A Quick Guide to Reverse Logistics in the Supply Chain
If you’re new to supply chain logistics, want a quick refresher, or are just looking for more details about reverse logistics, you’ve come to the right place. We’ll discuss reverse logistics, describe a few examples of it in action, and explain how to measure its impact on your supply chain. Read on to learn more.
What Is Reverse Logistics?
The reality of retail is that you’ll always have to deal with customers who want to return the products they purchased. Reverse logistics is the process by which these goods are handled, from the hands of the customer back to the seller, distributor, or manufacturer.
Reverse Logistics Examples
Many actions can be part of the reverse logistics process. Different sellers may choose to use one or more of these actions, depending on the type of goods being returned, the condition of those goods, and whether or not the seller can resell them “as-is.”
Here are a few examples of the types of actions you may take as part of your reverse logistics process:
- Accepting direct returns in the store
- Accepting returns through the mail
- Accepting returns via a 3rd party or retail partner
- Returning goods to distributors
- Secondary market sales of returned goods
- Refurbishment or repairs of returned goods
- Re-manufacturing of goods from parts of returned items
- Recycling or destruction of returned goods
For example, let’s say you sell cell phones in your store and someone returns a recent model. Once you receive the return, you may examine the phone for damage or signs of use, and then you have some choices:
- Sell it as a used phone
- Refurbish it and resell it
- Strip it for parts to be used in your repairs services
- Return it to the manufacturer for credit (if you have such an arrangement in place)
On the other hand, if you sell cosmetics or personal care products, you may be unable to resell these items due to health concerns and the potential for contamination. In that case, you may have to destroy any products returned to you if you cannot ascertain whether they’ve been opened.
Reverse Logistics and Supply Chain Analytics
Reverse logistics is one small piece of the supply chain, but it’s one that you absolutely must understand and monitor if you want your business to remain successful. Fortunately, you can look toward several supply chain metrics to see its impact on your business and your supply chain in general.
- Volume of Returns – The first, and generally easy to locate, data point to track is the volume of your returns. As a part of this number, you should also look at whether a specific product or product line seems to have an abnormally high return rate.
- Cost of Returns – It’s essential to understand how returns affect your bottom line. Track the cost of your returns, both in products lost and the expenses you might incur to refurbish or otherwise refresh these items if you make that choice..
- Percent of Sales – Once you understand both your volume and cost of returns, you need to compare that to your overall sales. Look into what percentage of sales have become returns, both in terms of volume and expenses. For example, if your returns are primarily your highest-dollar items, that’s a far different impact than if they’re typically less expensive ones.
- Product Return Condition – Finally, it’s important to track the condition of your returns. If products are regularly returned in like-new condition, that’s a far cry from products that come back looking like they’ve been used for weeks and then brought back. Try to pinpoint the reason for returns if possible – if a specific part is typically broken, this might be something to address with the manufacturer.
We Can Help
Blue Ridge is on your side when you’re looking to understand and predict any part of your supply chain better. We offer demand planning software for a more resilient supply chain, which can help you weather the storms created by reverse logistics by boosting your profits and helping you make informed decisions about planning and pricing. If you’d like to learn more about how we can help you master the reverse logistics, request a demo today!