Reverse logistics refers to managing product returns and the disposal or recycling of materials, a significant aspect of supply chain management. The reverse logistics industry is becoming increasingly important as consumers demand more sustainable practices and the ecommerce market grows.
However, managing returns and improving sustainability in reverse logistics pose significant challenges for distributors.
Simplify the Return Process for You and Your Customers
Returns traditionally have been an afterthought for many distributors. Managing returns is a significant challenge, as it involves handling products that are no longer new and may have been damaged or opened. Working these returns can be time-consuming and expensive, and it requires careful planning to ensure that products are returned to inventory or disposed of properly.
Prioritize the Process
Without robust processes and procedures for managing returns, operations will only dedicate labor to returns when they can vs. when needed. Typically, this is because current customer orders are prioritized, measured and tracked, whereas customer return metrics usually are not. Most operations professionals will jump through hoops to ship a customer’s order out on time but fail to promptly process their returns.
It is up to leadership to educate the team on how essential processing returns is to provide a great customer experience. It is also incumbent on those same leaders to properly incentivize their team to prioritize processing those returns by not negatively affecting their efficiency tracking.
Communicate with Customers
Distributors must communicate a straightforward returns policy to their customers. Returns are a fact of life in ecommerce, and customers expect to be able to return products easily and quickly. However, working returns can be complex, and customers may only sometimes understand the processes involved. Distributors can overcome this challenge by providing clear return policies, and ensuring they are easy to access.
Sustainability is another significant challenge in reverse logistics, as it involves managing waste and reducing the environmental impact of returns. Many returned products cannot be resold and end up in landfills, contributing to pollution and waste. Sometimes the most cost-efficient and sustainable path is to allow the customer to keep the item and give them credit.
Distributors can implement sustainable practices in reverse logistics operations to overcome this challenge, such as recycling, refurbishing and repurposing returned products. Distributors can also partner with third-party logistics providers with expertise in sustainable logistics, such as those specializing in refurbishing, repackaging, recycling, reselling and reusing materials. These providers bring additional value by helping businesses reduce the cost and time of managing returns.
As the demand for sustainable practices grows, reverse logistics will become an increasingly important aspect of supply chain management.
Leverage Technology to Streamline Reverse Logistics
Technology is critical to overcoming reverse logistics challenges, as it can streamline processes and improve efficiency. Distributors should invest in the right technology and techniques, such as automated returns management systems, barcode scanning and serial number tracking, to manage returns efficiently and reduce the cost and time associated.
Returns can disrupt inventory management, and distributors need systems to track returns, manage stock levels and ensure that returned products are either put back into inventory or disposed of properly. This requires accurate tracking and monitoring of returns and careful planning and forecasting to ensure optimal inventory levels. Your company’s ERP must also have the capability for such labor-saving processes.
Distributors can prevent some returns by controlling the factors that cause them:
- Sending the customer the wrong item, commonly called a “mispick,” can be prevented in your distribution center or warehouse with solid processes and procedures for receiving, put away, cycle counting, picking and shipping.
- Incorrect information on the website or a poor picture of the item is another reason for returned products. Using a robust PIM solution and clear high-resolution 360-degree photos will reduce returns.
- Use the proper packing materials and containers to ship the item so it is not damaged during shipping.
Taking these steps will significantly reduce distributors’ returns.
Finally, distributors need to consider the financial implications of reverse logistics. Returns can be expensive, and companies must manage their costs carefully to ensure that returns do not eat into their profits. This requires a detailed understanding of the costs of managing returns and careful planning and analysis to identify areas where costs can be reduced or eliminated.
Overcome Reverse Logistics Challenges for Growth
During a recent conversation with two of my professors from my supply chain masters program at Elmhurst University, I asked:
“Why must the modern distributor have a robust and effective returns policy and process?”
“The efficient processing of returns is no longer a competitive advantage. It is now a necessity. With the growth of ecommerce, many people have firsthand experience with simple, intuitive, fast and painless (and often free) return policies. This has become the norm in their everyday life, so they struggle to understand why business-to-business should be any different. While I do not think they expect the experiences to be identical, they certainly expect them to be easy to navigate and end with a quick resolution.” – Dale Polson, Senior Director of Operations at RxCrossroads
“Managing the reverse supply chain is a very different and much more complex matter than trying to make an organization’s forward supply chain more efficient and cost-effective. Reverse logistics is shifting from being seen as a ‘necessary evil’ to being recognized as a strategic asset – reducing costs, improving the customer experience and helping to grow the business.” – Tim Engstrom, Senior Vice President of Supply Chain at Essendant
Overcoming challenges in reverse logistics requires a comprehensive approach that involves clear policies, effective communication, strategic partnerships and the right technology and processes. By effectively managing customer expectations, inventory and costs, businesses can ensure that their reverse logistics operations are efficient, effective and sustainable. Distributors that invest in this area will be well-positioned to succeed in the years ahead.