How to build a best-in-class reverse logistics process
JP Arnaud-Marquez
·December 28, 2023
As an ecommerce retailer, you most likely put a lot of time and effort into managing a seamless logistics process—ensuring that your product makes its way from your warehouse to the customer’s location quickly and efficiently. But considering that up to 30% of ecommerce purchases end up with returned items, you should be putting just as much focus on developing a best-in-class reverse logistics process.
By prioritizing your reverse logistics process, your brand will be able to reduce landfill waste, lower reverse shipping costs, and improve customer satisfaction and retention. Best-in-class reverse logistics is the future of returns—by taking steps to optimize your strategy now, you’ll be ahead of the game.
Let’s take a look at what reverse logistics in ecommerce entails, and how to build a smooth returns management process that will help you make the most of the product life cycle.
What are reverse logistics?
Reverse logistics refers to the reverse of the traditional logistics journey — in this case, getting a returned product back from the customer to the product’s final destination, whether that’s the warehouse, a donation center, or recycling plant.
The reverse logistics process involves:
- Customer communication
A smooth returns management strategy involves communication with the customer at every step. You’ll need to confirm their return request, provide them with details for return shipping, and provide them with real-time status updates once the returned product is en route — ensuring that they receive their refund or exchange in a timely manner. - Repackaging
When it comes to customer returns, customers may not want to, or be able to, repackage the item as securely as your warehouse team did initially. In this case, it’s helpful to ensure that they have the option for packaging assistance, which you can do by offering white-glove repackaging service in their home (often used for furniture and other large bulky items), or encouraging your customers to visit a nearby drop-off center, where they can take the item to be repackaged and shipped by a shipping service. - Shipping
Depending on your return policy, you may insist that your customer pays reverse shipping, or you may include free returns as part of your store policy. If you offer free returns, it’s important that your returns management solution calculates the most cost-efficient carrier and shipping route to ensure that you get your items back in stock based on your ideal timeframe. - Restocking, refurbishment, or recycling
Not all returned items can be returned to inventory for resale — so it’s important that your reverse logistics solution ensures that each product return ends up in the right place, with automatic routing based on the product category and condition. While some new, unused product returns may be returned back into inventory, others may be sent to a secondary marketplace for refurbishment and resale; and some items may be sent to a donation center or recycling plant where the materials can be repurposed. By setting up a logical returns management pipeline, you can prevent your returned products from ending up in landfills, and ensure the most sustainable option for each product.
The importance of an automated reverse logistics process
As we’ve seen, there are a lot of moving parts to manage in reverse logistics—and trying to handle it all manually simply won’t cut it.
As your business grows, your product return requests will also grow—and by forcing your customers to deal with a customer support rep for every return request, you’ll deliver a sub-par customer experience that will make the customer less likely to consider your brand in the future.
Additionally, without using automation to determine the return path for each returned item, you’ll likely end up routing the majority of your products back to your warehouse, only to ultimately end up in a landfill—an outcome that’s expensive, wasteful, and easily avoidable.
By using technology to optimize your return process, you’ll be able to deliver a strong reverse logistics strategy that ensures efficiency at every stage of the process. With returns management automation, you can:
- Build a great customer experience with a self-service returns portal
By empowering shoppers to initiate their own returns in an online portal, you can conserve customer support time and provide a smoother, more efficient return process. Your portal should show customers which products are eligible for a return, and ask them multiple-choice questions about the product condition and reason for return to identify the right next step for the returned product. - Optimize your reverse supply chain management for sustainability
By using conditional logic to determine the right return path for each product (return to warehouse, refurbisher, recycling plant, or donation center), you can ensure that each product return is handled with sustainability in mind. Automated workflows can determine the most efficient reverse logistics path based on the item’s category and condition, helping you keep your returned products out of landfills. - Lower costs in reverse shipping
Reverse logistics can be expensive, costing anywhere up to 60% of the cost of the original item. By automating your reverse logistics, you can optimize for the most cost-efficient carriers and routes, including the ability to ship in bulk when customers drop their products off at a drop-off center. Your returns management solution can also determine when a returned product is not cost-effective to send back, enabling you to save on return shipping by offering the customer a returnless refund. - Optimize your inventory management
Automated routing for your reverse logistics makes it easy to determine which products should be restocked at each warehouse, based on their current inventory levels and historic demand at each location. Using automated reverse logistics solutions can help you avoid overstocking at certain locations while running out of inventory at others. - Improve your bottom line by encouraging exchanges
By using a returns management solution like Loop, you can take advantage of the “shop now” and “shop later” features, enabling customers to redeem credit from their returned product instantly, and apply it towards either a different size or color of the same item, or to use it towards any other item from your store. By facilitating a streamlined exchange process, your ecommerce shop will be able to recapture more lost revenue and increase customer retention: Around 40% of return revenue is retained by Loop merchants.
How to build a best-in-class reverse logistics process
In order to build a great returns experience for both your customers and your team, it’s important to put the right returns management technology in place.
Your reverse logistics tech stack should include:
- A returns management solution
First and foremost, you’ll need a returns management solution like Loop, which can integrate with all of your other tech solutions, including your ecommerce platform. Your returns management solution should integrate data from all sources, so that you have real-time visibility on the status of your returned products and where they are in the reverse supply chain at any given time. Your returns management solution should also offer data insights, so that you can see which products are being returned and why, which will help you to optimize your product inventory and descriptions. - Carrier integrations
Your reverse logistics solution should integrate not just one, but multiple, shipping options, including USPS, UPS, DSL, and FedEx, as well as international carriers if you ship internationally. By adding multiple carriers, you’ll be able to automatically rate-shop to ensure that you’re using the right carrier and route for each type of product return. - In-store point of sale integration
While some customers may prefer to ship their returns independently, many prefer the convenience of getting their items professionally repackaged and shipped from a nearby drop-off center. By partnering with a network of drop-off centers, you can ensure that your customers always find the right option for their needs, and ensure that your returned products are scanned in instantly and sent back based on your custom shipping preferences. - An inventory management solution
In order to maintain visibility of your entire supply chain, it’s important to integrate an inventory management solution, which can help you see which products are in stock, sold, or in the process of being returned. By optimizing your inventory across multiple distribution centers, you’ll be able to ensure that you have the right inventory levels to meet supply across all of your location hubs. - Third-party reseller partnerships
By partnering with third-party circular economy solutions, you can build a secondary marketplace for gently used and refurbished products that aren’t eligible for resale. These solutions can build branded marketplaces where your products can gain a second life, helping you recapture revenue lost during the return process and encourage sustainable reuse for returned products. - Self-service customer support
If customers have questions about the returns process, your returns management solution should integrate with self-service support options, such as chatbots and a knowledge base, enabling them to quickly search for the answers to their questions. If they’re not able to solve their problems, they should be able to escalate their request to a live support agent, who’ll be able to guide them through the solution.
By building a robust reverse logistics solution for reverse supply chain management, you’ll be equipped with all the tools you need to automatically optimize the reverse logistics process for each customer — no matter what their needs are.
You’ll be able to boost customer satisfaction and retention while lowering your reverse logistics costs and improving your sustainability efforts—a win-win all around.
Ready to learn more about how returns management can improve your reverse logistics process? Get in touch for a demo of Loop.
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