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What is reverse logistics and how does it work?

19 Dec, 2022 | Business Tips

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While speedy delivery is a must to satisfy customers, what’s also important is to speedily solve their grievances after they receive their order. If customers aren’t satisfied with the product, they will request to return it.

This is where reverse logistics come into play. Read further to understand the concept in detail.

What is reverse logistics?

Most of us are already aware of forward logistics, where the goods are transferred from the manufacturers to consumers. Manufacturers sell to wholesalers in bulk, retailers buy the goods from wholesalers and disperse them to the end consumers.

But in reverse logistics, the items move back through the supply chain, that is, from customers to the resellers and manufacturers. Reverse logistics do not just help with retrieving the items from customers but also recover the value from the returned items.

Five R’s of reverse logistics

The reverse logistics process begins when the customer places a request for a return. After receiving the request, you can approve/reject it, schedule the shipment for collection, and sanction the refund once the item is collected.

Once you receive the items, you need to decide what should be done. This requires a thorough inspection of the product’s quality. Is it in good condition? If yes, it can be resold. If the product is defective, you can decide to either repair or recycle it.

The components of the reverse logistics processes can be summed up in five Rs. These are return, replace, repair, resell, and recycle. Let’s understand each “R” in detail.

1. Returns

Returns are the first step in the reverse logistics process, where customers return what they ordered. There can be plenty of reasons to return items, such as product defects, failure to meet expectations, or simply receiving the incorrect item.

Providing hassle-free returns is a sure way to improve customer satisfaction. It is important to have visibility over your returns to ensure they are inspected and processed correctly. It’s best to keep the returned items separate in the warehouse, so they don’t get mixed up and sent to other customers.

Returns aren’t always initiated by the customers. Sometimes, the brand can recall its items. For instance, maybe the product violates a governmental regulation or contains a manufacturing defect that could be potentially harmful.

Because processing returns costs money, try to reduce them. Selling good quality products, avoiding misleading advertisements, and using proper packing (to reduce transit damage) can help in lowering your product returns.

2. Replacement

Usually, customers expect to receive a refund after returning the ordered items. If the product was defective and the customer approves, sending a replacement can save you money and protect your reputation with the customer.

You don’t want your customers to wait for long to receive the replacement after returning the orders. To sweeten the pot, you can arrange the pickup and delivery at the same time. This way, the customer can exchange the old items with the new ones.

3. Repair

In case the customer voluntarily returns an item due to minor defects, you can repair and return the item or resell it as a refurbished product. Refurbishment is widely practiced in the electronics industry, where you may be familiar with refurbished phones, earphones, and televisions. Refurbished items are usually priced lower than original items, making it a win-win situation for both parties — customers pay less, and businesses get to recover some of their costs.

4. Reselling

Products that require repackaging are the easiest to deal with. These are usually good quality products that got returned because they didn’t meet the customers’ expectations. Think of it this way, suppose you accidentally shipped a black shirt instead of a brown one. Obviously, it will get returned, but that doesn’t imply the shirt has some defect that makes it unfit for reselling. You can ship that correctly to someone who ordered a black shirt.

Upon receiving the items, you should thoroughly recheck the products to ascertain any damage by the customer, which may require repairs. If not, you can add it to your existing inventory, ready for selling. Reselling enables you to generate revenue from returns.

5. Recycling

Customers appreciate brands that put environmental sustainability at the forefront. Recycling helps in waste management arising from the returns. Electronic items (like smartphones) have a life cycle, and once it reaches its end, it needs to be scrapped. Still, electronics items can be salvaged to retrieve important minerals like copper and titanium, which can be reused to make other components. With smarter recycling, brands can recover some of the cost incurred to manage the returns.


Try DEAR Systems to manage your reverse logistics

If you have a retail store, DEAR POS makes it a breeze to process product returns. All the sales are recorded in the POS, so whenever a customer requests a return, you can easily make a refund or provide a store credit right from the POS system. If the customer wants to exchange an item, that too is possible with DEAR POS. With DEAR POS, you can update your stock levels in real time after receiving the returns.

For those who sell online, customers can submit a request for product return through the “Return portal.” They can enter details such as the reason for the return and select the compensation method (refund, exchange, or repair). After you authorize the return request, you can also set the course of action for the returned items.

You can choose from:

  • Inspect: Instructing the staff to inspect the products to understand its condition.
  • Restock: If the product is fit for use, it can be re-added to the existing inventory.
  • Scrap: If the product is defective, it can be written off from your inventory levels.

To learn more about what DEAR Systems can do for you, schedule a call with our experts.

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