SHIPHERO BLOG

A Guide to Reverse Logistics

In eCommerce and retail, reverse logistics can be a complicated concept to wrap your head around. But understanding this process isn’t just crucial for warehouse managers—it’s absolutely essential! To show you how easy it is to get into gear with reverse logistics, we’ve crafted this comprehensive guide full of helpful tips, tricks, and advice on everything from streamlining returns to optimizing inventory flow. Read on if you’re ready to make reverse logistics work in your favor!

In eCommerce, returns aren’t just about the refund – it’s also about how long it takes to process those items. With labor shortages, retailers are feeling the pinch more than ever. According to eCommerce statistics gathered by the National Retail Federation and Appriss Retail, return merchandise was worth a whopping $816 billion last year – without any change in the average rate of return of 16.5%. But don’t panic just yet! Investing in a WMS (Warehouse Management System) for reverse logistics can help warehouse managers separate physical returns from accounting while contributing to sustainability and financial health. 

What is Reverse Logistics?

Reverse logistics sounds like a spaceship’s reverse engineering, but it refers to the work done after something has been sent out for consumption. So when you return that shirt you never wore, dispose of some sort of electronic device, get things repaired and shipped back, or recall products due to an issue – that’s what reverse logistics is all about. It’s what happens when something goes awry between point A (source) and point B (consumption).  

Whether it’s eCommerce returns solutions or something else, reverse logistics helps companies make the most out of what they do not want – by recovering resources to maximize worth and minimizing the environmental costs associated with returned products and materials. It can also delight customers by providing satisfying exchange and return options due to its efficient nature.

How Reverse Logistics Works

Reverse logistics is vital to the success of eCommerce returns. The process includes multiple steps, with careful planning and coordination necessary to maximize efficiency and minimize costs. Despite its complexity, it offers a great opportunity for businesses to cut costs while improving customer satisfaction and brand loyalty. The general steps in reverse logistics are:

  1. Product Returns: Getting returned products from customers or retailers is the first step in reverse logistics. Returns are then categorized by condition, the reason for return, and destination.

  2. Inspection and Assessment: Following the return of products, they are inspected and assessed to determine whether they can be resold, refurbished, recycled, or disposed of. By identifying the value of returned products, you can choose how to handle them.

  3. Refurbishment and Repair: Generally, if returned products need minor repairs or refurbishment, they can be repaired and made ready for resale or reuse. In this step, the products are repaired, cleaned, and repackaged to make them sellable again.

  4. Recycling and Disposal: Recycling or disposing of returned items may be necessary if they are damaged, expired, or unsellable. During this step, the products are separated into different waste streams and disposed of responsibly.

  5. Logistics and Transportation: Logistics providers can coordinate with repair centers, recycling facilities, or resale channels to ensure the products are delivered to the appropriate locations.

Types of Reverse Logistics 

There are several types of reverse logistics, each designed to handle a specific aspect of the product lifecycle and recover value from returned products. Some common types of reverse logistics include:

  • Returns Management: In this process, we handle returns from customers or prevent returns from happening in the first place.

  • Return Policy and Procedure (RPP): RPPs are the policies about returns a company shares with its customers.

  • Remanufacturing or Refurbishment: Remanufacturing, refurbishing, and reconditioning involve repairing, rebuilding, and reworking products.

  • Unsold Goods: For unsold goods, reverse logistics handles returns from retailers to manufacturers.

  • End-of-Life (EOL): EOL means a product is no longer useful, doesn’t work, doesn’t meet a customer’s needs, or is replaced with a newer version.

  • Delivery Failure: Whenever a failed delivery occurs, drivers return the product to sorting centers, who then return it to the source. 

5 Rs of Reverse Logistics

The 5 Rs are principles that help businesses maximize returned products’ value while lowering supply chain waste. By following them closely, companies can recover assets from formerly unusable goods and reduce the environmental impact on our world! Let’s dive into each one.

  1. Returns: Managing product returns includes issuing return authorizations, receiving and inspecting returned products, and managing the reverse flow of products.

  2. Recalls: Due to government regulations, recalls are often a more complex way to return products.

  3. Refurbishment: Refurbishing means repairing, cleaning, and repackaging products. It extends product life, reduces waste, and recovers value.

  4. Repackaging: What happens when customers return products because they’re unhappy with them, not because they’re defective? Usually, repackaging the product will allow it to be resold.

  5. Recycling: A recycling process takes old products and recovers raw materials. The process involves separating and processing products into their constituent materials, which are then used to manufacture new ones.

Reverse Logistics Examples

Reverse logistics are an ever-present force in many industries, offering clever solutions to secondhand parts and products. Take retail, for instance; when products are returned, reverse logistics allow companies to resell, refurbish, and recycle them. Electronics and automotive fare similarly – the former has remanufacturing and refurbishing at the ready, while the latter’s reverse logistics often take the shape of remanufactured auto parts.

In the food sector, reverse logistics use waste to create compost and animal feed. As for healthcare, reverse logistics may take back unused or expired medications from pharmacies, and apparel companies reclaim used clothing for resale, renovation, and recycling.

Importance of Reverse Logistics to your Business

Reverse logistics are proving to be an invaluable approach in business today. By taking a mindful second look at the supply chain, companies can reduce waste while improving operations and sustainability – giving their bottom line the boost it deserves.

  1. Cost Savings: Businesses can recover value from returned products with reverse logistics, reducing return, disposal, and replacement costs.

  2. Environmental Sustainability: Companies can reduce and improve their carbon footprint by implementing effective recycling and refurbishment processes with reverse logistics.

  3. Customer Satisfaction: By facilitating the efficient return and replacement of products, reverse logistics can improve customer service, satisfaction, and brand loyalty.

  4. Competitive Advantage: A well-developed reverse logistics strategy can give your company a competitive edge.

  5. Regulatory Compliance: Reverse logistics can help companies comply with regulations related to the disposal of hazardous materials, the handling of electronic waste, and other environmental regulations. 

Returns are Costing you – Save with ShipHero.

Reverse logistics doesn’t have to be a daunting task. A comprehensive, well-integrated WMS can significantly benefit companies looking to minimize their environmental costs while maximizing the value of their returned products. Handling the physical and accounting processes separately is key as it reduces time and improves efficiency for warehouse managers and customers.

When considering a WMS explicitly designed for reverse logistics, look at ShipHero. Leveraging a powerful cloud-based system, ShipHero can simplify your reverse logistics operations and get you one step closer to success. So if you’re ready to upgrade your WMS to ShipHero, don’t hesitate – let’s make something great happen together!

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Aaron Rubin, Founder & CEO – ShipHero 

About the author:  Aaron Rubin is the Founder & CEO of ShipHero. He is responsible for planning and executing the overall vision and strategy of the organization. Rubin’s greatest strengths are leadership, change management, strategic planning, and a passion for progression. He is known for having his finger on the pulse of ShipHero’s significant initiatives, entrepreneurial spirit, and keen business acumen. His leadership of ShipHero is grounded in providing excellent customer service that drives improved business operations. His passion for ShipHero comes from the culture and his ability to impact the lives of employees, customers, partners, and investors.

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