Reverse Logistics : challenges and opportunities

16 febbraio 2021

In order not to taint the consumer's customer experience, the major players in e-commerce, with Amazon in the lead, have redefined the codes for product returns. These have been simplified to the extreme, with return policies becoming a differentiating axis in the market.

In its Pulse of the Online Shopper Study of April 2018, UPS points out that 68% of website visitors check a website's return policy before buying.

As a result, reverse logistics is becoming a major issue for players in Retail, but also above all in E-commerce, both in France and in Europe, following the unprecedented boom in online sales and marketplaces, which was amplified by the COVID-19 health crisis.

The different forms of reverse logistics

Reverse logistics is defined primarily as "the set of efficient processes for planning, implementing and controlling the flow of raw materials, work in progress, finished products and the information relating to these flows, upstream to downstream, in order to satisfy the customer / end consumer. According to the definition issued by the Retail Chain. However, it can be translated as reverse logistics or returns logistics.

In addition, there are different forms for this essential point of the Supply Chain, here are some examples:

  • After-Sales Service: it consists of managing the start-up, maintenance and repair of the products sold, but it tends to develop towards recycling with the return of defective products, overstocks or end-of-life items.
  • Green logistics: we are talking about a distribution and transport system that is both effective and efficient and respects the environment. Green logistics is more than reverse logistics, as it seeks to save resources, eliminate waste and improve productivity; therefore it must therefore have the smallest footprint on the environment.
    In addition, it also takes up the idea of ​​eco-design of products: that is to say the manufacture of products without the use of toxic or degrading materials for the environment, thus allowing easier and faster reuse of waste. at a very low cost.
  • Recycling of WEEE (waste electrical and electronic equipment): this form of reverse logistics consists in creating return networks between the person owning a device and the seller in order to ensure the recycling of materials in order to limit costs related to collection.
  • The deposit of containers: it is very often practiced in the hospitality sector but also in other fields. It consists of allowing companies to pay for the purchase of containers such as bottles or kegs of beer from the supplier. However, when reordering the same containers, companies simply pay for the content and not the container. The objective of setting up a deposit system is to encourage customers to return their container when a new supplier order is delivered, in order to facilitate its reuse and / or recycling.
  • Management of handling units: professionals from different sectors receive support pallets during deliveries with their goods, which they must consign when registering the products in their logistics system. However, pallets must be returned in their original condition to the supplier within a specified period, in order to avoid invoicing them.

The challenges of reverse logistics today

Nowadays, the various challenges of reverse logistics are important and must be taken into account both in terms of the company's image, sustainability, but also profitability.

In addition, good management of its reverse logistics not only reduces costs, but also increases sales because consumers are more loyal and satisfied.

We can cite the main challenges of reverse logistics, which are:

  • The marketing issue: the volume of returns is exploding with a figure of 24%, especially in this health context which has favored the increase in e-commerce transactions, and therefore the number of parcels in circulation for companies present in different areas. Having become a real marketing issue, the return of products is generally offered free of charge and without any real conditions to customers during their purchase journey. Added to this is the complexity of logistics for traders because a company needs to be able to coordinate all the functions that depend on each other, whether upstream or downstream, such as the supply of raw materials, manufacturing, storage, distribution, sales, in order to deliver the right product or service at the right time.
  • The issue of customer satisfaction: Today, companies are more and more concerned about the satisfaction of their customers. Indeed, with reverse logistics, the consumer can be tempted to buy a product, being reassured that he can return it in case it no longer suits him or if it is defective.
    According to UPS, 76% of Internet users read the return policy before placing an order, and if the terms and conditions don't suit them, 51% cancel it. And also, according to Chronopost, 97% of French people find it interesting that the seller simplifies the return of products.
  • The ecological issue: reverse logistics maintains a strong relationship with environmental protection, because it is responsible for managing the products, components and materials that have been used or that are discarded and of which the manufacturer is in some way. responsible sort.
    Its primary objective is to give new life to these products and, as far as possible, reduce the final quantity of waste emitted. The principle is that by using recycled products, one avoids the use of new raw materials in the manufacturing processes of new articles which has the consequence of increasing pollution.
  • The logistical challenge: at present, return management places strong constraints on the Supply Chain and represents a high cost if it is not properly rationalized and optimized in the warehouse.
    The returns must first be received, then checked, then put away and stored in the warehouse before they are put back on sale, which requires a lot of handling and involves operators who cover long distances.

