The process of logistics is defined as “planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption”.
How does the reverse logistic process differ? It includes all the same processes that are mentioned in the definition of logistics, but the difference is that when it comes to reverse logistics, all these activities operate in reverse.
What is reverse logistics?
Reverse logistics is basically the process of traditional logistics done in reverse, and it describes all activities that are related to the reuse of products and materials. Whereas the purpose of traditional logistics is conforming to customer requirements, the purpose of reverse logistics is recapturing value or proper disposal of the products or materials.
Through reverse logistics, goods are moved from their usual final destination with the purpose of capturing the value or for their proper disposal. Activities such as remanufacturing and refurbishing can also be included in the definition of the reverse logistics process.
What is the importance of reverse logistics?
Reverse logistics may sound like something that is rarely needed in normal logistic processes. After all, the main goal is to get the product to the customer, not the other way around. However, the fact is that any processes following the sale of the product involve reverse logistics. For example, if the product is defective, the customer will return it, which means that the seller will have to send the product back to the manufacturer to have it tested, repaired, recycled or disposed. This means that such product would have to travel in reverse through the supply chain network, which is where reverse logistics comes in.
The amount of returned goods that need to be sent back in the opposite direction of a normal supply chain network is much bigger than most people think. The total volume of returns can range from 3% up to 60% of all shipments, depending on the industry and the company.
Reverse logistics is therefore becoming one of the biggest operational challenges in the logistics industry, simply due to the sheer volume and the costs connected to processing returns. Cost-effective and well-organized reverse logistics results in a number of direct benefits, such as improved satisfaction of the customers, reduction of storage- and distribution-related costs, and a decrease of resource investment levels.
How can reverse logistics fit into your traditional logistics processes?
Reverse logistics might be one of the most ignored aspect of today’s logistic processes; however, the need for quick and efficient reverse logistics simply cannot be brushed aside any further if you want your company to grow and develop. Reverse logistics is often considered the black hole of the entire operation, but it should not be only seen as an expense to your organization. It can also be profitable, as reusing or recycling returned products can help you reduce related costs.
Reverse logistics can be difficult to plan, which is another reason why the process is often ignored by most organizations. It is not easy to forecast the reverse flow of the products and to estimate exactly how much merchandise will be returned.
It is also true that reverse logistics is often more complicated and less structured than the normal supply chain; this is due to the variation in product quality, defect rates and maximum lifespan of the products. However, ignoring these facts will not make the problems go away – it will only make the whole process more complicated and more costly.
On the other hand, if the return flow is recorded and planned in regular intervals, it can easily be estimated and managed in a budget-friendly, effective manner. Start by creating a structured flow of pathways for different scenarios that can help you handle most of these problems without losing money, time, or energy.
The fact is that the majority of organizations don’t have the knowledge, infrastructure or manpower needed for reverse logistics processes, such as processing returns and running an operating system of returns. In these cases, outsourcing the reverse logistics processes to a qualified third party logistics organization is usually the most effective and budget-friendly alternative.