Once a product reaches a customer’s hands, it would be easy to think that the supply chain has met its end. However, in some cases, there’s another link that returns the product to the seller or manufacturer.

 

That’s where the concept of reverse logistics comes in.

 

Return, refurbishing, remanufacturing, recycling, and disposal processes all fall under the umbrella of reverse logistics. Paying special attention to this link in the supply chain holds a number of benefits for companies, including higher levels of customer satisfaction and the possibility for recapturing value. Of course, reverse logistics isn’t without its challenges—or, as a supply chain manager might see them, opportunities to increase efficiencies.

 

In this article, we’ll give you a solid foundation on reverse logistics: what it is, how it works, what benefits it offers, and what challenges businesses encounter along the way.

Inbound vs. Outbound vs. Reverse Logistics

Want to learn more about these critical logistics processes—and the differences between them? Check out our other articles on these topics:

  • What Is Inbound Logistics? How Does It Work?
  • What Is Outbound Logistics? How Does it Work?
  • Inbound & Outbound Logistics: What’s the Difference?

Reverse Logistics: Understanding the Basics

What Is Reverse Logistics in Simple Words?

In simple words, reverse logistics is the process of moving goods from the customer back to the manufacturer or the seller.

  • If you buy a shirt and decide it’s not for you, returning it to the eCommerce store you bought it from would be an example of reverse logistics.
  • Or, if you buy a printer that breaks within its warranty period and you send it back to the manufacturer for repair or replacement, that would be another example of reverse logistics.
  • Finally, did you know that bookstores can return books that they don’t sell? That’s yet another example of reverse logistics—returning unsold goods to a distributer like Ingram, which supplies books to brick-and-mortar bookstores all over the country.

So, Reverse Logistics Is About More Than Just Returns?

Yes! Returns, remanufacturing, refurbishing, returning unsold goods, recycling, and end-of-life recapture of goods are all part of the reverse logistics process.

 

For a supply chain manager, all of these scenarios come with processes and procedures to optimize and streamline. A supply chain manager will scrutinize the entire reverse logistics process, including:

  • How these items make their way back to the supplier/manufacturer
  • How they’re received at the warehouse
  • How they’re evaluated
  • Whether they can be refurbished, remanufactured, and resold—or whether they should be recycled or disposed of

In short, when it comes to creating an efficient and effective reverse logistics process, there are numerous elements for a supply chain manager to consider.

 

How Does Reverse Logistics Work?

Reverse logistics processes are as varied as the businesses that engage in them.

 

First, the goods have to make their way back to the seller or manufacturer. Some companies offer customers the option to send items in for return, repair, or recycling by mail. Others may offer drop-off points at retail outlets. In still other cases, a company might be willing to come out to remove a piece of machinery and haul it back to their service center for repair. Often times, these processes are paired with some kind of tracking system so customers can monitor the status, if needed.

 

Once the goods return to the seller/manufacturer, they’re evaluated to determine the next step. Can they be resold? Repaired? Refurbished and resold? Or do they need to be recycled or otherwise disposed of?

 

Items that can be resold may be relisted almost immediately and put back into the supply chain. Items that can be repaired or refurbished will be sent to the appropriate parties for any necessary work before being returned to the supply chain. And items that need to be recycled or disposed of will be sorted accordingly.

For all of these processes, the devil is truly in the details. How each company tackles each step will differ widely, based on the industry, the company’s infrastructure, and the company’s goals.

What Is an Example of Reverse Logistics?

Apple’s Trade In program is a great example of reverse logistics. Apple invites consumers to bring their old Apple device to an Apple Store or mail it in for credit toward a future Apple purchase. Devices that no longer hold value are recycled for free.

 

Apple then moves the devices to a five-robot assembly line, called Daisy, which breaks down the devices into their components. Pieces that can be reused are separated out, as are the pieces that can be recycled.

Patagonia’s repair program also offers another interesting example of reverse logistics. The clothing manufacturer accepts repair requests via mail.

 

Consumers pay the shipping cost to send the item to Patagonia, which will evaluate the item and repair it, if possible. Patagonia often covers the cost of the repair and the return shipping.

Finally, if you’ve ever bought something online and returned it, you’ve touched the return logistics process, whether you brought the return to a brick-and-mortar store or mailed it back in.

The Benefits of Reverse Logistics

Although it’s rare these days, there are some companies that simply don’t take things back, no matter what. Although it might feel like a way to simplify a supply chain, companies that don’t engage in any reverse logistics could be missing out.

Below, you’ll find the key benefits of optimized reverse logistics processes:

Customer Satisfaction

A “no returns” policy isn’t one that inspires consumer confidence—or purchases. In fact, the department store Nordstrom built their empire on their famously liberal return policy. The online retailer Zappos gained a serious foothold with their free and easy returns. In other words, offering returns—and easy ones at that—is a way to win not just customer satisfaction but also customer loyalty.

 

Additionally, offering options for repairs bolsters consumer confidence—and satisfaction. If Patagonia is willing to stand behind their products enough to repair them for free, their higher price might seem more than worth it. Additionally, for specialized items like Suunto dive watches, offering a repair process means you know you’ll have somewhere to turn if things go wrong, removing another potential barrier to a $300-$1,300 purchase.

