The cost of managing a supply chain is always a concern for businesses, especially when that supply chain doesn’t run as well as it should. Streamlining this process reduces costs and provides staff members with more time to perform their core duties.
Supply chain management most often refers to the process of moving products from a warehouse to a customer. But it also includes moving products in the opposite direction.
Reverse logistics provides many of the same benefits as typical logistics but in different ways. This post discusses six of the biggest reasons that an e-commerce business needs a solid reverse logistics process.
Reverse Logistics Overview
Reverse logistics is the process of moving products from the end-user back through a supply chain to the originating entity. That can include disposal companies, manufacturers, sellers and suppliers.
In the case of retailers, reverse logistics is part of the returns process, which is a routine event in that industry. Returns may occur for a variety of reasons. It can be a mistake in the order, a damaged product, or a product the customer simply doesn’t like.
Some companies try to “wing” their returns process, especially small businesses. However, this is a poor business decision for a variety of reasons.
For example, today’s customers generally pay close attention to how a business handles returns, as they do with all areas of customer service. Furthermore, most returned items still hold some value for a business, even if they’re broken or recalled.
As a result, it makes sense to invest the time and money needed to develop an efficient reverse logistics strategy. Sometimes this may include looking into a 3PL solution to help cover your reverse logistics.
Technological Solutions
Optimizing the flow of a return back up the supply chain requires a combination of efficient processes and the right technology. Solutions that help businesses manage reverse logistics are typically known as an order management system, or an OMS.
An OMS can ensure that a return comes back to a warehouse and is stored safely for the next buyer. This helps to keep things from getting lost in the shuffle, and makes your supply chain management easier.
1. Higher Profits
Optimizing reverse logistics management can significantly improve a business’s bottom line. Most returns in retail occur because the customer simply didn’t like the goods due to characteristics such as its color, size, or model. In these cases, the returned good or product may be eligible for resale since it isn’t defective.
Effective reverse logistics help make returns hassle-free for both the business and the customer. Once the business receives the product, it can inspect it, repair it if needed and place it back in inventory. Those items might need to be discounted, but the sale still provides revenue the business wouldn’t have received otherwise.
2. Happier Customers
Increasing customer satisfaction is one of the best ways of growing a business. The main reason for this tactic’s effectiveness is that it’s much harder to attract new customers than it is to keep the ones you already have. Studies consistently show that the great majority of customers will buy from a retailer again if their first experience was positive.
Common ways for e-commerce businesses to improve their customers’ return experience is to offer free return shipping and provide a full refund instead of charging restocking fees. In addition, businesses shouldn’t require customers to return the product in the original packaging. These are small details, but can go a long way with customer satisfaction.
3. Improved Sustainability
New business owners often believe that returned products have no resale value and need a proper disposal. While this is true of some items, others will still have uses that keep them out of a landfill. Minimizing environmental impact is an increasingly important benefit of a returned product.
Even if a returned product can’t be resold, its parts may still have value. This is particularly true of electronics, which contain many valuable metals that are worth recycling. Sustainable business practices also provide the benefit of improving a company’s reputation. And without a solid reverse logistics process, your company will struggle with sustainability.
4. Lower Costs
Efficient reverse logistics processes can cut costs for an e-commerce business in multiple ways. The right people and processes can reduce costs in the following areas:
- Administration
- Disposal
- Repairs
- Marketing
- Quality assurance
- Tech support
- Transportation
The preferred method of measuring the cost savings of improvements to reverse logistics is to track the total cost of ownership for each product category. The combination of gaining value from returned items and increasing operational efficiency will improve a business’s bottom line.
5. Better Brand Reputation
Online reviews by customers have become one of the most popular ways for businesses to establish their reputations. Today’s customers typically pay close attention to these reviews and the way companies handle them.
A reputation for a difficult return will definitely hurt your business. Many customers won’t even deal with a company that doesn’t have a favorable return policy.
On the other hand, a business with no-hassle returns can expect to attract new customers with their brand reputation. Consider companies like Amazon and Zappos for ideas on how return policies can help your business and customer experience.
Getting a Reverse Logistics Process Determined
The rapid growth in online shopping makes a solid reverse logistics process essential for a business’s success. Achieving this goal requires the right strategy and technology (or maybe the right 3PL provider). If you can get both of those in line, you can reduce costs, improve customer satisfaction and increase sustainability.
If you are struggling with your returns process, reach out to Tradefull and see how we can help.
