What is reverse logistics? Ultimate guide on reverse logistics tracking, challenges, complexities & solutions
By FarEye | October 13, 2022
Returns are not just hard but expensive too. All the effort a company took to provide a delightful customer experience doesn't end when the package has been delivered. Brands need to ensure that the product is efficiently returned to its origin efficiently and with as low a cost as possible.
Reverse Logistics Definition
Reverse logistics is a term used in supply chain logistics that means moving goods from their traditional final destination (customer) back to the seller. Reverse logistics can also mean the return of unsold goods by distribution partners due to contract terms.
Reverse logistics continues to grow. As the growth of e-commerce continues, the amount of returns is also growing. Companies are beginning to focus on making the reverse logistics process more efficient, easier for the end-consumer and eco-friendly.
What is reverse logistics tracking?
In short, reverse logistics tracking refers to the process of tracking the journey of a returned parcel back to a hub, warehouse or its point of origin. Tracking the returns process is critical as most businesses offer returns at zero cost to enhance customer experience and loyalty. Reverse logistics tracking drastically brings down costs associated with returns.
The Complexity of Reverse Logistics and Supply Chain Management
The process of logistics has been forward-focused for a very long time. But the new age shopping, i.e. through e-commerce websites, the process of reverse logistics has come into the spotlight. Customer satisfaction, without a doubt, is the priority of the e-commerce business, but following best practices for cost-effective and technological efficiency is a concern for the logistics industry.
Reverse logistics plays a vital role in industrial equipment too. In the U.S. alone approximately 4% -8% industrial equipment is returned every year. These returns impact the American economy to between $52 billion to $104 billion.
The complexity of the process is ever increasing due to the sheer volume. Many supply chain managers are working to make the process simpler, cost-effective and free-flowing.
The Challenges of Reverse Logistics
E-commerce is now a booming industry. People are more inclined to buy online because they have greater freedom to return the products, and it is a hassle-free process. Did you know, 30% of all orders placed online get returned? The returns of brick and mortar stores are only a mere 8.89%. Surveys have found that around 92% of people are willing to buy products online if the returns are easy and efficient.
However, the process of reverse logistics takes the supply-chain at least one step back. Another major challenge faced by companies is tracking the profitability of the business and forecasting for the future. Reverse logistics also presents another problem- it makes it difficult for sellers to ascertain the correct value or proper disposal of goods.
Hidden Costs in the Reverse Logistics Process
The reverse logistics process is complex and needs intense planning, implementation and control. The reverse supply chain process includes multiple hidden costs.
The supply chain managers are trying their level best to make the process of reverse logistics automated. However, it's challenging when the workforce is involved, as it incurs hidden expenses.
There are labor charges involved at many steps in the reverse logistics process:
1. Deciphering the issue with the product and business requires manual labour. This is done by customer relation advocates on a one-off basis, and they also look into returns management.
2. Managing carriers and services, for a door to door delivery, is designed for profits. Returning the goods leads to losses in pickups, increases shipping costs and damages during transit.
3. Warehousing the returns is a small cost, but that can accumulate over time and may lead to significant losses.
At times, the products cannot be recycled or refurbished. Companies need to look into the proper disposal of goods so that the same do not to find a way to the black market post-return. The logistics company has to look into fail-proof disposal methods.
Tracking of Reverse Logistics
Customers and companies need access to the return status of the goods and related information. Logistic companies bear the burden of expenses and time in customer service.
The process of return logistics is often time-consuming and involves the restructuring of human resources. The time spent on planning, implementing and controlling leads from negative reviews by customers can hamper the company's reputation.
Hurdles in forecasting
It's easy to keep track of products and finances when the flow is one way. Reverse logistics make the process difficult. The accounts department finds it challenging to predict the future of the company and trends.
Addressing the Issues in Reverse Logistics
Though the process of reverse logistics is complicated, customer satisfaction as part of the customer experience is key. Sellers have to streamline new trends and strategies needed for enhancing customer experience and have to implement best practices. The process needs to be cost-effective so that businesses flourish and logistics services may flow freely.
Returns Management Cell
The need of the hour is to employ a complete cell or wing for the management of returns. The design of the supply-chain institution needs to change. The traditional method of the only point of origin to final destination should change. The entire system needs to incorporate the reverse movement of goods and products.
