November 30, 2021

Going back: A reintroduction to reverse logistics


It was all laughs when Barry Kripke took his infamous jab at Sheldon in an episode of The Big Bang Theory, suggesting the genius scientist pursue a career in retail so he could ‘take things back for a living,’ alluding to his recent retractions of an erroneous scientific paper. However, in an era where e-commerce is growing at an unfathomable pace, we have learned that modern retailers must be not merely capable, but in fact, adept at this very skill, with the resurgence of reverse logistics in its digital avatar.   

While it has been common for suppliers to stop measuring themselves post the delivery of a product, the emergence of reverse logistics means a new variable in customer satisfaction. Although this is not to suggest that it is a novel aspect of retail – large retail businesses have been managing product returns even preceding the e-commerce era. However, the see-saw battle between various corporations on the said digital platforms necessitates that companies put forward and reverse logistics at par on their priority list. Yet, the simple truth is that many myths and misconceptions cloud executives’ views on strategies for reverse logistics. And even though studies predict phenomenal benefits to ramping up this department, only a minuscule number of companies name it an essential investment.  

Apart from the one obvious reason which is volume: the number of transactions in reverse is usually far lesser that forward logistics. 

Why do retailers continue to let reverse logistics play the second fiddle? 
It is, essential to identify and solve some of the major puzzles in reverse logistics.   

1) Lack of dedicated team  

Most firms do not boast a sole reverse logistics department. It is, many a time, assigned with an underqualified individual/team discrediting its importance as a domain of itself.  However, the Inability to monitor the condition of products returned, percentage of sales lost, customer base lost, secondary revenue loss etc., could break the foundation of your enterprise, especially  if the returned products can be repaired or repurposed, scrapped for parts, or directed to the secondary market.   

2) Categorisation of the returned products as trash   

As cited earlier, this is one of the biggest misconceptions of the modern retail industry. At the same time, less than 20% forms the bulk of all defective returned products; even defective products can find value through proper processing. Analytics has shown that the number one reason customers return items is remorse, not defect. The key to reclaiming value from returned goods, damaged or otherwise, is the implementation of streamlined and effective reverse logistics processing.  

For instance, we know that the reverse logistics chain is initiated the second a customer clicks return on the purchased product. Therefore, the initial assessments must happen at this instant, making an effort to understand the cause of the return to make an informed guess on how it can be dealt with to ensure your company’s losses are minimal.  

3) Absence of tailormade reverse logistics software  

It is appalling how every subsequent point made in this analysis leads back to the others; here, we see the consequences of a common myth in action: ‘managing returns is simpler than running distribution.’ Nothing could be further from the truth. 

 The fact is that  returns management is far more complex than distribution. Returns management requires executives to work with buyers, operations, sales, accounts payable, and systems. While the leadership on the distribution side needs to care only about the safety of their loads as a whole, the reverse logistics manager must inspect every item in detail. In the case of returns, the OEM has to grant authorization before shipping. F 

Most distribution centres employ WMS to expedite these tasks to manage the large volumes, and the returns are synchronously processed through the same software resources. This creates complications because the software is just not designed to hadle the unique workflows and level of detailing required for Reverse Logistics management   

Warehouse management system for reverse logistics  

While your firm’s standard WMS will encounter difficulties in processing forward and reverse logistics, it is possible to build them to maneuver in both operational areas seamlessly.  Much rides on the symbiosis between the WMS and the enterprise resource planning systems (ERP). This combination works in a customer-oriented manner, maintaining what looks like a thorough customer record, complete with the profile of all transactions between the company and the customer. The ERP platforms, paired with a warehouse management system, allow companies to track returns easily, monitor the movement of goods, issue credits through the accounting system, and update everything in the customer record.  



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