The Power of Reverse Logistics
As the e-commerce movement continues to grow, the importance of an effective reverse logistics strategy is paramount. A flexible and strong reverse logistics strategy helps companies reduce costs, add efficiencies, improve the customer experience and build a sustainable supply chain. The official industry definition of reverse logistics is “the process of controlling the efficient flow of goods from the point of consumption to the point of origin for purposes of recapturing value.” The primary driver of reverse logistics is the massive cost of returns. In 2010, MIT reported that product returns cost manufacturers and retailers more than $100 billion, or an average loss per company of approximately 3.8% in profit. The electronics industry spends $14 billion annually on product returns through reboxing, restocking and reselling. As more people adopt online shopping companies need to develop a customer-centric return policy which allows them to manage costs and resell products quickly and effectively. Zappos, an online retailer of shoes, apparel, and home goods, has a very liberal return policy (365 days for any reason) which has resulted in 75% of Zappos’ customers returning and increasing profits each year of their existence. By looking at the reverse logistics cost equation, you can learn how reducing costs can have a positive impact on your bottom line. A reduction in any one of the reverse logistics cost equation components will go straight to the bottom line. A seamless operation with quick turnaround can help retailers re-sell products quickly while minimizing the depreciation on assets. This is crucial within the electronics industry where new devices are released monthly and a product that was purchased a mere three months ago will quickly become obsolete. Repairing, refurbishing, or recycling a product instead of disposing of it in a landfill is also more sustainable. An efficient returns process will reduce transportation moves, reduce carbon emissions and improve air quality. Consumer electronics retailer Best Buy boasts one of the best-in-class green reverse logistics operations. The implementation of a virtual parts returns process has helped Best Buy greatly reduce freight emissions, while reducing freights costs by millions of dollars. What reverse logistics best practices have you implemented? What does the future hold for reverse logistics? Leave us your thoughts in the comments section below.