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How To Improve Efficiency of Reverse Logistics

Reverse Logistics

It is quite an astonishing fact to know that a country like US has about 1% of its GDP equivalent to the value of its reverse logistics activities. More than 6% of the products sold is returned back to the seller and their value is a whooping 40 billion. These figures have been collated from several industry-leading and US government researches. When such figures are compared to developing countries, the numbers are only higher, indicating customer dissatisfaction.

In order for industries to gain competitive advantage over their adversaries, it’s important to set up channels for planning and implementation of flow of material, in processed inventory or finished products, back to their origin from the destination. In other words, reverse logistics.

From e-commerce giants to OEMs, voluminous backward movement of products can be difficult to manage in terms of tracking and decisions on its future course of action. Organizations will find it difficult to understand the nature of the returned products and as a result, may find it difficult to re-route it back to the market or send it for re-manufacturing.

As a result of this, many products which could have been reengineered back to the market are being sent to the disposal section, resulting in loss of revenue.

The lot of non-conforming products may pass through quality checks and end up in warehouse for resale, leading to decrease in brand value. Business organizations around the world today play with very narrow profit margins, and the market has been flooded with credible players.

To stay ahead in competition, they must invest in gathering knowledge. It should focus on the art of reuse through proper goods-return management. However, handling the reverse logistics is a test of warranty administration strategic capability for any organization. Business houses use this for altruistic reasons and gain higher brand management. According to studies, it has been seen that bulk of the customer base will not prefer to do further business, if the return policy is not a fair and hassle free one, the number is above 80%!

The best methods of reverse logistics integration are carried out in the following basic steps:
Let’s begin with establishment of a linear return process flow for returns management. The managers should design the best possible process flow to facilitate returning of the goods back from customers. This includes the primary interaction of the customer with customer care, which differentiates the claim according to different product-failure parameters. The internal logistics team, may then plan for the extraction of the goods and transport them to pre-designated centers, for further processing.

Next comes establishment of a sound logistics model. The step is marked with involvement of the logistic team, internal and external (3PLs). For internal logistics team, it is important for them to devise the optimum route, using the advanced critical path method. However, it may be of the organizations interest to go for 3PLs to save time and money which would otherwise be spent on planning and coordinating for the activities internally.

Setting up of the distribution centers or controlling points is a critical stage in which the organization decides the strategic placement of distribution centers or warehouses. After the stage of segregation of product, done in the previous level, it is decided whether the product can be reworked and reuse or sent to disposal centers. If a product needs to be reworked upon, then it may be dispatched to the plant directly by the 3PL.

Supplier Recovery and other parts of a goods return policy also need to be well defined. The OEM should not forget about the role of third parties during such a process and remember to check on integration quality of the IT systems with them. Maintaining communication should be top priority, as customers have the right to know every stage through which a product passes. It will invoke a sense of trust and build lasting business relationships.

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