What does reverse logistics mean?
Reverse logistics operates in the opposite direction to the conventional direction of the value chain and covers goods that go back at least one step in the supply chain. Reverse logistics processes include pickup, handling and transport as well as returns processing, repair, recycling, disposal, resale and recovery of spare parts. Reasons for returning goods include:
- Defective goods
- Incomplete shipment
- Item does not meet the buyer's expectations
- Goods are out of date
- Goods are subject to seasonal fluctuations and are stored for the next season
Considering the supply chain as a whole, reverse logistics is considered to be a sub-category that occurs after distribution. The opposite of reverse logistics is distribution logistics or outbound logistics, which deals with the flow of goods to recipients.
Goals of reverse logistics
The goals of reverse logistics in the supply chain are ever clearer, especially with the e-commerce boom and increasing awareness of sustainability:
- Close the recycling loop
- Conserve resources
- Reduce waste
- Increase customer satisfaction
Reverse logistics has played a significant role since the enactment of the Closed Substance Cycle Waste Management Act, which encourages resource conservation and waste prevention. Companies are required to take back products. They therefore take appropriate action to reuse, repair, refurbish or dispose of defective items in an environmentally friendly manner.
Logistics professionals often use their warehouse management system to keep track of returns and manage returns processing.
Reverse logistics in practice
Like other areas of logistics, each company has to set up its own individual process for return logistics and develop a complete solution for it. The supply chain itself starts with raw materials that are used to manufacture individual parts. The parts are then assembled into semi-finished products, which are combined to form the final product. The product then enters distribution and reaches the consumer. This is where the conventional direction of the value chain ends and reverse logistics begins.
The consumer returns the article. If the item can be reused, it goes back into the distribution process. If it needs repairs, it is sent to the parts assembly step. It is reconditioned in the semi-finished product production step. If this is no longer possible, the article is recycled and its components used to produce individual parts. The reverse logistics chain ends with the disposal of the returned item. Since recycling, repair, reconditioning and disposal can be costly and are unrelated to the actual core business of many logistics companies, external service providers have emerged to manage this process.
Logistics companies use various tools to reduce returns since they cause costs and significant administrative effort. They include:
- Clear descriptions of the product in the online store or by the sales department.
- Use of high-quality raw materials to avoid early defects.
- Special care in packaging management to avoid damaging items in transit.
- Careful picking to ensure shipment is complete.