Efficient returns management: the importance of reverse logistics

Axes Software » Efficient returns management: the importance of reverse logistics

Supply chain logistics is a complex set of operations through which goods reach the end users/beneficiaries/consumers, either directly or through intermediaries (suppliers, distributors, online or offline retailers, transporters, etc.). However, for various reasons, manufacturers or intermediaries need to take back some of the goods that have reached their destination, and this has given rise to reverse logistics.

Here are the most important details about reverse logistics and its importance in returns management. In this way, you will be able to develop an efficient strategy for the use of resources throughout the logistics chain and choose the right software solutions to implement new procedures in your business, whether it is production management, warehousing, distribution, transport, courier services or e-commerce.

What reverse logistics means and when it is used

Reverse logistics refers to the operations of distributing products backwards in the supply chain and focuses on the return of products from the final recipient to any point in the distribution channel.

The reasons for activating reverse logistics are manifold. For example, in e-commerce, product returns are already standard practice, a right of consumers who can ask either for the replacement of defective, unsuitable, damaged in transit or unsolicited products, or for a refund. A WMS software solution can be used in the warehouse to reduce the number of returns of products delivered by mistake and to add them to the inventory (e.g. if there are no other problems that require sending them to the supplier). But it is not only these types of errors that generate returns. Customers can cancel an order even after the products they requested have left the warehouse but have not yet reached their destination. In this case, drivers can use POD solutions in the field that can be used not only for deliveries or order cancellations, but also in reverse logistics to take back returned goods.

There are also situations where some manufacturers find that the items they put on the market have defects that put users at risk (e.g. cars with braking or other problems, planes with faulty software, phones with dangerous batteries, food products with harmful ingredients, etc.). In these cases, they are obliged to take them back from buyers in order not to violate legal regulations on consumer protection and, last but not least, not to lose the trust of their customers.

By using reverse logistics, manufacturers or companies offering 3PL services also seek to recover returnable packaging (pallets, crates, various containers) used during the transport of products, in order to use them multiple times. Recovering this type of packaging minimizes the costs of replacing it and more – the availability of the necessary stocks at any time gives them much greater flexibility in making faster deliveries.

In the manufacturing industry, reverse logistics ensures that scrap from technological processes, (which can no longer be reused to make other components), is sent for recycling. In this context, monitoring scrap and rework is a first step that facilitates the activation of reverse logistics not only for recycling or reuse, but also for the disposal of unusable waste. 

And the list of examples goes on. Essentially, the ultimate goal of reverse logistics is to recover goods that can then be reused, replaced, refurbished, resold (either in full or as spare parts), recycled or disposed of.

As with traditional logistics, which enables the movement of goods from manufacturers or suppliers to final customers, reverse logistics involves information resources and activities to plan, implement and control the flow of goods in the opposite direction to that followed by goods along the supply chain. These ‘reverse’ logistics operations, which are carried out along the route of goods from the point of consumption to the point of origin, include transport planning and management.

The increase in the volume and diversity of return services requires the digitalization of reverse logistics through well-defined activities and procedures. It is important for companies in different industries to pay more attention to reverse logistics in order to increase efficiency in customer relations, reduce losses as well as warehousing and distribution costs.

The benefits of efficient reverse logistics implementation in returns management

Here are the main benefits of implementing the modern concept of reverse logistics in returns management:

Cost reduction and efficiency increase through reverse logistics

The effective use of supply chain software solutions tailored for reverse logistics management, alongside adequate hardware, enables companies to significantly reduce the costs associated with returns processing. For example, by optimizing returns management processes, wasted time and human and material resources are reduced and the speed of returns processing is increased. Companies can thus make significant savings while achieving greater efficiency in returns management.

Increase in customer satisfaction through reverse logistics

Efficient returns management through the digitalization of reverse logistics leads to increased customer satisfaction. Fast and accurate processing of returns, prompt refunds or replacement of returned products, effective communication with customers are factors that improve the buying experience and strengthen brand trust.

Sustainability through reverse logistics

Reverse logistics helps minimize environmental impact by facilitating the recycling and reuse of returned products or their responsible disposal. By implementing effective reverse logistics policies and processes, companies can reduce the amount of waste generated and help protect the environment. For instance, constant care for the management of returnable packaging plays an important part in returns management and in the company’s long-term strategy for sustainable development.

Regulation and compliance through reverse logistics

Effective implementation of reverse logistics helps companies meet various regulations and legal requirements regarding product returns. There are strict provisions in national legislations and EU regulations for managing returns and disposal of certain types of products and/or packaging. By complying with these procedures, companies avoid fines, penalties, suspension or closure. Responsible behaviour, in compliance with the legislation in force, also decisively contributes to preserving reputation with customers and authorities.

How to use reverse logistics in returns management

Start by identifying and thoroughly analyzing all the costs associated with implementing and managing reverse logistics. These costs may include: returns-related transport costs, processing and storage costs, recycling or disposal costs, and the cost of personnel involved in returns management. It is important to evaluate each aspect of reverse logistics to get an overview of the costs and identify possible savings.

Analyze the way in which reverse logistics costs can impact on a company’s profits and overall profitability. For example, higher costs of returns-related transport or processing and warehousing can reduce a company’s profit margin. Also, costs associated with recycling or disposal can have a significant impact on a company’s budget.

Evaluate different strategies and techniques that can be used to minimize the costs associated with reverse logistics. Improving the efficiency of return processes can be a key factor in reducing costs. Also, investing in new technologies such as return tracking systems or inventory management solutions can help optimize reverse logistics. Working with 3PL service providers can also be an option for reducing costs and increasing efficiency in returns management.

Collaborate with companies that specialize in logistics software and use the management solutions you need. For example, if you have returnable packaging you have to keep track of, use Packaging Management System (PMS) solutions, which offer significant benefits for companies in areas such as manufacturing, distribution, retail, 3PL, etc. In this way, you gain control over the circuit of the returnable packaging, reduce the number of stolen or lost packaging items, lower the costs of replacing them and save time on delivery by changing ownership. Other important PMS benefits are: optimized management of the pallet reconditioning process, reduced number of human errors, traceability of packaging and vouchers, identification of packaging with RFID.

You can contact us by filling out any form on our website to get more details about Axes Software solutions. We are looking forward to your questions!

7 September 2023

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Antim Mogos
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