Reverse logistics guide: types and how it differs from traditional logistics
Aug 3, 2023
The size of the global reverse logistics market was estimated at $731.30 billion in 2022 and is expected to grow annually at a compound rate of 12.4% from 2023 to 2030, provided that there is effective management of product returns to commercial activities or manufacturers from customers, which drives the global market towards growth and achieving these expectations.
But what exactly is the reverse logistics we are talking about, what are its types, and is it very different from traditional logistics services?
All this and more we will learn about in this article. Let's start with the definition.
What is Reverse Logistics?
The term reverse logistics refers to the process of planning, implementation, monitoring, and control of the cost-effective and actual flow of raw materials, work-in-process inventory, finished goods, and related information from the point of consumption, which represents the customers, to the point of origin, which represents manufacturers or distributors, through logistics companies in Saudi Arabia with the aim of recovering product value, recycling, or safely disposing of them.
According to this definition, reverse logistics involves several forms as follows:
Returning goods from consumers to manufacturing companies or distributors for multiple reasons such as manufacturing defects, poor quality, non-compliance with specifications, etc.
Returning unsold goods by distribution partners according to the contract.
Returning products from consumers to the manufacturer for repairs and maintenance according to warranty agreements.
Remanufacturing goods from returned or defective materials.
Recycling and disposal of expired goods.
It is worth noting that the term reverse logistics has multiple names that are used interchangeably, including: after-sales supply chain, retro-logistics, or reverse logistics, etc.
The mechanism of reverse logistics is based on multiple stages, the most prominent of which we review below.
Mechanism of Reverse Logistics
Reverse logistics involves multiple stages in its mechanism, including:
Return processing stage: In this stage, standard procedures are established that commercial activities will undertake once goods are retrieved from customers, including the method of return, inspecting the goods to ensure their condition, determining times for receiving shipments, approving refunds, replacing defective goods, etc.
Handling returns: In this stage, returns are handled and classified based on their condition into the category of recycling, repairs and maintenance, or damaged items that require safe disposal, etc.
Repair and recycling stage: This involves dealing with items that can be processed and repaired to be resold or at least selling the salvaged parts to be utilized in the production process for other items.
It is worth noting that reverse logistics is divided into branching types that serve different aspects, which you will find explained in the following paragraph.
Key Types of Reverse Logistics Services
Reverse logistics has 7 main types:
Returns Management.
Packaging Management.
Unsold Products.
Returns resulting from unsuccessful deliveries.
Products that have reached their end of life.
Products that require repairs and maintenance.
Remanufacturing or Refurbishment.
Here is more detail on each of these types:
First: Returns Management:
This type is the most common in reverse logistics as it deals directly with goods returned by customers. Therefore, commercial activities are interested in this type of reverse logistics to provide a smooth and hassle-free return experience, enhancing customer loyalty to the brand. This is done by relying on unique Returns Management Systems (RMS) that allow for the easy and smooth management of all operational processes.
This is the system followed in Oto – the first shipping portal in the Arab world – which provides an integrated technical system specializing in returns management, for smooth and safe handling of customer returns with multiple return options that suit the needs and budgets of various commercial activities. If you want to try Oto's different solutions, you can now create a free account in Oto and benefit from the various management systems that organize the entire logistics operations.
Second: Packaging Management:
This type of reverse logistics focuses directly on utilizing usable packaging materials to re-package products returned by consumers or distribution centers for resale, thereby helping to save the cost that could be spent on new packaging for the returned goods.
Third: Unsold Products:
This type is concerned with returning items from retailers or distribution centers to manufacturers for multiple reasons, including:
Weak sales.
The product's expiration date passes before it can be sold.
Fourth: Returns Resulting from Unsuccessful Deliveries:
This is a type of reverse logistics that deals with shipments that failed to be delivered to customers, either by addressing and correcting the reasons that led to the delivery failure and sending them to the consumer again, or by returning them to warehouses for shipment and return to the manufacturers.
Fifth: End-of-Life Products:
This is one of the important types of reverse logistics as it relates to the scientific disposal of various goods by manufacturers upon the end of the product's lifespan, without harming the environment.
Sixth: Products that Need Repairs and Maintenance:
This type is concerned with handling consumer goods and returning them for repairs and maintenance work according to the warranty. Consumer goods include, for example: computers, electrical appliances, mobile devices, etc.