Machine Learning and Analytics
When you can see your path ahead, it bodes well for your business. The future of supply-chain management and logistics business is bright but more insights can provide an added advantage. New technology, like machine learning, can come in handy. The process of planning implementing can be sharpened if the analytics can indicate the chances of a product being returned. The analytics can dive in the history of both product and customer.
The record can predict the probability of the product return and the customer's tendency to keep or return the product. Such insights can play a crucial role in advancing the processes of reverse logistics.
Digital Control Tower
Line hauling and forward logistics are optimized to the point that each step they take is optimized to the grassroots level, including paths they take and hubs they stop at. As reverse logistics has become an integral part of the supply chain of products, optimization with machine learning can cut down pickup timings and help combat shipping and inventory challenges.
The tower can also accumulate data from many software in play like CRM, ERP, TMS and convert the data into one figure so that supply chain managers can make sense of them, and understand the granular details of reverse logistics, shipping and inventory.
Tracking of Shipments
It has been observed that hidden human resources and labour expenses are involved in reverse logistics tracking if conducted manually. The automation of reverse logistics tracking can help in many areas. Following are four ways in which reverse logistics tracking may ensure better customer retention.
Better 3PL/Carrier Management
Dealing with third-party logistics presents its challenges. The return of goods may include freight distribution and outsourcing. Shipment tracking helps both the industry in management and warehousing.
Reduced Returns Management Costs
Returns management needs manual interaction at every step- from a discussion with the consumer to updating the customer about the progress. Automated tracking will reduce human interaction leading to saving of cost in the workforce and working hours.
Increased Reverse Logistics Productivity
Now that we have established that reverse logistics is here to stay, we now need to concentrate on increasing productivity and gain better brand image. Productivity can be increased by implementing tracking and understanding customer and product analytics.
Traditionally the process of tracking ends once the product is delivered to the consumer or the company. Setting tracking as the industry standard for the reverse movement of goods will fasten the process and consume less time and energy.
Enhanced Returns Experience
In the competitive world, nothing matters more than brand image. Services rendered by an enhanced tracking system for reverse logistics will gain customers trust and brand the company as trustworthy. The new and advanced tracking system will enhance the customer experience.
How to Ensure Seamless Returns Management
Easy returns are one of the biggest reasons why customers shop with a particular brand, and the easier the returns, the more they shop. This keeps the economy running. Supply chain managers have found three key areas to keep the returns seamless.
Controlling and Increasing the Visibility of Shipments
Reverse logistics is an integral part of the new age shopping system of e-commerce platforms. The best way to ensure seamless returns is to keep the process transparent and detailed.
The consumer finds relief when they can see real-time updates on the reverse product flow, from the location of pickup to the pickup personnel's name and time of pickup. Including the hubs and flow of return, logistics will help companies make the process of reverse logistics transparent and seamless.
Increasing Customer Transparency, Improving Flexibility and Boosting the Personal Touch
Reverse logistics is a part of the delivery service. Treating the reverse logistics process as a standalone process and system will help the businesses establish better authority. Undeniably tracking is an integral part of the return process, but it's not enough. Giving a personal touch to the process will help boost customer loyalty and advance your business.
Setting a product pickup location or point of origin and time convenient for the consumer and ensuring bank details for refunds will help build trust with the consumer, ensuring loyalty in future endeavors.
Keeping the Expenses and Resources in Check
Treating reverse logistics as a process in itself will help business plan their costs better. Customers prefer free delivery and reverse logistics and make buying decisions based on the delivery charges too. However, all businesses are striving to ensure free shipping; it's denting the companies' profit margins.
The logistics industry needs to concentrate on preventing losses by automating processes that require workforce and hours. Using advanced machine learning algorithms for predictive analysis, companies can save on precious money and increase consumer satisfaction in reverse logistics.
Drive Towards Circular Supply Chain
The online shopping scene began to boom across the globe in 2020 as the global pandemic moved traditional brick and mortar store customers online. As e-commerce purchasing continues to grow, so does the need for returns and reverse logistics. Allowing visibility for consumers and companies through reverse logistics tracking becomes more important than ever.