Reverse Logistics is operationally related and focuses on adding value to the reversal procedure of a supply chain.Or the flow of a product from a customer to the manufacturer is considered as reverse Logistics.
Hence we could say reverse logistics is the “Operational process of planning and executing of the reverse flow of products in a cost-effective and efficient manner.
The Council of Supply Chain Management Professionals defines reverse logistics as “The process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.”
What are the reasons for Reverse Logistics?
There could be reasons like below for a product to flow from a customer to the supplier.
- Warranty claims
- Reuse of packaging
- Unsold goods
- Delivery Failure
- Repairs & maintenance
Businesses have identified the prominence of the reverse logistics for the sustainability of the company by confirming “Selling is not the end.. It’s the beginning”. The reverse flow could includes raw materials, work in process materials and finished goods. Every item in reverse logistics ended up with a value addition or disposal.
Return of defective goods, recycling of paper, plastics for remanufacturing are commonly followed activities, yet the concept of reverse logistics and well organised procedures for mentioned activities were introduced recently to the commercial world.
A research study conducted by the University of Nevada, Reno highlighted the concept of reverse logistics has not gained much attention in early decades as it was not identified as an important function, and lack of understanding on the right system.
It is obvious that even the reverse logistics management system is well effective, it is a cost to the company. Company has to arrange re-shipping, if the product is defective refund the payment, damages to the brand image are some of the cost involved in reverse logistics.
Yet, it will increase customer satisfaction and, loyalty towards the brand by establishing a strong relationship with customers.
A company with a closed loop supply chain does not have items to throw away. These companies have well established reverse logistics system with zero waste. A closed loop supply chain does not release materials to the environment after use and instead send them for proper disposal.
An effective reverse logistics system could add values to the company in un-recognised angle.
A company can easily analyse which products have returned the most and reasons for the return whether it’s a quality failer or wrong product. This could be used to address the bottlenecks of forward logistics chain.
For examples, if the products are returned due to a quality failer, there should be some loop points in the quality checking to release defective items to the market. The finding could be used to correct the current procedure of quality checking.
In today’s context, the attention on green practices, and being environmentally friendly has gained much attention. Companies can set up a reverse logistics policy for waste segregation, reuse, and recycle it will definitely add value to the company’s brand image. Proper risk management policies are critical when considering an environmentally friendly reverse logistics system.
It is a common practice of businesses to outsource reverse logistics processes along with some forward logistics processers like transporting and warehousing. This will further enable the businesses to gain cost effective advantages.