Reverse logistics in the supply chain,What it is,Types

Learn about the importance of reverse logistics in the supply chain, the types of reverse logistics that exist and some examples applied to e-commerce

Globally, shoppers return an average of US $ 642.6 billion in merchandise each year (equivalent to more than 900 million iPhones 11), which significantly reduces profit margins and increases logistics costs in stores. Business. In this sense, the reverse logistics process and its transportation costs and other associated costs for returning orders is a complex challenge for 83% of retailers in Latin America. This is indicated by the Study on the future of omnichannel operation , carried out by Zebra Technologies.

Faced with this scenario, e-commerce must be prepared to assume reverse logistics in its supply chain that is profitable for the company and quality for the customer.

What is reverse logistics? 

The reverse logistics is a stage of the supply chain that occurs after delivery of goods to the final customer, and its goal is to return the product from the customer to the supplier or provider. In other words, it is the same process as in conventional logistics (which takes the goods from A to B), but in the opposite direction (taking the goods from B to A). 

This process is not strictly necessary within the supply chain , since a product return or waste collection does not always have to be carried out. Therefore, the different types of reverse logistics are developed under very specific circumstances.

Types of reverse logistics

According to the functionality of the company, 2 types of reverse logistics can be differentiated : 

  1. Reverse waste logistics: consists of the collection, recycling and treatment of waste generated by the final product after it is marketed. This in order to reduce the environmental impact of said waste, and also to meet the logistical objective of reusing them to generate value again from them as raw materials, spare parts, etc.
  2. Reverse return logistics: consists of returning the product from the end customer to the center of origin. This can be caused by customer dissatisfaction, wrong delivery, defective product, among other reasons.

In particular, the reverse logistics of returns is the one that is most related to the operation of e-commerce.

Importance of reverse logistics in the supply chain

According to the UPS Online Shopper Pulse report , the return experience affects the purchase decision of 73% of consumers globally, thus impacting sales rates and brand positioning. In this sense, reverse logistics plays a fundamental role in offering a good return service , which improves the shopping experience, promotes customer loyalty, multiplies sales and promotes competitiveness in the market. 

However, when it comes to e-commerce, the importance of reverse logistics lies not only in that it improves the customer experience, but also that through it, logistics costs can be optimized . A well planned and executed reverse logistics process is economically sustainable, since it facilitates saving time and money .

Characteristics of reverse logistics

The main characteristics of reverse logistics are the following:

  1. The reverse logistics can occur between various stakeholders at the same time. For example, if a customer receives a defective product, there is a return from the buyer to the dealer, and then from the dealer to the supplier.
  2. Generally, reverse logistics is conducted through the after – sales service.
  3. From a global perspective, multiple company departments are involved in reverse logistics : technical support, customer service, sales, finance and logistics.
  4. The reverse logistics is sustainable through the effect of economies of scale: the more products are returned, the greater the reduction in land transportation costs and other partners.
  5. The reverse logistics process requires more effort, work and investment from the company; but it also creates an opportunity to establish a better relationship with the customer.
  6. Within the category of reverse logistics return also is the process triggered by failed delivery of last mile . That is, shipments that were not finally delivered to customers and that, therefore, must be returned and reprocessed.

Examples of reverse logistics in e-commerce

Today, most businesses have a reverse logistics service for product returns as a fundamental part of their supply chain . Some offer the service free of charge to the customer, others add a return charge (as the case may be), others have a returns center and others delegate the responsibility of the return to the customer, although in the latter case the company continues executing the return processing functions in the information systems, especially when the e-commerce is only the intermediary in the transaction between the buyer and the seller.

Let’s see some examples of reverse logistics in practice:

  • Amazon reverse logistics example

Amazon is a company that is known for providing excellent after-sales return service. Its reverse logistics process allows customers to return products within 30 days of receiving them, as long as their return policies are followed , which vary depending on the products to be returned and the reasons for which they are returned. they want to return.

  • MercadoLibre reverse logistics example

MercadoLibre is an e-commerce that applies reverse logistics by taking two measures according to its return policies : in the first instance, the customer must agree on the return with the seller and notify it on their website. If this procedure is not effective, the buyer can request the mediation of MercadoLibre to proceed with the return. 

Finally, as with the traditional logistics of the last-mile delivery service , reverse logistics also requires the optimization and continuous improvement of its processes , considering that, at this stage, the client demands an economic, efficient and quality process . For the buyer, it is important that the company complies with both on-time deliveries and prompt returns.

If you want to coordinate reverse logistics that is satisfactory for the customer and profitable for the company , you must implement technologies that allow you to streamline each of the associated processes. This is particularly important in the case of businesses, whose reverse logistics services involve collecting products from their customers’ homes.

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