Key Takeaways:
- Reverse logistics refers to the process of returning items to you or an authorized disposal agent.
- This process varies widely, depending on the industry and reason for the return, but can involve repair processes, lease returns, excess goods and more.
- Having a dedicated team and space for reverse logistics makes it easier to handle returns without any confusion.
Getting a product to a customer is what drives our economy. Even though many industries are service-oriented, there are still billions of physical products moving around the world every day.
For some industries, reverse logistics is a necessary process. Even if your industry rarely has returns, you need to have a process in place for defective goods or packages that are returned to you before they even reach the customer.
What Is Reverse Logistics?
Reverse logistics is the process of getting goods from the customer back to the distributor or to a disposal facility the distributor designates. However, reverse logistics takes place for various reasons, including returning excess goods, refurbishing or making repairs, ending leases and safe disposal.
Reverse logistics is a broad subfield that includes a variety of shipping, sorting and processing steps. Each situation requires a different approach to reverse logistics, including shipping and storage, depending on the type of product and volume of returns received,
Returning Excess or Incorrect Goods
Although returns cut into your profits, they are a necessary part of business. A well-designed return policy is the backbone of any reverse logistics operation, especially if returned items cannot easily be resold.
Ideally, a customer contacts you before attempting to send an item back. However, your team needs to be prepared for items to show back up unexpectedly. You need to have a place and process established for sorting through returns, even if your policy does not usually allow them.
In some cases, you may have a contract with a customer that you know will likely involve some returns. This may be the case for agile supply chains or other supply chain models where the customer has to respond to market conditions and customer demands at the last minute. These situations make it easier to plan for and resell the return items, including providing the customer with shipping barrels and other essentials for a safe and convenient return.
Keep in mind that because of the logistical cost associated with returns, it’s normal to charge a small restocking fee for them that isn’t due to damage or recall. Refunding the customer with or without this fee is also part of the reverse logistics process and needs to be handled promptly.
Ending Leases
In addition to cars and property, leases are a popular option for heavy equipment, specialized machinery and more. At the end of the lease, the customer usually returns the equipment to the retailer but sometimes has the option to buy it.
The reverse logistics process for leased equipment could include retrieval, cleaning, maintenance, inspection and preparation to sell it to another customer. This process is even more complex for larger items that require special shipping and transportation. Items that contain or come into contact with hazardous materials likely have special considerations for transporting.
Since the end-of-lease return process could include the return of damaged goods, you need to have a strategy for handling inspections promptly. Following up with the customer about additional fees is part of this process and usually must be done within a specific time frame under law or per the terms of the lease agreement.
Maintenance or Repairs
Repairing and then returning a defective good is also potentially part of the reverse logistics process. If an item is inexpensive and not custom-built, it may make sense to send out a replacement and dispose of the defective product. However, many industries either refurbish the product and sell it at a slight discount or repair it and send it directly back to the customer.
In the case of long-term leases, you may need to bring equipment in for repairs occasionally. Items that are in for maintenance or repairs need to be carefully tracked to ensure they are later sent back to the right customer. In many cases, this is best accomplished with a barcode or QR code directly attached to the item as soon as it arrives at your facility.
Also, have a plan in place for more specialized repairs that your team can’t handle alone. Although this often results in repairs being more expensive than the item is worth, in some cases it may still be worth it to bring in a specialized contractor to help. In these cases, consider hiring someone to train your team members on how to do the repairs themselves.
Small- or Large-Scale Recalls
In the rare case that items need to be recalled, the reverse logistics challenges can become immense. Depending on the number of items being recalled, your team might need more warehouse space than you have available. You may even need to dispose of large quantities of the items, especially food and other perishable goods.
You also will need to be prepared for the possibility that some customers or stores send back items unaffected by the recall. Having a policy in place for handling these returns is essential to keeping them from getting mixed in with the recalled items. Be prepared to contact these customers and send the item back to them immediately to maintain customer satisfaction.
Recalls usually require reimbursement to the customers for the price of the item and the cost to ship it back to you. Providing shipping boxes and pre-paid shipping labels is one option for making the process as simple as possible, but this may not be possible for customers who bought their item in person and have limited technology access.
Get Shipping Barrels and Other Essentials for Your Overall Logistical Needs
Refurbishing Used Goods
Refurbishment is most common with electronics and equipment, such as warehouse racking and other large storage units. It requires your team to go over every inch of the item and make sure that it is in like-new condition. For electronics, thoroughly erasing and resetting the hard drive is also part of the process.
It’s easy to set up an assembly line process for receiving, inspecting, reformatting and repackaging electronics and equipment. If customers receive compensation or refunds for turning in their used electronics, you need to decide how and when to process that payment. For example, you might need to establish a policy that those payments will only be made after the product undergoes an initial inspection for damage.
