Reverse Logistics
Operating a business has been a struggle for many people, thanks to the financial crisis that happened in 2008. Because of the crisis, many large and small companies had to limit their expenses and halt expansion. As a result, many businesses were unable to keep up with the changing economy, and some began shutting their doors permanently.
Furthermore, there is a huge concern that pollution and global warming pose a threat to the environment.
Now, businesses are facing a new challenge, the current COVID-19 pandemic. The pandemic has impacted how businesses operate, leading to a decrease in profit and permanent closure.
Despite these challenges, some businesses have found a way to persevere thanks to reverse logistics. We will go into more detail about what reverse logistics is and how it works.
The Difference Between Reverse Logistics and Regular Logistics
Before we learn what reverse logistics is, we must understand what traditional logistics means. Regular logistics or forward logistics is the procedure of transporting raw materials to consumers.
The process includes product development, material sourcing, manufacturing, transportation to distribution centers, and the final destination to the consumer. The method of forward logistics is initiated by customer demand.
Reverse logistics, sometimes known as green logistics, is the process of transporting products from their final destination to capture usefulness or proper disposal. The goods move from the consumer to the distributor to the manufacturer.
Basically, reverse logistics involves returns and recalls, repairs and refurbishment, repackaging for restocking or sale, recycling, and disposal. Unlike traditional logistics, the process of reverse logistics is initiated by the supply of a product. Companies like Gilbert International oversee reverse logistics and support both distributors and their consumers.
Detailed Process of Reverse Logistics
Let’s dive deeper into the process of reverse logistics. According to the Supply Chain Resource Cooperative of North Carolina State University, retrieving a product is the first step. The quality and the quantity of a retrieved product must be systematized with other distributors and consumers. The product undergoes transport to a central location, where it is examined and sorted.
During the examining and sorting process, set procedures to determine what products can be saved, reworked, remanufactured, resold, or disposed of. In some cases, automatic tracking or testing systems help with sorting. Some parts of a product are restored to good condition, while others are either recycled, resold for parts, or discarded.
Companies sell reconditioned products once the items meet certain specs. The refurbished product market sells both to direct customers and companies that need more affordable wares.
Types of Reverse Logistics
There are multiple reverse logistics methods, depending on the product’s condition and the retailer’s goals. Here is a detailed list of the most common types of reverse logistics.
Returns
Product returns happen when consumers bring back a product that they had purchased to the retailer. Returned products are usually ones that are faulty, damaged, obsolete, seasonal, unable to meet expectations, or represent excess inventory. As a result, retailers can either refund money to the customer or can exchange the returned product.
Returns Avoidance
Returns avoidance is the process of limiting the number of returns. Companies accomplish this through collaborating with repair shops and support websites. Another option is providing a return allowance, which means companies let customers return a limited number of goods.
For example, the electronics retailer Best Buy offers customers 24/7 support to answer troubleshooting questions regarding various products that have been purchased through its subsidiary Geek Squad. Furthermore, Geek Squad offers repair services to customers to prevent the possibility of customers returning products.
Remanufacturing
Some companies will take previously purchased, aged, or non-functional items or parts and restore them to a suitable condition for purchase again. This process is called remanufacturing. The process of remanufacturing includes:
● Product Collection● Identification & examination● Product dismantling● Reconditioning and replacement● Reassembly● Quality assurance and testing
Remanufacturing is common in companies that specialize in electronics, automobile parts, office furniture, printing equipment, medical equipment, and food services equipment.
Refurbishing
Many people believe that refurbishing is the same as remanufacturing, but there is a huge difference. While remanufacturing restores a used item to quality condition, refurbishing doesn’t involve the thorough process of making an item like new.
Refurbishing is the operation of upgrading old or updated products to meet new specifications and standards. It exclusively involves testing for functionality and defects and verifying the product to function properly.
After an item is tested and verified, the manufacturers improve its appearance and performance. During the refurbishment process, the product is never dismantled. The product is then returned to the retailer to be sold again.
A product can also be considered as refurbished if it applies to one of the following circumstances:
● Used in field tests, sales displays, and demonstrations.● Returned for reasons besides defect, and checked by the manufacturer.● Returned to the manufacturer because the box or item was damaged during transport.● Used and donated to a charity or non-profit organization.● Leftover equipment offered by a downsized company to a 3rd party refurbisher.
Packaging
This type of reverse logistics is the easiest to follow but the least likely to be considered as reverse logistics. In this category of reverse logistics, the packaging is reused instead of being sent to the landfill. For example, milk delivery companies advise customers to return empty glass milk bottles for reuse.
You may wonder why this is important. Well, The Environmental Protection Agency states that in 2018, 30.5 million tons of containers and packaging went to landfills. Landfills emit toxins, which can penetrate through the soil and groundwater, causing pollution. There is also a release of greenhouse gases from landfills, which is the main contributor to global warming. With reusable packaging, a company can reduce packaging waste, labor and transportation costs, and inspection.
