The Reverse Logistics is a collaboration of manufacturers, retailers and academics in getting the products back from the customers which are fit for disposal or products which have crossed its expiry dates back to OPMs is called Reverse Supply Chain Management.
Reverse Logistics is the process of moving goods from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.
Reverse Logistics activities include:
- Processing returned merchandise for reasons such as damage, seasonal, restock, salvage, recall, or excess inventory;
- Recycling packaging materials and reusing containers;
- Reconditioning, remanufacturing and refurbishing products;
- Obsolete equipment disposition (EHM: Environmental Hazardous Materials)
- Hazardous material programs(WEEE: Waste Electrical and Electronic Equipments)
- Asset recovery.
With most companies, handling Product Returns also includes an important transaction with the customer who is returning the goods. This may involve the shipment of a replacement in the case of goods returned for a warranty issue. For other customers, it may also involve the issuance of a credit or refund.
The SCOR Model (Supply Chain Optimization Review) developed by the Supply-Chain Council now includes Reverse Logistics.
Traditional Supply Chain improvement strategies have tended to focus on the forward logistics processes. New forces and an understanding of the connection to revenue and customer satisfaction are moving Reverse Logistics higher in the supply chain agenda. But this model for getting realized in current world of FSCM implementation would take time will still take time. As the return process i.e, the RSCM does not come with FSCM logistics. This involves hiring RSCM third parties as said.
Reverse Logistics Opportunity
It is time to rethink Returns. Reverse Logistics is an excellent strategic source of value added revenues. Manufacturers, Distributors and Retailers are struggling with the Reverse Supply Chain. Industry experts suggest the annual costs of Reverse Logistics total $35 billion. Product Returns handling is an important process of the supply chain that is not well handled even today even with world’s number one product sellers. Economic pressures for corporate profits are forcing manufacturers and retailers to look very hard at cost controls. Reverse Logistics is one of the few remaining opportunities that has NOT yet received much attention.
Many Manufacturers and Retailers are looking to outsource Reverse Logistics and Product returns since it is not a strategic part of their business. But this could be cut down and the same cost can be used in implementing RSCM. They currently have very inefficient, slow and expensive processes for handling returns. Few tools or systems exist to assist in handling returns effectively. Considerable value is lost when these Returned Assets are not processed quickly and completely.
Traditionally, with a solid understanding of Reverse Logistics needs and processing, Reverse Logistics represents a quick and excellent source of high volume transaction fees that can be generated from your existing facilities and skill sets.
Difference between Reverse Logistics and Forward Logistics
Logistics typically refers to moving product in the forward direction. Reverse Logistics involves moving the product in the reverse direction, from the customer or channel partners back to the manufacturer. The biggest differences are as follows:
- Open box – the units are usually being returned due to a problem, dissatisfaction or warranty issue. The warranty units could be 3 or even 5 years old.
- Single units – the returned units often do not arrive in bulk on pallets. They are single units often in non-standard packaging.
- Verification at Receiving – since the returning product is not in “new” condition, additional verification must be performed at receiving to ensure the expected product from a customer matches the actual received product.
- Inspection and Grading – since the returned units are in various conditions they need to be processed through inspection or grading to determine where to stream the unit to recover the highest value.
- Reconditioning – many returned items just require basic testing and repackaging. (Well within the existing capabilities of most logistics providers). Some units require more advanced repair work. The units are streamed back to the original manufacturer or to a service center for repair.
Retailers need to handle returns from their customers. These returns arrive in a variety of conditions, many with open boxes, some with defective units and many with no faults. A retailer needs to process these returns and maximize value from these returned items by getting them back on the store shelf, returning them to the manufacturer for credit, liquidating them through some other channel or scrapping them.
OPMs need to handle returns from multiple sources such as end-user customers, retailers, value-added resellers or distributors. The manufacturers typically require their customers to obtain an approved RMA (Returned Materials Authorization) or RA (Return Authorization) before accepting any product returns. These returns arrive in various quantities. The returns may be new stock, damaged stock, open box or defective.
The manufacturer’s main concern is to satisfy the customer or distribution channel partner who is returning the goods by exchanging the unit, repairing the unit or issuing a credit. The returned units need to be processed and then returned to inventory, repackaged, returned to the vendor, repaired or scrapped. The manufacturer needs to maximize value on these returned units by processing them quickly to yield the highest price through secondary market channels.