Seventh: Remanufacturing or Refurbishment:
This type is concerned with reconditioning goods returned by customers or distribution centers, including recycling, manufacturing, and refurbishment, which contributes to reducing losses for institutions and commercial activities regarding defective products, as well as disposing of unnecessary waste.
You should know that reverse logistics differs significantly from traditional logistics services, as there are fundamental differences between the two terms.
Differences and Discrepancies Between Reverse Logistics and Traditional Logistics Services:
There are several differences between both reverse logistics and traditional or forward logistics, including:
From a supply chain perspective, traditional logistics is concerned with producing new goods from provided raw materials and then working to distribute them to retailers until they are shipped and delivered to the final consumer. As for reverse logistics, goods are directed from consumers to distributors and manufacturers either for replacement, repair and maintenance, recycling, or disposal.
Reverse logistics deals directly with managing returns, processing them, and inspecting them after receiving them from consumers, while traditional logistics services deal with managing and processing orders completed by customers for delivery at specified times.
Traditional logistics services focus on packing and packaging products for shipping and delivery to the consumer with the best possible quality, while reverse logistics focuses on reusing packaging materials and improving their poor quality due to their return from consumers to reduce packaging-related costs.
These are the most prominent differences and discrepancies between reverse logistics and traditional logistics services. To professionally implement reverse logistics to ensure the success of your commercial activity and grant customers a smooth return experience, you can use these tips.
Tips for Professionally Implementing Reverse Logistics in Online Stores
Establish a clear and easy-to-understand return policy for customers, which must include many important elements such as: the allowed period for return, the required conditions for return, the necessary cost if any, the shipping method, etc.
Accurately classify returned products, and determine whether returned products will be sent back to the warehouse to be reused and resold, or returned to the supplier due to manufacturing defects, or directed to the manufacturer for disposal.
Rely on modern technologies to reduce fraud, such as barcodes and automatic image recognition to detect returned products and limit cheating and fraud.
Cooperate with multiple shipping companies to facilitate the return process, and to ensure a smooth return experience for customers that guarantees enhancing their loyalty to the commercial activity. It is worth mentioning that by creating an account on the Oto platform, you will be able to easily return your shipments through any of the types of shipping companies available and choose from more than 200 local and international shipping companies through an easy and simple user interface.
Continuously improve reverse logistics services by analyzing operational performance, identifying problems, and developing appropriate solutions to improve the service provided.
What is the Importance of Reverse Logistics for Commercial Activities?
Reverse logistics has great importance for various commercial activities, and this importance is manifested in several points:
Reducing costs related to management, repair, technical support, safe disposal or recycling of goods, and return management, by establishing systematic strategies and relying on external sources to manage and execute this process with the lowest possible costs and high quality.
Increasing revenue: If a strong return system is relied upon, you can retrieve goods from customers, inspect and repair them or recycle them, and then resell them, which increases the return on investment.
Improving customer satisfaction and enhancing their loyalty by giving them the possibility to easily and smoothly return, exchange, or repair goods without going through complex steps and imposing exorbitant fees.
Improving the brand's reputation: One of the important aspects that consumers care about before purchasing from any online store is the brand's return policy and handling of returns. Thanks to the application of reverse logistics and reliance on external sources to manage this process professionally, there will be an increased opportunity to improve the quality and reputation of the brand by building smooth and easy return policies that customers can deal with, which will then be reflected in their positive comments and reviews.
Promoting the sustainability of the product life cycle, by retrieving goods, recycling them, and working to improve them, which contributes to reducing investments in resources and achieving more profits.
Managing risks related to product exchange and disposal. For example, some products require scientific methods for safe disposal without harming the environment, and other products contain confidential data that must be deleted before being recycled and sold, and so on.
Conclusion
Reverse logistics is a pivotal process that commercial activities must pay attention to in order to provide a smooth return experience for customers that contributes to gaining their satisfaction and enhancing their loyalty to the brand. Reverse logistics also has other important aspects that contribute to strengthening national economies through recycling and disposing of used or no longer required products, and it is an integral part of the circular economy which aims to reduce waste and reuse resources.
This reflects its effective role in creating new job opportunities and boosting the economy. Therefore, innovative solutions should be developed to effectively apply reverse logistics and rely on an experienced logistics company to achieve the maximum possible benefit from it for the benefit of all concerned parties.
إيهاب محمود