The packaging typically involves a durable material such as plastic, steel, wood, glass, or polypropylene fabric. Durable materials prevent products from becoming broken or damaged and eliminate the need for plastic airbags or foam peanuts. Reusable packaging also protects workers from getting hurt while lifting due to its ergonomic design and features such as handles.
Unsold Goods
If there is merchandise that does not sell, some companies discard or destroy it. However, in reverse logistics, companies return unsold products to distribution centers and warehouses. The benefit of returning unsold products is that companies can carry more stock due to the repetitiveness of products becoming obsolete.
End-of-Life
When a product is no longer considered usable, the retailer stops advertising, selling, and providing services or software to the product. Electronics companies are an excellent example of end-of-life. In most cases, companies stop providing product support for electronic products such as computers and smartphones.
In reverse logistics, an end-of-life product is returned to the manufacturer to be reused or recycled.
Delivery Failure
There are some instances where products fail to be delivered. As a result, the products return to a distribution center or a retail store. The following factors can cause failure to deliver:
● Customers declining to have merchandise delivered to their homes due to buyer’s remorse.● The customer is not at home● Wrong address● Delayed delivery
Rentals & Leasing
Some companies will rent or lease goods to their customers, such as automobiles, cleaning equipment, and electronics. Before a customer can rent a product, companies must examine and verify whether or not a product is good for use. If the product is no longer good, then it gets recycled.
Repair & Maintenance
Companies will send returned products to manufacturers if the minor defects or damages are reasonably simple to address.
The Advantages of Reverse Logistics
The first advantage of reverse logistics is that it creates a strong relationship between the business and its customers. That’s why Gilbert International is passionate about addressing this step in the product to consumer chain. Businesses can learn about their customers and that customer’s concerns about a purchase. Then, the organization can expand on the relationship with their consumers by addressing reverse logistics scenarios.
Sometimes, businesses can repair or replace damaged goods, which increases customer satisfaction and loyalty. Businesses can also learn how to improve their customer service by allowing customers to provide feedback on why they decide to return a particular product, even if it’s not defective.
Another advantage of reverse logistics is its positive impact on the environment. Used merchandise that is still in good condition can be restored and sold again to other customers. Furthermore, items that aren’t suitable for resale can be disassembled so that the usable parts can be recycled. Therefore, reverse logistics reduce harmful emissions and energy use.
More people are leaning towards sustainability and are willing to give their money to eco-friendly companies. Because reverse logistics adhere to environmentally friendly principles, it can boost a company’s reputation with the public.
It is expensive for companies to buy new supplies for producing merchandise. However, reverse logistics decreases the supply cost because it provides companies with more raw materials from products that have been returned.
The Downside of Reverse Logistics
With benefits, there are some challenges when using reverse logistics. The main disadvantage is that reverse logistics is usually complex and uncertain. Retailers are unable to see which products are heading back to the store, and they may not be aware of a return until it arrives at the warehouse. Therefore, retailers receive little to no information about handling and processing items that return in multiple shapes and conditions.
Companies who Practice Reverse Logistics
There are various industries that practice reverse logistics. Outlet stores are an excellent example of reverse logistics because they prevent accumulations in warehouses by taking products that were in line to be destroyed and giving them another chance to be purchased.
Some grocery store chains will allow their customers to return empty plastic containers. The companies will then sterilize the containers and use them for shipping new orders out to consumers.
Pharmaceutical companies and drugstore chains make sure that they remove any expired medicines from the shelves. Some drug stores even have a medication disposal program where customers can drop off their expired prescriptions for delivery to a disposal center.
Here are some well-known companies that practice reverse logistics:
● Dasani provides bottle bins to facilities such as schools where people can dispose of empty Dasani bottles.● Apple provides discounts for new items to customers who turn in old items. Old items are sent to factories to be used for making new products.● H&M has a program that allows customers to donate used clothing regardless of brand or condition. The clothes are used to create an eco-friendly clothing line.● UPS allows customers to reuse boxes for transport items and will pick up and properly dispose of unwanted items.● Volvo retrieves and dismantles vehicles, sells used metal, plastics, and car parts.● Zappos allows customers to order any style, color, or size of shoes, try them on, and return the ones they don’t want through a 365-day return policy.● IKEA allows customers to return furniture, fabrics, light bulbs, and plastics. IKEA either resales the items or recycles them.● Nike takes back tattered shoes and recycles them to make a Nike Grind, which is used for basketball courts, tracks, turfs, and more.● Coca-Cola reuses glass bottles and restores them before returning them to the market. They also recycle broken glass bottles.● Johnson & Johnson recalled products that caused preventable medical emergencies from every store.● General Motors allows car parts to be returned to a single facility using the automotive company’s shipping labels.
In Closing
Reverse logistics play an important role in how businesses operate and how they impact the environment. Despite the current economic struggles caused by the recession and Covid-19, reverse logistics can help save companies from permanently closing their doors by cutting down expenses and boosting profit. Companies can also expand their clientele with a heightened awareness of economic issues and close attention to customer service.
At Gilbert International, one of our specialties is reverse logistics. If you are interested in adding reverse logistics to your business or learning more about other industry-specific topics, contact us today.