With a plethora of businesses coming up in the industry, logistics providers have also ventured into new and profitable domains. One such domain of logistics is reverse logistics. If you are not familiar with how reverse logistics providers work and how can they help your business, read along to discover the answers.
In basic terms, reverse logistics refers to assessing the value of a product by moving it from its typical point of disposal to its point of origin. This reverse journey of a product helps the manufacture to capture the costs involved in the production at each point so that they can determine the actual value they will gain after disposal. Mostly, the goods which come for refurbishing and remanufacturing are put through the process of reverse logistics apart from the returned products.
The logistics of a product are complete once it is sold to the buyer. However, if it is found defective, the customer returns the product. The product that moves even one step backwards in the supply chain becomes a part of reverse logistics.
Once the product comes back to the manufacturer through reverse logistics, they are supposed to check it for defects, test it, repair it, and then decide whether it has to be disposed of or recycled. An organized reverse supply chain is followed in the process so that the product does not suffer further damage in the process.
How does Reverse Logistics Work?
There are huge costs involved in processing returns. Then again, no manufacturer can back out from taking up the responsibility of defective goods because customer satisfaction is the key nowadays. Moreover, there are other benefits of reverse logistics, including decreased investment in resources, reduced cost of storage and distribution.
You might wonder that many businesses might not even have as many returns as to require the services of reverse logistics providers. However, certain industries have to deal with volumes of returns ranging from 3% to a whopping 50%. Some businesses struggle to deal with returns if they do not have a service provider in place because they can consume up to 50% of their revenue. Hence, reverse logistics is as important for business as the rest of the operations to maintain a rapport with the customers.
How does Reverse Logistics Work as Compared to Traditional Logistics?
Traditional logistics begin with sales forecast to figure out the requirement of a product in the market, and then the stock will be shipped to the distribution centre. Then, the retail stores will receive the product through the supply chain.
Now, when the returns occur, the supply chain gets activated again (this time in reverse), and the product is collected by the distribution centre again. The returned product comes with a report attached to it with all the information regarding the reason for the return, the condition of return, and the members in the supply chain it has passed through before reaching the manufacturer. Once the manufacturer receives the product, they run a check on it to figure out the defects by dismantling it and then take the final decision.
The final decision involved whether to refurbish the product and resell it for a lower price; recycle the product and repurpose its useful parts; or to dispose it off if it is going to serve no further value.
Reverse logistics can be a tricky procedure but is equally essential for the smooth functioning of an organization.