Understanding reverse logistics challenges will be crucial in the coming years due to the growing emphasis on meeting consumer demand and satisfaction. Reverse logistics is the process of handling returns, recycling, and disposal. The rise of third-party logistics (3PL) firms is helping raise distribution standards by investing in innovative technology that streamlines last-mile delivery. Here are important issues businesses should think about for a successful return policy.
Why Reverse Logistics Is a Rising Concern
Product shipments move from the factory to distribution hubs and then to retail outlets or directly to consumers. Recent studies have shown that it takes about 20 percent more space and double the labor to process a return compared with shipping a package. Up to nearly a third of gifts bought online are returned after the Christmas season versus only 8 percent for physical stores.
An important recent e-commerce statistic from XPO for all online businesses to consider regarding returns is that 83 percent of consumers make the return policy a factor in determining online purchases.
Solutions to Reverse Logistics Problems
Top solutions to reverse logistics challenges include embracing and implementing sustainable solutions that help cut costs, waste and negative impacts on the environment. Manufacturers are concerned about maintaining a positive public profile and must run operations as efficiently as possible. In order to maximize efficiency, manufacturers need to invest in smart technology that generates real-time data on operational processes and automates redundant tasks.
Here are some of the problems common to retailers and suppliers regarding reverse logistics that can be resolved with the appropriate technology solution:
- Tracking unit value - While it may seem difficult to track the value of a unit that is taken out of inventory and put under inspection for repair, the right tracking software can generate estimated value for returned items based on the consumer's claims. The program knows the value is worth more than $0 but less than full value. It then factors in the reason for the return and adjusts the value to maintain real-time data for the accounting department.
- Warranty and routing status tracking - Since warranties can be complex, it's important to maintain easy access to them via software when difficult service issues arise. A retailer can get warranty reimbursements using the right software. Reverse logistics may also involve routing packages within a facility, which may involve automation equipment. RFID chips can communicate with a central control center to track item locations in real-time.
- Agreements with dealers and contractors - The contracts merchants sign with suppliers should clearly specify the roles and responsibilities of each party. These contracts with manufacturers, distributors, and third-party vendors should be readily available in digital form to review at any time. These agreements determine what happens when items are returned for certain reasons such as defects. The software should allow for setting policies on replacement parts and other reverse logistics concerns.
- More efficient repair processes - Another reason to use sophisticated inventory software that tracks all items is to monitor, analyze, and schedule the unit for repair. Fixing the problem allows the company to still sell the product, which cuts down on waste. Machine learning software can play a significant role in streamlining the repair process by diagnosing problems and recommending solutions. The software can then document the results. Ideally, reverse logistics analysts can access a video tutorial on the specific problem, which can accelerate the learning curve on repairing the item.
Selecting the right technology is an important step to meeting reverse logistics challenges in supply chains. The technology solution should be able to track the complete journey of a product from the manufacturer to its destination, including after a customer returns it. Since there are a multitude of complexities involved with manual labor handling reverse logistics, it's best to use robust inventory management software that is set up to simplify customer returns.