The Forgotten Part of Logistics - "Reverse Logistics"

The term "reverse logistics" applies to the process of moving goods for the purpose of extending the product's lifecycle, recapturing value, or ensuring proper disposal.  Companies that ensure timely delivery and processing of returns position themselves to save more or earn more from the returned product.

You may be surprised by the fact that less 20% of the returned goods are actually completely wasted. Rest of them are in good shape to get reused after some repair. Also, the reverse logistics accounts for 4% of the total logistics costs of a company.  These two facts alone justify the existence of  reverse logistics in terms of profit and expenditure.

For high-tech companies, reverse logistics offers a wealth of revenue opportunities in addition to processes that can help them be more efficient and avoid fines. As a whole, the electronics industry spends over $14 billion on returns every year. High-tech manufacturers without a well-managed reverse logistics process could be losing over 50% of the returned inventory value since the majority of returned products can be sold in secondary channels. This lost opportunity could add up to millions for a medium to large company.

After a company has decided to have reverse logistics, it becomes important to decide whether reverse logistics should be developed internally or outsourced. A company can have some parts of its reverse logistics outsourced and remaining parts can be developed internally. How much to outsource depends after the cost benefit analysis has been done. There are four distinct parts that make up a comprehensive reverse logistics process. Most companies outsource one or more of these:

1. Product processing, which includes transportation

2. Repair and refurbishment

3. Liquidation

4. Returns management systems

It is important to remember that you develop you reverse logistics operations in isolation with the forward distribution activities regardless of whether you are outsourcing some or all parts of your reverse logistics.

Many of you would think that it is necessary to integrate the forward and reverse supply chains but this is not appropriate to do so. Can you think why?

Source - "UPS Reverse Logistics", http://www.ups.com/media/en/Reverse_Logistics_wp.pdf