Understanding Reverse Logistics

Reverse logistics means the process of sending goods back in the retail supply chain. The basis of thinking here is that to have successful supply chain solutions it’s not simply enough to plan your product’s distribution but you must also plan how you can bring it back. This involves not only products returned by customers but also includes obsolete products. If you manage your returns just right it will let you recapture the value of the product or reduce write-offs and at the same time you’ll keep your customers happy and content. A high performance reverse logistics consultant can advise and help you to design, plan and carry-out a reverse supply chain that will support your profit goals and will also provide you with the maximum value of your assets. If everything goes just right this will provide you with the exacting management, resources and technology that are needed in order to increase control and asset recovery, improve information management and also save on administrative time. Among reverse logistics services you’ll find product restocking, recycling and disposal of goods, exchange, unit repair through those popular automated IT systems.

So how can effective reverse logistics services help your business?

It has been proven time and time again that these services work well and effectively no matter if you want to recapture product value or if you want to manage your recycling processes in order to safely dispose of your goods. Keep in mind that integrated services operate on continually global processes to be able to increase brand loyalty in the marketplace. It is strongly advised that you seek these return and repair services from a company which is experienced and has a good reputation. A knowledgeable service provider can help to create additional profit. This must be done continuously throughout the life cycle of the product in question while at the same time minimizing repair and touches which are obsolete in the supply chain. A qualified reverse logistics service provider, such as DMG Freight Services, must also be able to provide you with critical feedback of data from among your supply chain constituents and continuously deliver improvements for not only existing products but also for new generation products and must be able to uncover efficiencies that were not previously identified.

Stepping back a bit to look at the whole picture reverse logistics can be said to be the process of planning, implementing and controlling the capable and cost effective flow of raw materials, in-process inventory, finished goods and other related information from the point of consumption to the point of origin in order to recapture value or make proper disposal. Activities such as re-manufacturing and refurbishing can also be included in this definition. Keep in mind that there is a lot more to reverse logistics than just reusing containers and recycling packaging materials.

How important is reverse logistics?

Look at it this way if no materials are sent back, this activity is most likely not a reverse activity. Reverse logistics includes returned merchandise processing due to damages, restock, seasonal inventory, excess inventory or recalled inventory.

Software Industry

Distributors are constantly trying to cut down retailer returns by making use of just-in-time delivery in the software industry. The problem that often occurs is that retailers overestimate demand. Since software manufacturers most often want the product on the retailer shelves they over-stuff the channel. When compared to its price, the box that the software comes in is low in cost. Due to the need to destroy a huge amount of one software product recently return rates in the software industry were around 20 percent. Another thing that forces returns is the release of more software titles because the product life cycles of those titles are contracting. Due to the fact that their risk is low there are some retailers who are willing to accept software purchase somewhere else. Big named departments attempt to reduce the amount of returns they receive by reexamining channel relationships. There are also retailers who have started setting up return policies that involve 30 days.

Retail Industry

The retail industry is constantly under a lot of competitive pressure and uses return policies as a competitive weapon. It seems that the greater the pressure becomes the more innovative the solutions are. In the retail industry is seems that necessity has become the mother of invention. Since their profit margins are so slim it is of utmost importance for them to have good return management. It was the grocery retailers who first developed such innovations. Reclamation centres then led to the establishment of return centres. Nowadays retailers have consolidated and large retail chains are the rule. They now have a fair amount of power when it comes to the supply chain than before. It has now turned about that large retailers have a lot more power than the manufacturers. There are not many manufacturers that can hold their own against large retailers like Tesco or Asda. If there is a manufacturer that won’t accept returns the large retailer won’t agree to this.

Retailers use a centralised return facility in order to handle returns a lot more often than manufacturers and they are more likely to sell returns to a broker or similar entity. Manufacturers are more likely to recycle or landfill material that is returned than retailers.

Putting it all together reverse logistics practices greatly vary depending on industry and channel position. It is a fact that industries which have a larger portion of operational cost have better reverse logistics systems and processes. In the book industry returns are a great part of profitability. Taking a look at the computer industry the quick handling of returns at this time is looked upon as a critical strategic variable. Retailers who are successful have understood that controlling such things like the reverse logistics effectively will in turn have a positive impact on their company. Those industries which haven’t had to spend a lot of time and energy when it comes to return issues are now attempting to make major improvements. Finally it is now more important then ever before to implement reverse logistics.