Reverse Logistics
Reverse Logistics
Reverse logistics is the planning and control process for the return of products from consumption or end
user points to the manufacturer or distributor for their recovery, repair, recycling or disposal. Reverse
logistics is therefore yet another stage of the supply chain and occurs after the “delivery” stage.
Reverse logistics start at the end consumer, moving backward through the supply chain to the
distributor or from the distributor to the manufacturer. Reverse logistics can also include processes
where the end consumer is responsible for the final disposal of the product, including recycling,
refurbishing or resale.
The objectives of reverse logistics are to recoup value and ensure repeat customers. Less than 10% of in-
store purchases are returned, compared to at least 30% of items ordered online. Savvy companies use
reverse logistics to build customer loyalty and repeat business and to minimize losses related to returns.
Well-designed supply chains are responsive to changes and can handle some reverse logistics
requirements. This reverse process can return products one step back in the chain or to the original
supplier. They can even send returned products back to regular sales or discount channels (like
liquidators).
The reverse logistics process involves managing returns and buying surplus goods and materials. The
process is also responsible for dealing with any leases or refurbishments. Reverse logistics vary across
different industries, and there are different economic incentives for improving reverse logistics
management.
For example, in the beverage industry, the reverse logistics process uses empty tap containers. Beverage
production companies want to recapture the value of their containers by reusing them. This
requires planning transportation, managing shipping loads and cleaning the containers.
In the construction industry, reverse logistics moves and recycles salvaged materials to new sites. As the
construction industry adopts more sustainable practices to reduce waste, there is an opportunity for
cost savings by using reverse logistics.
In the food industry, reverse logistics is responsible for returning packaging materials and pallets.
Companies also must deal with rejected food shipments. Rejections can create logistical challenges due
to delays that lead to food spoilage and concerns over tampering.
The Reverse Logistics Association is developing secure, quick, reliable, login (SQRL) codes on packaging
to provide detailed product information and address these logistical challenges.
● Returns management: This process deals with product returns from customers or avoiding
returns in the first place. These activities should be fast, controllable, visible and
straightforward. Customers judge a company on its return flow and re-return policies. A re-
return is the return of an item a second time. Often, these returns trigger the extended return
policies, such as offering store credit. For example, a customer buys a returned product on
clearance, takes it home and discovers it broken. The store policy would not normally accept the
return, but it does allow for a store credit for the faulty product. A re-return can also occur
when a vendor rejects the return and gives it back to the purchaser without a refund. This
scenario could happen with custom-made items.
● Return policy and procedure (RPP): The policies about returns that a company shares with
customers is its RPP. These policies should be visible and consistent. Employees should also
adhere to them.
● Remanufacturing or refurbishment: Another type of reverse logistics management includes
remanufacturing, refurbishing and reconditioning. These activities repair, rebuild and rework
products. Companies recover interchangeable, reusable parts or materials from other products,
also known as the cannibalization of parts. Reconditioning involves taking apart, cleaning and
reassembling products.
● Packaging management: This type of reverse logistics focuses on reuse of packing materials to
reduce waste and the disposal.
● Unsold goods: Reverse logistics for unsold goods handles returns from retailers to
manufacturers or distributors. These types of returns can be due to poor sales, inventory
obsolescence or a delivery refusal.
● End-of-life (EOL): When a product is EOL, it is no longer useful or does not work. The product
may no longer meet a customer's needs or be replaced by a newer, better version.
Manufacturers often recycle or dispose of products that are end-of-life. These goods can create
environmental challenges for manufacturers and countries.
● Delivery failure: With failed deliveries, drivers return products to sorting centers. From there,
the sorting centers return the products to their point of origin. While rare, some sorting centers
may have the staff available to identify why a delivery failed, correct the problem and resend.
● Rentals and leasing: When a piece of equipment comes to the end of its lease or rental contract,
the company that owns the product can remarket, recycle or redeploy it.
● Repairs and maintenance: In some product agreements, customers and companies maintain
equipment or repair it if issues arise. In some cases, the company sells damaged returned
products to another consumer after repair.
Gartner Research says that about 70% of businesses plan to invest in the "circular economy." This
circular economy follows traditional logistics and then continues around through what Gartner calls a
closed-loop supply chain.
