, and as you guessed it was nowhere near as sophisticated but held the same premise.
“In 1872, a furniture retail company named Montgomery Ward incorporated retail returns in its customer service policy. This policy stated that if customers were not 100% satisfied with the product, they could bring it back for a full refund.” - The History, Evolution, and Future of Reverse Logistics
Before the internet and the evolution of reverse logistics, the process to return items was undoubtedly clunky and full of pitfalls that were hard to find quick solutions for. From slow communication and slow processes, it used to be more of a hassle to return items so consumers and if they were unable to make the drive to the store some would either dump them or try to sell them in a local garage sale. After the 2000’s that would all change.
With the advent of ecommerce reverse logistics exploded and become more readily available to manufacturers and consumers alike. More businesses began incorporating reverse logistics into their operations as online software expanded and became relatively more affordable. As time progressed consumers became more demanding and instant gratification became the standard expectation. Thanks to big companies such as Amazon, they are able to handle millions of returns easily through a function within their application.
Just how does it benefit companies and consumers?
Businesses over the years have spent time and money perfecting their reverse logistics for multiple reasons. One of the more obvious reasons is to stay current with competitors and modern times. With bigger companies being able to spend more on intelligent programs to ease reverse logistics, smaller companies and start-ups have to keep up as well. Without a system in place, a retail business won’t likely last long. Everything from using 3PLs to programs such as Shopify to handle their returns and all that comes with it, companies big and small find these types of resources a relief on the budget for their reverse logistics. When coming up with how to strategize your reverse logistics, the following are few key items to keep in mind:
- How well do you provide an easy returns process and commit to faster processing?
- What processes and space do you need to ensure efficient receiving, processing and disposition management?
- How can you speed up “return-to-stock” processing and increase the recovery value of unsaleables?
Handling shipping, managing inventory and overseeing quality control are all functions that require more time and money in order to operate efficiently. Returns are accompanied by refunds. This is where companies take a loss since they will typically cover the costs of shipping the returned item being sent back, on top of refunding the money for that item. For larger items such as appliances or even materials, only partial refunds are given to protect the business. These kinds of circumstances are usually discussed and agreed on before the purchase.
Though companies take a loss, some can resale their returned products for a discounted price, recouping some of the loss. This has become a business in of itself for organizations and depending on how they run their reverse logistics, it can be lucrative.
Another benefit is bettering customer relations. The simpler a returns process is for the consumer, the more likely they are to be a return customer and maintain a positive reputation. This in turn can help the growth of the company and instill the reliability of it.
Outsourcing Reverse Logistics
Briefly touched on above, companies can save themselves headaches and money by partnering with a third party logistics company and letting them handle all that comes with reverse logistics. It can help more so by freeing up time for the company to work on improving products and internal processes when they are not being bogged down by logistical nightmares that returns can turn into.
Though it takes time and money upfront in order to outsource properly, ensuring they have partnered with the right company, building up the knowledge of the product and how the retail company works internally etc.., the long-term return on a 3PL makes more fiscal sense in most cases.
There are risk factors in making the decision of outsourcing your reverse logistics and depending on the line of business a company is and what stage it is in, it may not even be an option. So, researching and taking the time to consider all options is always a must.
An example of a company outsourcing a function of their 3PL that some may be more familiar with is Amazon’s use of Kohl’s brick and mortar stores. This move may not have been so much to mitigate issues within their own reverse logistics strategy but rather offer a more versatile way for customers to send back their returns. Not only does this benefit the customers and Amazon by making returns more accessible, it gives Kohl’s a chance to increase their sales by having a customer come into their store.
These types of decisions that are made within a smaller company though can make or break the business. Strategic planning in your reverse logistics project is something that continuous effort should be made. This is doubly important as according to most insiders; e-commerce is the future and brick and mortar stores will slowly decrease as technology advances.
Benefits and roles of a 3PL in reverse logistics
Hiring on a 3PL to handle your reverse logistics is a critical decision during growth of your company but you would be joining over 40% of retailers that use one. Though this is not a comprehensive list, here are some of the pluses of partnering with one:
- “Convenient facilities – With a strategic network of locations, 3PLs can offer a convenient, centralized hub for handling returns. With facilities close to the end customer, they can process returns and get salable products back into stock faster.
- Scalable resources – Return rates often increase or spike. A third-party provider has flexible space and staffing to scale to handle fluctuations in return volume.
- Robust technology – With a sophisticated order management system (OMS), a 3PL can manage returns and get products back in inventory more efficiently and cost-effectively.
- Parcel management – As demand grows for free returns, it is particularly important to control transportation expenses. 3PL’s negotiated rates with parcel and freight providers can help to minimize return shipping costs.
- Quality control – An experienced provider can carefully inspect incoming products and determine if they should be put back in inventory. They may also have the ability to refurbish or repackage items if necessary.”
Meadow Lark Companies has been in the business for 40 years and taken strides in providing our customers with advanced transportation 3PL services. We are in the business of making sure those returned goods get to where they need to be in a timely, efficient manner while providing quality service and cutting-edge technology available to our customers.
If you find your company at a cross road with your current 3PL or would like to learn more, take a minute to learn about us and how we can resolve your reverse logistics.