The logistics industry is integral in streamlining supply chain operations by efficiently packaging and transporting goods globally. Once these goods are shipped, there are possibilities that the customer decides to return the shipment due to various reasons, such as defective or damaged shipments, missing parts, or dissatisfaction with the shipment. Sometimes, the logistics company also has to return the shipment to the seller due to failure in shipping the goods to the designated location. Returning the goods from the customer to the seller through the logistics company is known as reverse logistics in shipping. Let us learn more about the importance of reverse logistics in shipping.
What is meant by reverse logistics?
Reverse logistics is a process that reverses the flow of goods in the supply chain and carries cargo from the customers back to the sellers or manufacturers. The customer usually initiates the process of reverse logistics after the delivery of goods to their location based on their dissatisfaction with the received shipment. In the e-commerce and trade industry, the inward flow of finished goods in the supply chain aims at value-recovery and reusing or recycling the goods. It is the opposite of traditional logistics, where finished goods move from the manufacturer or seller to the customer. Reverse logistics is essential to customer satisfaction and also promotes the importance of supply chain sustainability; therefore, various e-commerce businesses have adopted it.
In simple words, when a customer or shipping company initiates the process of returning the received shipment to the seller, it is known as reverse logistics. It can occur for various reasons and identifies the shipping party to whom the return shipment will finally go, i.e., the seller or the manufacturer. Let us learn why customers or shipping companies opt for reverse logistics.
Causes of reverse logistics in shipping
The reasons for reverse logistics initiation are-
- Defected shipment– Sometimes, the shipment received by the end user is not in working condition. Cases of cargo damage may occur during cargo handling processes, which leads to breaking or spoilage of the shipment. The customer is bound to return the shipment if the integrity of the cargo is sabotaged. Shipping companies often detect damage in cargo and initiate a return themselves.
- Failed delivery– Although shipping companies ensure that the customer gets informed about the shipment’s arrival, customers sometimes fail to receive their calls or the delivery agent cannot trace the delivery address. If the delivery fails to deliver the goods in consecutive working days, the shipping company initiates reverse logistics.
- Customer dissatisfaction– It is common in the e-commerce sector where customers purchase products and are eligible to return them to the seller within the specified number of days. Since the e-commerce sector works on customer service and satisfaction, it pre-states its return policies and procedures for customer satisfaction.
- Missing parts– Upon receiving the shipment, customers may discover that one or more products/ parts are missing. Under such circumstances, it is common for the customers to return the shipment to the seller.
Why is reverse logistics important in the shipping industry?
The importance of reverse logistics in shipping is as follows-
- Customer satisfaction– Return policies allow customers to freely try products in the comfort of their homes and exchange them or get a full refund if the shipment is not up to the mark. A hassle-free and fast return process helps create better customer relationships and enhance brand loyalty.
- Waste management– The products from reverse shipping do not go to waste and are modified to be used better. Shipments from the reverse logistics process go to the seller, who further sends them for refurbishment, repairs, recycling or disposal. Proper disposal methods are followed in case the goods are meant for discarding.
- Cost-effective– Remanufacturing or refurbishing, recycling, and repairing returned products helps reduce significant losses otherwise caused by discarding the returned shipments. These goods are remade quality-appropriate and resold to capture the value of the products.
- Maximise supply chain efficiency– A well-managed reverse logistics process helps in efficient supply chain management. Businesses can restock the modified products from reverse logistics and assist inventory management at places with a deficit for similar goods. It is a good way of optimising inventory turnover during an influx of demands when the manufacturing company fails to comply with the demand.
- Improves sustainability in the supply chain– The shipping industry’s impact on the environment cannot be overlooked. By optimising and streamlining the reverse logistics process and recycling returned goods, the logistics industry helps reduce waste production. It helps in minimising environmental damage.
How does the reverse logistics process work?
Reverse logistics in shipping follows these steps-
- Return authorisation– When a customer requests a return of products or shipments, the seller receives a return authorisation with reasons and proof of why the shipment is being returned. It is up to the seller to determine if the request is valid and eligible for a return. The customer is then allotted a return authorisation (RA) number.
- Initiation of product return– A delivery agent takes the shipment’s return and brings it back to the logistics centre. The shipment is checked for its labels, tags and condition while taking the return.
- Inspecting and categorising– The goods are shipped back to the seller or retailer once the logistics centre receives the shipment. Inspection of the shipment is necessary to check and categorise its condition based on quality standards. Products in the proper condition and quality are sent to be restocked. The rest of the products are organised for refurbishing, repairs, recycling or disposal.
- Refurbishing or repairs– Returned shipments are sent to their respective facilities to fix defects, replace or add missing parts, and refurbish them. Once the goods are repaired, they are returned to the seller for sale as new.
- Recycle or disposal– Certain goods are beyond repair or refurbishment and are sent for either recycling or disposal. Goods are skimmed for various parts by disassembling them and collecting parts for raw materials for new products. If the shipment is beyond recycling, it is carefully disposed of by following compliance and safety regulations for disposal of goods.
- Restocking for redistribution– The refurbished and repaired goods are re-sent to the seller or retailer to be resold as new or refurbished items.
What role does technology play in optimising reverse logistics processes?
Since reverse logistics plays a significant role in the shipping industry, it is essential to optimise reverse logistics processes. Technology is being integrated into the logistics supply chain and is helping reverse logistics management.
- Big Data Analytics– The logistics industry stores pools of data collected during the packaging and transit process. Data collected from all customers during reverse logistics is essential in tracking consumer behaviour and other relevant information such as product condition on return, reason for return, and customer feedback. Businesses can combine the data from various systems to perform big data analytics in the supply chain and filter out insights to improve customer experience and minimise the return of goods.
- RFID technology– It facilitates supply chain visibility by barcoding each product, enabling logistics companies and sellers to track the movement of goods during the reverse logistics process. It reduces the risks of misplaced or lost shipments.
- Machine learning– The filtered insights from big data analytics are used by machine learning to automate the decision-making process for the returned goods. Based on the quality and condition of the returned goods, technology can categorise the goods for refurbishing, recycling, repairing or discarding.
- Artificial Intelligence– AI-based predictive analysis is highly advantageous in predicting which goods are most likely to be returned due to issues in product manufacturing or failure to meet quality standards. It helps in saving money and time. AI-powered chatbots are also essential to customer satisfaction by giving personalised responses to their queries.
These are a few technologies used in reverse logistics in shipping to facilitate customer satisfaction and streamline supply chain operations.
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