With this practice, companies are participating in a system focused on a sustainable economy.
Companies find new uses for disposed products with recovery, repair and recycling. Materials once
typically viewed as waste have value again.
The circular economy also ensures compliance as many countries institute a policy requiring "producers"
to develop more sustainable practices. The guidelines outline subsidies for waste prevention, research
and development and recycling. Other policies restrict landfills, mandate collection and recycling
programs, and penalize certain waste practices.
Gartner Research finds that less than half of returned goods are resold at their full price. There is value
in finding the best disposition option for returned items. For example, retail businesses like B-Stock
resell returned goods. B-Stock sold 70 million returned or excess goods in 2019. The company buys the
returns for a percentage of their original cost and then resells them at a discount to the consumer.
Using reverse logistics to boost the efficiency of the traditional supply chain benefits everyone. Some
businesses separate their forward and reverse logistics, and others combine them. The relative success
of combining them depends on the company’s experience, the value of its products and return volume.
Either way, they use practices to maximize their profitability ratios with their supply chain activities.
The product data collected when engaging with customers after delivery is an advantage of well-
executed reverse logistics. Data provides insight into an organization’s supply chain and an opportunity
to improve products and/or the customer experience.
Optimized reverse logistics also leads to better supply chain visibility, which leads to benefits like:
6. Cost reduction
7. Greater customer satisfaction
8. Better customer retention
9. Faster and better service
10. Loss reduction
11. Improved brand sentiment
12. Waste reduction and greater sustainability
Companies must track inbound and outbound logistics to get the full picture. Inbound logistics manages
the receipt of raw materials or goods from the supplier to the manufacturer. Outbound logistics is the
processes that deliver the finished goods to the end user. Both inbound and outbound logistics are
measured from the manufacturer’s perspective, while reverse logistics can be part of any point in the
supply chain.
To begin with, in direct or conventional logistics, product quality, quantity and management is more
predictable and can therefore be planned and controlled more easily. But reverse logistics is a more
demanding process for various reasons:
Product demand:
While in conventional logistics, product quantity, quality and time management can be programmed far
more strictly, it is almost impossible to anticipate a number of returns. The complexity of that estimate
is the first determining factor of reverse logistics, being more unpredictable and more demanding,
requiring a higher reaction capacity to maintain an optimal service that satisfies the customer.
Transport:
In reverse logistics, the transport of goods to their point of origin or the warehouse from which they
came for the final stage of the delivery phase is normally carried out by more than one transport and
distribution company, each with its own conditions and characteristics, so it is more difficult to
accommodate and coordinate those times with those deliveries in reverse logistics than in direct
logistics.
Warehouse:
Having a specific warehouse area for products that are returned and therefore subject to reverse
logistics, will greatly help this stage of the supply chain from not interfering with the rest of the stages.
Once the products are received, their status is checked to see if they case can be marketed again or not;
if not, they must be withdrawn or repaired. Quality control will also be carried out and a new inventory
classification made. After the identification phase, some products will be stored once again. In this
process phase, it is crucial to have a storage system that adapts perfectly to the product characteristics
and/or unit loads and which also fully optimize the warehouse surface area and height.
To offer a completely satisfactory product experience, the customer must perceive that the return is a
relatively quick and easy process. In other words, the customer must have the feeling that the return
process is so straightforward and efficient that they consider it an added value factor when choosing
one vendor or another.
To achieve that objective though, it is important that reverse logistics is integrated in the business
strategy and that the necessary material and human resources are assigned so that the process is part of
an efficient and profitable business and, if possible, its good management is perceived as a competitive
advantage over the competition. This is where administration, financial, logistics, marketing areas, etc.
play their part.
● Improved brand image: firstly, because the customer perceives that they are buying from a
company with an excellent management and response capacity. And, secondly, because if the
material or the product returned becomes part of a recycling or reuse chain, the users will
perceive a respect for and commitment to the environment that is increasingly valued.
● Strict stock control: reverse logistics will require greater deployment of resources to ensure
agile and clear inventory control, but this more stringent planning and control requirement will
possibly result in less margin for error and unnecessary costs.
● Better customer service: a broader, faster response capacity will help the company to be better
valued, thus capturing more customers and helping to retain current ones.
