Non-conforming product, manufacturing defect, overstock… for many reasons, a company can cknow a product return, or even several product returns. However, this generates significant costs. Indeed, these products must be stored, repaired if necessary, disposed of, etc. For companies, the challenge is to process these returns in an optimal way, while reducing costs. The management of these returns represents a high cost. Hence the importance of setting up reverse logistics.
What is it exactly ? What are the challenges of reverse logistics? Response elements.
Reverse logistics or reverse logistics: kezako?
reverse logistics, also known as reverse logistics, is the process that manages product returns from the end customer to the point of sale or to the manufacturer for repair, recycling or disposal, minimizing costs and maintaining business productivity. So, while logistics manages the flow of goods from manufacturers to customers in the supply chain, reverse logistics deals with the reverse process.
The reverse logistics affects all companies making deliveries. Moreover, the management of returns is a legal obligation since the Hammon law. Indeed, customers are entitled to 14 days to return their orders. Similarly, merchants have the obligation to reimburse customers within 14 working days from the date of the return of the product or the date of withdrawal.
Product returns: what are the causes?
Product returns can come from the company’s initiative (to reduce the environmental impact of its products, for example) or from customers (dissatisfaction). Generally, products are returned for the following reasons:
- The product is defective or has a defect and the customer requests that it be repaired or exchanged
- The product does not conform to the customer’s order following an error during the preparation of the orders
- The customer is not satisfied with the product
- The product is become obsolete : instead of throwing it away, the customer returns it to the company according to the company’s policy
- The product is seasonal : this is the case of summer or winter clothes, Christmas toys, advent calendars, etc.
- There is a excess or overstock
Whatever the reason for the return, it must be handled quickly and efficiently. The costs associated with returns have a strong impact on company profits.
The challenges of reverse logistics
Reverse logistics is an important part of the product life cycle.
Reverse logistics has several challenges, including financial ones. A product returned and left in stock loses its value. Reverse logistics gives them additional value by limiting storage time and giving them a second life. Furthermore, it also makes it possible to eliminate efficiently and at a lower cost products that can no longer be reconditioned (obsolete products) or to recover certain parts for the manufacture of new products (recovery of components or cannibalization).
In addition, reverse logistics is also a customer retention process. Indeed, the product return is one of the criteria that encourages a consumer to proceed with the act of purchase. According to a FEVAD study in 2020, it ranks behind price and delivery terms.
Finally, reverse logistics impacts on the company’s brand image, its notoriety and its sustainability. In fact, companies that implement reverse logistics are companies committed to the environment. They are more competitive than their competitors, because for many customers, this is a major argument for choosing a product, merchandise, material, equipment, etc.
How to optimize reverse logistics?
Product returns require transport and classification according to the reference of the goods. All this requires personnel, man-hours, premises and significant costs.
To optimize reverse logistics, the company has several solutions.
Assign a room for processing returns
The premises are dedicated to the reception, control and storage of returned products.
Here, operators examine returns and identify their cause in order to reduce their number. At the same time, they assess whether the product can be returned to the point of sale or whether it requires repair or refurbishment during the control phase. A return to suppliers or a resale via another distribution channel (outlet store) can also be considered.
Digitize the processing of returns
The digitalization of reverse logistics is now a reality in companies. The use of warehouse management software or WMS makes it possible to effectively manage reverse logistics without impacting other operations (warehousing, order preparation, packing, etc.). It accelerates the product reintroduction stage in the sales cycle, reduces costs, improves the company’s brand image, optimizes customer satisfaction and limits the environmental impact of production by reducing the use of new raw materials.
Returned products are scanned, then they are automatically referenced and listed in the company’s stock management solution. This limits stock errors and losses. In addition to saving time and money, automating reverse logistics allows for better product traceability and improved productivity.
Outsource reverse logistics
External service providers offer to support this part of the supply chain. With the right skills and infrastructure to optimize returns management, they allow companies to gain flexibility and reduce costs while improving customer satisfaction.
Using software, the service provider detects returns. The products are transported directly to the company’s warehouses or points of sale without any downtime in the sorting centers.