Any astute supply chain manager wants to seize opportunities of driving efficiency throughout the lifecycle of the product. However, there is an area that has been traditionally overlooked and this is reverse logistics. Traditionally, product lifecycle was considered to end the moment the consumer walked out of the shop with a purchase. Many organizations viewed returns management as nothing more than a cost center and there was little attention into what products or parts remained in the pipeline and what to do with them. But today, this is changing.
Defining reverse logistics
Forward logistics deals with the movement of products from the manufacturer to the consumer. On the other hand, reverse logistics has to do with returning materials, products or parts from end consumers. The activities involved here are warranty recovery, repair, redistribution, product recalls, value recovery, and end-of-life recycling among other things. In all cases, the ultimate aim is to maximize supply chain efficiency and asset recovery, improve customer experience and reduce costs.
Why reverse logistics is becoming critical today
There are factors that make this part of supply chain management so important today. It is estimated that on average, 8%-12% of all the products that are sold are returned. The costs involved in returning the unsold units is 2-3 times that of forward logistics activities which bring the products to the market.
There is also the explosion of expensive electronic gadgets such as smartphones, smart TVs and tablets, and this amplifies the amount of returns because their product lifecycle tends to be very short. Another factor is the increasing environmental responsibility focus. It is estimated that ever year, more than 400 million units of electronic gadgets are disposed by American consumers. Most of these e-wastes are not recycled but end up in landfills. Today, majority of e-waste legislations hold manufacturers to account with regard to collection, transportation as well as recycling of products. Implementation of maintainable reverse logistics activities such as refurbishment, repackaging, repair, recycling as well as harvesting can help in mitigating impacts.
These trends, combined with retail return policies that are more flexible, shorter product lifecycles, continuous innovation and tough e-waste laws mean that reverse logistics is very important product lifecycle component.
Why reverse logistics is so important to the electronics and hi-tech industry
Electronic and hi-tech products have specifically shorter lifecycles. Consumers are always looking for latest gadgets, and this means that innovation cycles are even faster. As a result of shorter lifecycle of products, focus on energy emission or use, and multi-channel distribution, having a reverse logistics strategy that streamlines transport, inspection, retrieval, sorting, disposal, sorting as well as recovery and recycling of returns can assist manufacturers in recouping revenue streams.
The core functions that reverse logistics involve
There are typically four areas that end-of-life product process involves:
- Waste management: this involves disposition, disposal as well as related compliance activities.
- Repair and refurbishment: this involves diagnosis, repair, component and cosmetic repair, parts planning, sourcing and harvesting.
- Liquidation: this involves marketing as well as sale of products to secondary markets.
- Service logistics parts: his involves field stocking locations and parts management.
Keys to maximizing reverse logistics
The keys to maximizing reverse logistics are usually dubbed as the 3V and they are visibility, velocity and value recovery.
- Visibility: this involves the use of technology in creating visibility across the entire supply chain.
- Velocity: it deals with co-locating forward, reverse as well as repair functions in trimming transportation, infrastructure as well as overhead costs and also to increase speed to speed to shelf and disposition.
- Value recovery: This involves determining the proper disposition of company assets so as to recover maximum value. According to the asset condition, options may include refurbish/repair, return to vendor, donation or recycling.
Clearly, reverse logistics is very crucial in the entire product lifecycle. Despite that, it is an area that is constantly overlooked insofar as product lifecycle is concerned. Most companies see it as an expense sector but the truth is that it can actually be profitable to them. However, in case your company does not have the wherewithal to tackle this project in-house, the best thing might be to partner with a qualified and strategic reverse logistics services provider to help not only to recoup better value from returns but also to reduce environmental impacts. This way, you will experience better efficiency.