● Source of valued information: reverse logistics will help the company to understand and know
better the customer, but also to have more and better information on the product that it sells.
The return provides information which may prove valuable if the following is analyzed: what
type of product is returned more frequently (if several are marketed), why, what aspects can be
improved about the product, what part of the process fails (the customer does not receive what
they expected, the packaging is defective, the product arrives in poor condition, the delivery
times are longer than desired...)
● Decreased Losses: Setting up an internal process to repair any items that have been returned
due to flaws or damage is a terrific idea when selling things that can be fixed or reconditioned.
This can reduce the impact of the returns on your finances. Try to have as much work done on
the items that consumers have sent back and then offer them at reduced rates to compensate
for the work. You may convert your liabilities into assets and get the most money out of your
items in this manner.
● Streamlined Costs: You may save money in several ways if your company has a good reverse
logistics system in place. Transportation, administration, maintenance, technological support,
quality assurance, marketing, and disposal expenses may all be reduced with the proper people
and systems in place. Monitor the total cost of ownership for each product type to calculate cost
reductions. Assuming that other aspects of your company are also running well, you may expect
a boost to your bottom line from the value you recoup from items that are subsequently resold
or recycled.
● Increased Revenues: Increased profits are a major upside of reverse logistics optimization.
Many customer returns may be attributed to the item being the incorrect size, color, or model
number. Products are typically in pristine condition, ready to be resold. The products are
received at a staging location, inspected, and any required repairs are made before being
restocked for sale; all of these steps are coordinated with the client as part of a streamlined
reverse logistics process. Even if you sell certain items at a loss or label them as “refurbished,”
the money you get through these channels is still money you wouldn’t have if you hadn’t
created a secondary market.
How Do Reverse Logistics Impact Supply Chain Management?
Reverse logistics provide another critical opportunity for supply chain optimization. Supply chain
management accounts for the reverse and forward flow of goods, and a surge of returns can drive up
supply chain costs, harming profitability.
The reverse supply chain is the backward movement of goods (such as defective products) from vendors
back up the supply chain. It is the opposite of the typical supply chain, where items go from
manufacturer to retailer to consumer.
Reverse logistics refers to everything related to returns and what happens to those products after the
consumer takes them back. That includes planning and implementing strategies to reduce costs and
losses related to returns and to build a better returns experience.
Some organizations have the simple goal of on-time delivery; others reach for what they call the
"perfect order.” For every order, the goal is to get a perfect score in place, time, condition, package,
quantity, documentation, customer and invoice.
The only way to achieve a perfect order is to monitor the data, develop metric targets and improve
processes based on your results. Reverse logistics can play a central role in delivering the perfect order.
1. Volume: The volume of products returned and subsequently resold, reused and recycled is a top
metric used to track reverse logistics. Companies should use these measurements to identify
missed opportunities or problems and determine where process improvements can make a
difference.
2. Percent of Costs: Compare the costs attributed to resales, refurbishing, reuse and recycling to
the total supply chain cost. Determine the difference in the price of these activities versus the
cost of returns. Be sure to calculate the percent of expenses recovered by item.
3. Condition of Returned Products: Some products come back in perfect resale condition, and
companies can turn them around for resale at full value. Other goods may need some work
before a company can resell them. In that scenario, companies should consider other sales
channels for those products. For example, companies may sell refurbished electronics through
another sales channel. Determine the cost of materials and workmanship to determine the full
value. Review the percent of items sent to each sales channel and whether the company is
recouping enough money.
4. Financial Value: Each part of the supply chain has economic value. Understanding what financial
stake your company has in each step can lead to better processes and efficiencies.
5. Errors: Every step in the supply chain also has the potential for errors, such as unaccepted
deliveries or defective materials. Review the cost of mistakes and how frequently they occur to
identify opportunities for improvement.
Supply chain analytics should exist throughout the entire value chain, from sourcing materials through
distribution and delivery. Useful metrics lead to growth in revenue, better margins and controlled
capital. Supply chains are increasingly going digital, so collecting the data is easier.
Looking forward, IMARC Group expects the market to reach $958.3 billion by 2028, exhibiting a growth
rate (CAGR) of 5.5% during 2023-2028.
