Reverse Logistics and its Pros & Cons

If Reverse Logistics were a person, it would say ‘It’s time to clean up the mess!’

Reverse logistics refers to the process of moving goods from their typical journey’s end, for the purpose of apprehending value or ensuring proper discarding. Remanufacturing and revamping activities also may be included in the definition of reverse logistics.

Usually, logistics deal with events that bring the product towards the customer. In the case of reverse logistics, goods move from the customer to the distributor or to the manufacturer.

reverse logisticsflow

Reverse logistics involves the progression of the product upwards the supply chain structure after its sales. In other words, reverse logistics takes place when the product is returned by the customer if it is damaged or not as per what the customer desires. The product would go the other way through the supply chain grid for the purpose of recalling any use from such product.

Reverse logistics has garnered a lot of attention in recent years. Yet, many companies haven’t fully comprehended its prominence. As a matter of fact, reverse logistics is considered to be more of an annoyance, an expensive and recurring headache.

One thing to acknowledge is that the amount of returned goods from the final destination (customer) is much more than people ponder. As an example, about 3% to (as high as) 50% of total shipments across all industries are just absolute returns caused in the companies. About 3%-5% of total revenue constitute as a cost of returns, as per research. Understanding the importance of reverse logistics, its neglect in the corporate world opens a chance to generate and accomplish customer relationships and build customer loyalty.

There are many advantages of Reverse Logistics such as financial gains along with social and environmental benefits.

  • It lets a trader collect products from the consumer or drive unsold products back to the manufacturer to be dissembled, organised, reassembled or reprocessed; lessening overall costs for an organisation.
  • Reverse logistics result in increased product lifecycles, diminished supply chain intricacy, sustainable practices and consumer preferences; which have to be improved on to maintain productivity and growth.
  • Gains include retaining customers by refining service goals and meeting sustainability goals.
  • More value can be mined from used/returned goods instead of utilising ineffective manpower, time and costs of raw materials involved in the original supply chain.
  • It also results in enhanced customer satisfaction and loyalty by looking into faulty goods and its repairs.

As compared to its advantages, one may find the following disadvantages too. But keep in mind, these can be removed by proper planning and execution of reverse logistics strategy.

  • If third party logistics are involved, there is a chance of loss of control. It is particularly eminent in outbound logistics where the third party logistics provider does not communicate or interact with the firm’s customer or supplier in depth.
  • Unexpected fees are incurred, like labour cost. Specific costs in this category can be customer relations and service labour costs, financial reconciliation labour costs, warehousing costs among others.
  • Cycle times tend to be longer. It refers to the time an organisation takes to routinely fill customer orders and related activities.

One must understand that reverse logistics plays an important role in the growth of an organisation, whether it’s financial, social or environmental gains. Because, in the end, the real mission of any organisation is ‘Customer Satisfaction’.

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