Improving the reverse logistics process
JP Arnaud-Marquez
·September 1, 2023
While logistics in ecommerce refers to the process of getting your products through your supply chain from the retailer to the consumer, reverse logistics is the opposite of that: It refers to everything associated with the process of getting returned products from the customer back to a retailer’s warehouse for resale, or to the product’s final destination, which could also include a landfill, a recycling plant, or a refurbishment facility.
The reverse logistics process is often expensive for retailers: More than 20% of ecommerce products are returned to retailers, and it costs about 66% of the price of a $50 item to process a return. Even worse, many of the items that are returned end up going into landfills even after being shipped back, contributing to pollution and environmental waste.
In this article, we’ll explore:
- What is the reverse logistics process?
- How to build a better returns management process
- How a returns management solution can optimize your reverse logistics process
What is the reverse logistics process?
The reverse logistics process is the process of managing returned goods from a customer to their original seller, or in some cases to a third-party merchant. This includes receiving the return at an appropriate warehouse or fulfillment center; inspecting, sorting, and processing it; and then sending it back either for resale or to its final destination.
When possible, the goal is to return the item to the point of origin, or back to the company’s inventory for resale. This helps companies avoid costly returns fees and provides customers with a more efficient returns experience.
However, this isn’t always possible due to product condition, packaging requirements, or other factors. In these cases, third-party providers may partner with retailers to refurbish and resell returned items. This can be time consuming and expensive, as it requires companies to set up and manage relationships with multiple vendors, deal with customer service inquiries related to the sale of returned goods, and handle any disputes or returns that may arise.
And in many cases, items are returned to retailers’ warehouses only to be sent directly to landfills, contributing to environmental waste and pollution. In fact, five billion pounds of returned products end up in landfills each year.
How to build a better returns management process
In order to ensure that the reverse logistics process is managed efficiently and cost effectively, businesses should have well defined processes in place for managing returns.
This includes setting up processes to identify, receive and review returned items and determine the best course of action (e.g., re-sell or dispose). If a returned product is not likely to be resold for full price, it may make more sense to encourage the customer to keep, pass along, or donate the item.
You can also establish a partnership with a donation program, helping your returned products find a second life: For instance, the bedding-focused retailer Brooklinen offers a generous return policy that accepts returns for a full year. If the items are no longer in new condition, the brand will distribute them to donation centers through their partner, Good360, where they can be used in places like homeless shelters or pet shelters.
It’s also important to have a strategy in place for handling customer service inquiries related to returns, as well as a clear return policy and procedures for dealing with disputes or returns that may arise.
Finally, businesses should have a plan for recovering lost revenue from returns by reselling returned items. By having the right processes in place, businesses can improve the environmental sustainability of their product returns process and maximize their return on investment.
How a returns management solution can optimize your reverse logistics process
The reverse logistics process is ripe for improvement — and by partnering with a returns management solution like Loop, you’ll have the tools to build a cost-effective workflow that helps you improve customer satisfaction, reduces environmental waste, improves efficiency, and boosts your profit margins.
Here are some ways automating your returns management process can help your ecommerce business:
- Automated returns management workflows based on set conditions
Rather than accepting all returned products back to your warehouse, your returns management platform can automate the returns process based on set conditions, including the item category, condition, weight, and whether it can be resold at full price. Based on a variety of factors, the platform will automatically route the product to the most cost-effective option, whether that’s requesting a return, donating the item, sending it to a third-party provider for resale, or encouraging the customer to keep the item while refunding their money. Your returns solution will calculate the ROI of each customer return to determine whether resale is cost-effective, and provide the customer with the right return option for each product. - Better visibility into your supply chain process
With a returns management solution, your team will have full visibility into the product life cycle, including when returned products are en route to your warehouse, are being resold to a third-party provider, or are being written off as losses. Your returns solution can integrate with your 3PL so that you’ll know which items are available for immediate resale and which need to be repaired or refurbished. It can also automatically route returned products based on the most cost-effective carriers and shipping classes, helping you save money on return shipping. - Improved customer satisfaction and retention
A self-service returns management platform makes it easy for customers to fulfill their goals independently, leading to faster resolution time and reduced customer support needs. Your platform can also offer incentives for the customer to choose an exchange or store credit over a return, with a streamlined process that doesn’t require the customer to complete another shopping cart transaction. By optimizing for exchanges, Loop merchants have been able to retain about 40% of their revenue from returns — money (and customers) that would likely be lost forever otherwise.
Want to learn how Loop can help you improve your reverse logistics process? Get a demo today.
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