The growth of e-commerce businesses around the world has increased the number of returns and
replacement items and the need for an efficient reverse logistics service. The demand for reverse
logistics services to enable unhindered client satisfaction is growing around the world as manufacturers
become more aware of the need to reduce negative environmental impact. Reverse logistics is an
important part of the supply chain in a variety of industries, including automotive, electronics,
pharmaceuticals, and others. Reverse logistics services have been developed and implemented by
countries all over the world to extract value from returned and damaged products. Reverse logistics
activities involve warehousing, reselling, recycling management, returns management, replacement
management, and environmental compliance.
The global reverse logistics market is segmented into return type, end user, and service. By return type,
it is further divided into recalls, commercial & B2B returns, repairable returns, end of use returns, and
end of life returns. Depending on the end user, it is fragmented into e-commerce, automotive,
pharmaceutical, consumer electronic, retail, luxury goods, and reusable packaging. By service, the
reverse logistics market is classified into transportation, warehousing, reselling, replacement
management, refund management authorization, and others. Region-wise, the market is analyzed
across North America, Europe, Asia-Pacific, and LAMEA.
Key players operating in the global reverse logistics market include C.H. Robinson Worldwide, Inc., CCR
Logistics Systems AG, Core Logistic Private Limited, DB Schenker, Deutsche Post DHL Group, FedEx
Corporation, Kintetsu World Express, Inc., Safexpress Pvt. Ltd., United Parcel Service, Inc., and Yusen
Logistics Co., Ltd
The unprecedented growth of online shopping in the recent years has promoted the development and
adoption of reverse logistics services and solutions by the leading retail, e-commerce, and third-party
logistics companies (3PLs) For instance, in June 2021, Ruby Has launched an industry alliance DTC
Consortium with the support of multiple companies.
The consortium is expected enable the organizations to comprehensively navigate through their market
strategies such as reverse logistics, marketing, fulfilment, vertical-specific considerations, and more. The
returns segment of the e-commerce industry has become a critical component of the retail customer
experience and thereby drives the adoption of reverse logistics services across the e-commerce industry.
The increase in the adoption of reverse logistics services to enhance the customer experience is the key
driving factor propelling the growth of the reverse logistics market during the forecast timeframe.
By Return Type
Increased product recall due to stringent government rules for product quality
in the automotive industry
The global automotive industry has observed a rise in decentralized production owing to a rise in
demand for high-quality automotive parts. The installation of an inferior quality part in automotive can
lead to fatal accidents, which anticipate the involvement of the government in the prevention of
accidents by invoking regulations and law.
The government involvement in the utility of automotive manufacturing and deployment has further
boosted the growth of the reverse logistics market. For instance, in February 2019, automotive giants
namely Subaru, Tesla, BMW, Volkswagen, Audi, Daimler Vans, Mercedes-Benz, and Ferrari had to recall
their vehicles owing to the faulty airbag installed in those vehicles. The airbags supplied by Takata Corp.
can be triggered to deploy without an accident and spray shrapnel into passengers and drivers. In
addition, the increase in the adoption of electric vehicles drives the number of electric vehicle batteries
being circulated in the world. The batteries at the end of life need to be recycled which creates an
opportunity for the growth of the reverse logistics market.
For instance, in May 2021, MG Motor India and Attero announced a partnership for recycling electric
vehicle batteries. Under the partnership, Attero will provide reverse logistics, refurbishing, and recycling
solutions to MG Motor India. Automotive manufacturers are adopting reverse logistics services to
reduce e-waste and ensure passenger safety.
The above-mentioned factors such as the rise in adoption of reverse logistics by leading automotive
manufacturers owing to the government regulations for passenger safety and minimizing e-waste fuels
the growth of the reverse logistics market during the forecast timeframe.
By End User
Moreover, outsourcing to a third-party reverse logistics (3PL) company could potentially lead to a breach
of confidentiality, resulting in the exposure of customer personal data or the sharing of commercially
sensitive information. The barriers such as lack of coordination at the CEO level and non-alignment of
short and long-run strategic goals of the company also restrict the adoption of reverse logistics services.
Thus, the lack of control of manufacturers on reverse logistics service is anticipated to hinder the growth
of the reverse logistics market.