After that, your items need to be cataloged and sealed in packaging that establishes it is a refurbished item instead of a brand-new one. Instead of using a color-coded system that only your staff understands, consider including the words “refurbished item” on the label to help ensure your customers understand the product they have received. Any cosmetic damage or missing components should be carefully logged in the inventory software used to track your products.
Proper Disposal
Some items that are difficult to recycle or which can be harmful if disposed of in landfills may require specialized recycling plans. Electronics are a typical example of this, but there has also been a large push for retailers to provide recycling for printer cartridges and device batteries in recent years.
The best process for disposal will partly depend on local and federal laws. In some cases, you may have to partner with a third-party company specializing in this type of disposal or recycling. However, you can include the cost of recycling or disposal in the initial price quoted to your customers and include shipping materials in the product packaging if the product is small enough.
Recapturing Value
Some products aren’t good candidates for traditional refurbishment but may still have value. This can include electronics that have reached the end of their useful lifespan but contain expensive metals that can be reclaimed.
Retrieving these internal parts can take time and energy but may be well worth it. Your team needs to have a streamlined process for assessing each item and deciding whether it’s worth taking apart for salvage.
In some cases, individual parts can be recycled into a new product without compromising the product’s lifespan. Instead of being a traditional refurbishment, this process is more like recycling. It requires careful inspection, cleaning, repairs or melting down and reforming the metal or other material to meet the needs of the new product.
To recapture any value, the reverse logistics process must be performed as efficiently as possible. This means using staff who are well-trained in completing tasks as quickly as possible and minimizing the required actions and potential outcomes.
Minimizing Work for the Customer
Even customers who understand the nature of business and logistics don’t want any more hassle than necessary. To keep their business over the long term, you need to streamline the process as much as possible, even if it’s a voluntary return in accordance with your company policies.
This includes providing hazardous material labels and any other required packaging for the customer to return the goods with. You can build the cost of materials and return shipping into each initial purchase to avoid surprises for your customer.
Make sure that all this is communicated to the customer, ideally at the time of purchase. If a customer does not know the proper steps for returning an item, they might box up and return the item without waiting for further instruction from you. This can result in confusion or even damage to the item during the reverse logistics process.
Logistical Needs
Having a dedicated space for returns, repairs, repackaging and other reverse logistics steps is essential for keeping your facility running smoothly. If you keep your returns and damaged products in the same area as your new products, you may inadvertently send a customer an imperfect product.
As soon as possible, separate the returns and other reverse logistics shipments from the incoming raw materials and other supplies.
Make Sure Your Shipping Materials Are Ready for Any Scenario
Having a Dedicated Team
Your reverse logistics workflow will work best if it has one set of people dedicated to managing it. This team can focus their time and energy on just one department instead of bouncing back and forth to handle returns and reverse logistics on an as-needed basis.
This might not be possible for small businesses and startups working with a small group of people. In these cases, have one or two people who are the designated contacts for returns and who can step away from the main team to handle returns and reverse logistics as the need arises.
Common Problems in Reverse Logistics
One of the most significant problems in reverse logistics is the high cost. This can potentially affect any stage of the reverse logistics process, from refurbishments or repairs to repackaging. Startups, in particular, may struggle to streamline these operations, but even larger businesses don’t always develop a cost-efficient reverse logistics system right away, especially if there are seasonal spikes in returns.
Fraud or inappropriate reasons for returns can also be a major issue in some industries. Retail return is not common overall, but big-ticket items like designer clothes and electronics may be targets. Restocking fees and tamper-evident tags can help keep fraudulent returns from clogging up your reverse logistics operations.
You also need a seamless way to enter returned undamaged items back into inventory. Most sales and inventory software makes this easy, but repackaging and returning the item to the rest of the stock is an extra step that your staff needs to keep track of.
Addressing these problems requires a close look at the financial and logistical demands of your company. Even having a solid team and dedicated space for handling returns isn’t always enough, especially if you have a huge range of products that require refurbishment or repairs.
Being as Prepared as Possible
It’s impossible to account for every scenario in reverse logistics, especially if you sell goods to a wide range of customers at any given time. It’s best to be prepared with a set of policies in place and a manager or supervisor in charge of making the call when a new situation arises.
Packaging needs are a huge part of reverse logistics, especially if you handle liquid or hazardous materials. Air Sea Containers is always ready to be your partner whenever you need packaging and storage supplies to keep yourself, your team and your customers safe.
We stock a huge range of shipping barrels, cardboard boxes, shipping labels and more. Contact us anytime if you have questions or need to place a specialized order to meet your logistics needs.
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