Alignment with Sustainability Practices

Reverse logistics are also a pathway for companies to enact sustainability practices. eWaste within landfills is a real problem, and Apple’s Trade In program offers consumers an easy way to dispose of electronics properly.

 

The rise of fast fashion has also led to tremendous waste in the fashion industry. Patagonia’s repair program keeps items out of landfills longer. Clothing manufacturer Lululemon runs a trade-in program that allows customers to bring used clothing to a store and exchange it for store credit. The company resells these items in the Like New section of their website, giving each individual piece a longer life.

 

In other words, for companies with environmentally conscious customers, reverse logistics offers a visible way to commit to sustainable business practices.

Future Improvements

Taking back items from customers can also offer companies significant insights into creating better business practices. An excess of returns for a single style of clothing could be the impetus for a change in direction. A number of refurbishments could lead to an improvement in manufacturing, eliminating the problem altogether.

 

In other words, receiving and analyzing products that make their way back can offer an organization the opportunity to make improvements in the design and manufacturing process to prevent these challenges in the future.

The Possibility to Recapture Value

Finally, reverse logistics offers companies a compelling opportunity to recapture value.

Apple reuses many of the components it receives from its Trade In program. In fact, in 2021, 20% of all material used in Apple products was recycled. Even eCommerce giant Amazon either resells returns or sells them in bulk to liquidators, allowing them to recapture value.

The Challenges of Reverse Logistics

Despite all of the benefits, reverse logistics isn’t without its challenges. As they consider their reverse logistics processes and procedures, supply chain managers have to consider the following potential speed bumps in the road.

 

Profitability

Reverse logistics processes can quickly put a strain on a company’s profitability. Ever have an eCommerce company tell you to just keep a product after they’ve processed your refund? That company judged that the value they could recapture from your return would be less than the cost to move that product through their reverse logistics process. It’s a tricky balance.

 

After all, the reverse logistics process includes more than just the shipping. It also involves the receiving of those items at a warehouse, evaluating them, and processing them for their next stage—repair, resale, recycling, or disposal—all of which comes with costs.

 

Profitability Spotlight: Patagonia Repair Program

You may have noticed in the example above that Patagonia asks customers to pay their shipping cost to the repair facility. That’s just one way of managing the costs associated with reverse logistics: asking the customer to chip in. Additionally, having to pay the cost of shipping ensures that consumers aren’t simply sending in any old thing, keeping repair requests—which cost Patagonia money—more limited.

Supply chain managers are always balancing the cost of reverse logistics against the benefits, including customer satisfaction. If they’re not careful, the cost of reverse logistics can eclipse the upsides, which puts a business in a precarious situation.

 

That’s why automated processes, like Apple’s Daisy, can be so critical to the reverse logistics process. Although Apple does use human pickers farther down the line, having a robot do the bulk of the work saves Apple a significant amount of money.

 

Processes, Procedures & Infrastructure

The other challenge supply chain managers face is setting up the right processes and procedures to handle reverse logistics efficiently—including the necessary infrastructure.

This includes things like:

  • How will customers request a return, repair, etc.? Does the company have existing software that can handle these requests, or will they need to make a new investment?
  • What kind of tracking information will be provided so customers know the status of their request?
  • How will these items be received and processed at the warehouse? Can automation, like Daisy or Soft Robotics’ SuperPick Polybag Picking System create efficiencies?
  • How will items be evaluated for repair vs. recycling/disposal?
  • What’s the repair/refurbishment process?
  • How will eligible items be returned to the supply chain? Does the organization already have a process in place for refurbished/previously owned items, or will one have to be created?
  • Who will manage the customer service aspect of these processes, in case customers have questions, complaints or feedback?

Of course, these questions just scratch the surface. A supply chain manager would look at every aspect of the reverse logistics process in detail to uncover the most efficient—and effective—solutions, protecting the company’s profitability.

Of course, rather than handling these items in-house, there is another possibility.

Can a Company Outsource Their Reverse Logistics?

Absolutely. There are plenty of third-party logistics (3PL) companies that handle reverse logistics. Of course, outsourcing such an important function means carefully aligning with your 3PL to ensure that you’re on the same page in terms of customer-facing policies, refurbishing/repair procedures, recycling/disposal protocols, and more.

 

In other words, you’ll still have to put some work in to ensure that the customer experience is seamless—and that the relationship with your 3PL achieves your business goals. Ultimately, you may find it significantly easier to let your 3PL handle the nitty-gritty, day-to-day details of reverse logistics.

Optimizing All the Links of Your Supply Chain

Reverse logistics is a key element of the supply chain, one that can win you more customers, help you recapture value, and execute on more sustainability practices. However, like all of the links in your supply chain, reverse logistics processes also need to be optimized in order to protect your company’s bottom line and reputation.

 

Need some help with your reverse logistics? We’ve helped our Pacific freight customers create cost-effective reverse logistics solutions, and we’d be happy to help you. Just reach out for a complimentary consultation to get started.

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