By Service
Introduction of Blockchain technology
Technological advancement such as Block-chain enables enhanced tracking and transparency of the
overall lifecycle of the product beginning from sourcing of component materials by the manufacturers to
the final disposal of the product. The leading market players of the logistics industry have begun testing
and deploying blockchain technology for augmenting their reverse logistics operations. For instance,
Walmart Canada utilizes a blockchain for automated invoice generation which removes the time-
consuming freight bill audits. The supply chain leaders have implemented a combination of block-chain
and reverse logistics strategies for managing product lifecycles such as reclamation, recycling, and
disposal. Blockchain technology also helps in tracking returns and identification of issues for high return
rates.
The evolution of advanced blockchain technology for reverse logistics services presents an opportunity
for the growth of the reverse logistics market.
● Recalls
● Commercial Returns
● Repairable Returns
● End-of-Use Returns
By End User
● E-commerce
● Automotive
● Pharmaceutical
● Consumer Electronic
● Retail
● Luxury goods
● Reusable packaging
By Service:
● Transportation
● Warehousing
● Reselling
● Replacement Management
● Others
By Region:
● North America
o United States
o Canada
● Asia-Pacific
o China
o Japan
o India
o South Korea
o Australia
o Indonesia
o Others
● Europe
o Germany
o France
o United Kingdom
o Italy
o Spain
o Russia
o Others
● Latin America
o Brazil
o Mexico
o Others
● Middle East and Africa
C.H. ROBINSON WORLDWIDE, INC., CCR LOGISTICS SYSTEMS AG, CORE LOGISTIC PRIVATE LIMITED, DB
SCHENKER (DEUTSCHE BAHN GROUP (DB GROUP)), DEUTSCHE POST DHL GROUP, FEDEX CORPORATION,
KINTETSU WORLD EXPRESS, INC., SAFEXPRESS PVT. LTD., UNITED PARCEL SERVICE, INC., YUSEN
LOGISTICS CO., LTD.
1. ShipBob
ShipBob is a tech-savvy 3PL focusing on forward and reverse logistics services for direct-to-
consumer model eCommerce stores. They offer seamless integration with eCommerce
platforms, including Amazon, Shopify, and BigCommerce (among others). ShipBob can store
products in their warehouse and then package and ship them to consumers. ShipBob offers their
own process for returns and also partners with Happy Returns and Returnly.
2. XPO Logistics
According to their website, XPO Logistics is “the second largest provider in North America, with
over 100 million sq. ft. of facility space in the Americas and Asia.”
They offer forward and reverse logistics solutions to both business-to-business (B2B) and
business-to-consumer (B2C) companies in multiple countries. XPO Logistics not only processes
returns, but they also handle refurbishing, disposal, and/or product recycling.
3. Bowman Logistics
Bowman Logistics offers a wide range of logistics and storage services, including pick and pack
for eCommerce businesses, temperature-controlled food grade storage, consulting, and space
for lease. Bowman Logistics offers warehousing and returns management for B2B and B2C
companies.
4. Mercury Logistics
Mercury Logistics boasts a centrally located U.S. headquarters that is “within 1 day’s drive of
more than 60% of the country’s population.” They handle forward and reverse logistics across
an array of industries, including automotive, health/pharmaceutical, and spirit/alcohol delivery
businesses. Mercury Logistics uses Microsoft Dynamics AX to provide real-time order updates
and live tracking to customers.
5. Optoro
6. Zipline Logistics
On their website, Zipline Logistics boasts the “highest level of customer service in
transportation” based on their Net Promoter Score. Zipline Logistics provides grocery and
beverage suppliers with temperature-controlled shipping options in addition to serving other
industries.
7. ShipWizard
ShipWizard provides “end-to-end 3PL services” to a variety of eCommerce stores and other
businesses. One of their key offerings is reverse logistics management, with a focus on customer
experience. ShipWizard offers integration with an array of eCommerce marketplaces, including
Amazon and eBay.
8. GEFCO
GEFCO provides logistics solutions by land, sea, and sky to businesses across 47 countries.
They serve businesses in vastly different sectors, including fashion, aerospace, and healthcare. In
addition to forward logistics services, they provide reverse logistics and urgent deliveries
management.