In addition to making the processing of returns more reliable, companies and e-merchants must above all ensure the "correct" reintegration of items into their stocks or second-sale circuit, because only an excellent Smart Supply solution and adapted logistics procedures can. guarantee a rapid re-sale, without wasting time and products but rather avoiding stockouts. It is essential to have a real-time and global vision of all of the elements that make up its supply chain in order to display them in a Supply Chain control tower with all the traceability.

What about the opportunities?

According to an analysis by Statista, we find that the proportion of consumers who returned in the year at least one product purchased online in France is 45%, which is not negligible.

Despite the various major issues involved in reverse logistics, there are some significant opportunities if this essential link in the Supply Chain is well optimized and efficient.

Among these opportunities, we can address some which are:

  • An automation opportunity for faster and more agile reverse logistics: The automation of reverse logistics can go through digitization and robotization to make it more fluid.
    For example, shelves transported by robots will come to logistics operators automatically, which will speed up the processing of returns, from sorting to control, in order to put them back on sale as quickly as possible.
    With the digitization but also robotization of its process, the company is sure to benefit from immediate gains in traceability, fluidity and productivity, given that all returns are tracked and listed, thus eliminating losses and errors in stock. In addition, there is an unparalleled gain in productivity in the logistics management of returns in connection with processing rates compared to operations carried out manually.
  • An opportunity on the revaluation of returns: the current manufacturing system of companies is based on the use and transformation of raw materials into finished products, thus generating profits for the benefit of their customers.
    The completion of this process is by the reuse of these products through recycling, so recycling the products returned by the company for reuse means that a new value will be placed on them, as some of them might cost more than their first sale prices, but the reverse logistics make a revaluation possible.

If we take the example of various products in small amounts, with a shelf life of two or three months, if they are to be stored for the long term, they can quickly exceed their unit value.

In this case, reverse logistics therefore has the mission of restoring value to the returned merchandise, either by accelerating its re-sale, through accelerated processing, or by directing it to a new sales or recycling channel.

The success factors of reverse logistics

For companies, it is essential to succeed in all aspects of the management of returned or unsold products, because good management of its reverse logistics not only reduces costs, but also increases turnover. Thus, it is important to respond to certain success factors which are:

  • Real time: Managing product / merchandise returns is a process that is complex but essential for businesses, so they want to have a solution that allows them to track their products in real time.
  • 360 view of stocks with extended supply chain: companies that have a broad and complete view of their merchandise stocks can easily manage product returns from their customers at any time.
  • Traceability: in the field of retail as well as e-commerce, it is essential that companies can have a constant follow-up of the various packages / goods intended for customers throughout the journey.
  • Responsibility transfers: Today, companies want to be able to follow the movement of goods step by step in order to know how to control the transfers of responsibilities during the different stages until their final destination.
  • Management of invoicing in the event of non-return: as part of handling units, which are products that come with the goods during deliveries, such as boxes or even crates-pallets must be returned to suppliers. If the customer does not make this return on time, he is invoiced by the supplier for the price of the handling units he has in his warehouse.
  • Real-time information on disputes: better visibility on its reverse logistics gives the possibility of collecting real-time information during the journey of products. With this logic, customer service obtains correct and precise data to effectively resolve the various disputes / problems that may arise.

Reverse logistics is an essential and important process in the supply chain that has become increasingly common in businesses. It represents enormous challenges, but also opportunities that you have to know how to best manage in order to master it.

In addition, it contributes both to an environmental improvement, but also represents a good business opportunity thanks to the recovery of the economic value of the returned products.

In any case, companies must have a smart supply solution with a real-time view of their actions and end-to-end to both monitor and improve the entire supply chain of reverse logistics and even loops.

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