Reverse logistics (RL) is a process that refers to the organisational framework and arrangement following the sale. Basically, we’re talking about supply chain management after the product has been delivered to the consumer. In this regard, RL is focused on deriving value from a product that has already been “used” or delivered. As a result, strategists in reverse logistics focus on deriving value in reusing products, ethical disposal measures and breaking down complex products to form smaller products that may have value in other markets. Naturally, this form of supply chain management could be lucrative for many businesses. Let’s check out why!
A brief overview of reverse logistics
It’s important for businesses to recognise the utility of evaluating the use and value of their goods post service. This is because some goods can be returned by the customer for several reasons. A customer may decide to return a good (possibly because it was incomplete or defective). Well, that doesn’t mean that this good had no value anymore. In fact, if it is a comprehensive good (consisting of several components), then it certainly still has value. You can break this product down and extract the effective components that could be sold or re-used in other products.
Lower profit losses
Reverse logistics can also help your business reduce any profit losses. Large, global companies often lose thousands of dollars a year because of defective and unfinished products. Effective RL systems can reduce these losses, since companies can focus on fixing failed products, restocking your units and repurposing your products for secondary markets. A lot of these products could be broken down into smaller parts and valuable in other markets. You won’t have to worry about those “useless” products costing you money; instead turn those products into company assets.
Improved cost efficiency
Furthermore, reverse logistics can also help improve your cost efficiency and cost structure. RL regimes can help your business plan for returned products and how to handle these products in your supply chain. Having a clear plan will ensure that all your transportation charges (like shipping costs), general admin costs and tech support requirements can be implemented succinctly.
Another benefit of RL is that it can help your business deliver high-quality customer service and, ultimately, exceed customer expectations. It’s a lot easier to reimburse customers for faulty goods if you have effective reverse logistics systems in place. Moreover, it can help you pinpoint where the flaw in production is occurring and subsequently deal with the problem to prevent it happening in the future.
Stronger customer loyalty
By delivering on your customer experience objectives, your brand equity power will also significantly improve. If a customer has a poor experience with a product (e.g. damaged, late or incomplete order), they are very likely to return the product. Problems with procurement should be viewed as a learning experience, not solely a poor aspect of business performance. Making sure your customers are content and committed to your brand is a big part of long-term success. They want to be able to rely on your brand and feel comfortable purchasing your products. Make it easier for them by having effective reverse logistics and reimbursement policies.
How to measure?
Measuring reverse logistics systems can be a difficult process. One mechanism of evaluation is volume – are you noticing specific products being returned in large quantities after purchase? If the answer is yes, then there is probably a big problem with your production line. Likewise, if some of your products are showing recurring signs of similar defects, you probably need to improve your quality assurance and monitoring systems. All of this can be solved with reliable RL programs.