The flow of logistics can go either forward or backward when it comes to supply chain management. Perhaps you are already familiar with advance logistics, which pushes goods in the direction of clients.
However, since reverse logistics takes things from customers, it may be a novel idea. Sound perplexing? Don’t worry; all you need to do is read this comprehensive guide to understand how the supply chain’s reverse flow functions.
Reverse Logistics: Definition
Reverse logistics is a widely used technique in supply chain management that involves moving goods backwards or in the opposite direction. In other words, rather than being pushed from a supplier to a client, things are pulled from customers. It mostly aids in completing goods returns or refunds as well as product recycling, disposal, or resale.
Consequently, a cost-effective movement of goods and inventory through the supply chain is implemented in stages of planning, controlling, and implementation. Most of the time, the flow begins at a customer’s location and ends at the product’s original supplier or manufacturer.
Any eCommerce store may experience returns at a rate of between 3% and 50%, and this can use up a lot of resources. Because of this, it is crucial to optimize this procedure, especially for online eCommerce companies.
The Workings of Reverse Logistics
Let’s delve a little deeper to comprehend how the backward flow in logistics functions after going over some fundamentals. In a perfect world, the processing of refunds should be your top priority. You must devise a streamlined channel that will accept returns from your clients and handle them in accordance with your specifications.
The logistical approach you choose will be greatly influenced by how you handle returns. The logistics channel often uses one of these five methods to process items:
- Return: This is the easiest phase, in which consumers’ purchases are just picked up. Now, either a new product is exchanged for them, or their money is returned.
- Reselling: In this process, we choose a product from our consumers and resell it on the open market. One of the frequent applications of this paradigm is the resale of reconditioned phones.
- Repair: When a product is defective, we immediately pick it up and fix it. The product may occasionally be fixed by the customer as well.
- Recycling: This mostly involves products that the supplier and the customer no longer require. The product is simply discarded or recycled into new materials.
- Replacement: Lastly, there may be instances where you need to swap out a damaged component with a new one, as with an electronic device.
Typical Reverse Logistics Elements
As you can see, there are various approaches to complete a supply chain management reverse logistics cycle. The overall cycle can include a variety of elements depending on the kind of items you are working with and your process:
This is the most crucial step in the backward logistics process that all operators of online stores should prepare for beforehand. Create clear return, exchange, and delivery procedures before you start selling anything. Your store’s return and refund policy can be explained to customers on a specific page.
Creating policies is not sufficient since you also need to implement them via a simplified management approach. You must devise a workable, manageable, and adaptable process for this. You must establish policies regarding returns, how refunds are handled, timely delivery, and other things.
In many eCommerce companies, refurbishing an existing product is a crucial step. After that, it is fixed or rebuilt in accordance with established standards. Later, we refine and put the reconditioned item up for sale.
Additionally, you must oversee the procedures and supplies used in product packaging. To reduce costs and disposals, many store owners adopt various measures to improve their packaging materials.
The logistic cycles for moving both forward and backward can meet here. Let’s imagine that your shipping partner was unable to deliver the merchandise to your client. You must now provide a clear protocol for the second delivery attempt and what to do if it also fails.
A few online shops have also begun leasing goods. If this applies to your store, then you must offer a location where customers can pick up their purchased items after their rental period has ended. Additionally, you need to think of different strategies for maintaining product quality both before and after delivery.
Last but not least, after going through a number of supply chain cycles, certain products simply reach the end-of-life (EOL) stage. For instance, if a product has had multiple repairs or refurbishments, you might want to consider throwing it away. This stage might also be reached by a lot of unsold items that you don’t want to have in your inventory.
Important Reverse Logistics Metrics to Track
Managing reverse logistics can occasionally be a little intimidating. Therefore, if it appears overwhelming, you must begin by concentrating on the following critical KPIs.
It goes without saying that this simply states how many things you own. A warehouse management system can be used to quickly examine both the overall and per-item amount of products you own. In addition, you ought to look for goods having a greater rate of returns.
the state of returned goods
Suppliers occasionally receive returned goods in the greatest possible shape, but occasionally, they may be damaged. As a result, you should create a list of criteria to use when checking the quality of returned goods. It can assist you in determining the quantity of products you can immediately use or the products that require repair.
You should also estimate the overall cost of handling the reverse logistics process as you expand up your eCommerce store. By doing this, you may streamline the procedure and create a better budget.
The backward logistics process should follow a predetermined path, which is crucial. Based on that, you can quickly spot process issues and work to improve them.
Strategies for Improving Reverse Logistics
Great! You now have a clear understanding of the key elements of reverse logistics. It may face a range of operational, managerial, and financial difficulties, therefore you must use some wise advice to improve outcomes. Here are some of the top recommendations made by professionals for improving your backward logistics strategy.
Consider automating your tasks.
Automating your supply chain management processes is now simpler than ever. Installing a cloud-based logistics solution will enable you to automate the majority of the crucial job. You only need to handle everything, and you can reduce the likelihood of human error.
Review and update your policies
Many online store owners make the error of just adhering to the original return policy of their business. You might have developed those policies with a different perspective, and as a result, you risk losing clients. Many online retailers revised their return and refund policies as a result of the epidemic, making them more customer-friendly.
Get to know your providers
Working closely with their suppliers is another wise recommendation that the majority of online business entrepreneurs adhere to. Examine the caliber of their offerings and experiment with automation by installing your providers’ APIs.
Make decisions based on data.
You can use a variety of platforms and tools to help you make wiser selections. To obtain useful information for making wiser decisions, you can easily link them with your supply chain operations.
Do not disregard transportation
Many strategists disregard the financial and time restrictions relating to the movement of items in the whole process. Make careful to keep transportation constraints in mind as you develop expectations for the cost and timing of logistical activities.
Try to make everything centralized.
The most crucial requirement is to connect every touchpoint of the supply chain process to a centralized network. You may manage everything from a single location and conserve resources by doing this.
Learn to Manage Your Dropshipping Store with dropship-empire
Instead of handling logistics yourself, you may create a dropshipping store. You can easily look into dropship-empire, which is AliExpress’s official dropshipping service, for this.
- You can go through a huge selection of products from tens of thousands of different suppliers on dropship-empire.
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- dropship-empire is fully interoperable with popular eCommerce platforms like Shopify, WooCommerce, and Wix and is accessible for free.
As you can see, reverse logistics is a complicated topic, especially for newcomers. I have therefore specifically listed its advantages, types, and general procedure in order to make things easier for you.
I’ve also provided some sage advice that you can use to streamline the logistical procedure. However, you may use dropship-empire, the official AliExpress dropshipping application, to help make things even easier.