Reverse Logistics in the Business World

Reverse logistics is the backward movement of products from the consumer to the producer. Reverse logistics is one of the most ignored areas of supply chain management, so even those involved in the supply chain tend to avoid it. Several studies indicate that over 40% of businesses believe reverse logistics is useless. Nonetheless, nearly 35% of executives in the supply chain claim to have an inefficient system of managing this sector (Curtis et al., 2013). However, with the evolution of market requirements such as online retail, the “cumbersome” process has gradually received some attention. Reverse logistics involves the processes of returning anything inwards through the supply chain. These processes come at a cost but may become profitable in the long run. Companies have improved their reverse logistics practices to remain competitive and profitable in the current market demands. This paper explains the constituents of reverse logistics, costs and untapped value, existing issues, and possible innovations in reverse logistics.

Reverse logistics is conventionally defined as managing the flow of manufactured products and raw materials (Curtis et al., 2013). The flow, in this case, is from the consumer to the producer to recapture value and/or correct disposal. The main reverse channels include the return of products by customers, remanufacturing of defective items, recycling and dumping of end-of-life products. Until something goes wary, reverse logistics is always neglected. Many companies believe that dealing with returned goods increases business costs (Curtis et al., 2013). These companies are often unaware that improving their reverse logistics systems can boost their overall revenue by at least 5% (Sellitto, 2018).

Efficient management of reverse logistics systems can help a company discover untapped profits, improve customer relations, and minimize risks (Curtis et al., 2013). Many executives see processing returned goods as a downgrade to investing in other enterprises. They, therefore, focus on minimizing the cost of processing returned goods. They fail to realize that the 4% cost of production incurred provides opportunities for maximizing revenues (Curtis et al., 2013). For instance, companies that ensure timely processing of returned goods save and gain more from the sales of those goods (Curtis et al., 2013). From a 2005 country-wide survey, over 95% of customers with bad item returning experiences would not buy from the same company/seller again (Curtis et al., 2013). This explains why companies with established reverse logistics have better customer satisfaction rates.

Efficient reverse logistics systems protect the company’s profits. Handling wastes from returns save the company from fine from governmental regulatory agencies. For example, the FDA. Proper disposal of wastes reduces inventory costs and minimizes taxes and insurance covers, saving the company's revenue (Curtis et al., 2013). Environmental degradation is caused, but the disposal of end-of-life products necessitates the importance of reverse logistics (Li et al., 2018). Despite providing multiple economic and environmental opportunities, many industries and businesses still cannot implement the appropriate reverse logistics strategies (D'Amico, 2021). Many nations depend on companies based entirely on reverse logistics to tackle the problem of environmental pollution (Maheswari et al., 2020). There is a huge gap between developing and developed nations in the management of e-wasted because the available strategies in reverse logistics are only applicable in developed nations (Maheswari et al., 2020). The domination of informal businesses in developing nations makes it difficult for their governments to manage e-wastes properly; environmental regulations are often ignored during operation. 

Lack of awareness and uncertainties concerning the quantity, quality, time, and costs involved in implementing reverse logistics make it difficult for businesses to invest in this sector (D’Amico, 2021). Notably, from a survey conducted in 2005, 35% of executives in the supply chain sector admitted not having an efficient reverse logistics management system (Curtis et al., 2013).  The world today is filled with end-of-life products. After they are dumped in pits results in irreversible harm to the earth's atmosphere (Li et al., 2018). Unfortunately, the number of returned products increases faster than the environmentally safe disposition (Li et al., 2018). As a result, the industries have excess inventory of returned products which impairs their ability to secure profits.

The requirements of reverse logistics implementation are complex due to the uncertainties involved in the remaining value of the returned products (D’Amico, 2021). Due to these uncertainties, businesses take time to evaluate processes with greater potential for value recovery (Sellitto, 2018). The assumption is usually that the manufacturing, maintenance, and distribution processes provide reusing, remanufacture and recycling opportunities (Sellitto, 2018). According to a 2018 study on reverse logistics procedures, the supply process in manufacturing companies had little potential for value recovery, while a combination of different recovery channels had higher potential (Sellitto, 2018). Businesses that fully indulge themselves in reverse logistics must install several recovery channels that could ultimately shift their focus from their mission(Li et al., 2018). However, many businesses cannot afford to shift their focus from their primary objectives due to the current market conditions. 

Efficient reverse logistics begins with selecting a proper implementation strategy (Prajapati et al., 2021). The prominent strategies in reverse logistics are in-house, automation, and outsourcing. In-house strategies are carried out within the production center. They may include a review of return policies which reduces instances of overstocking and associated costs and pitfalls (Prajapati et al., 2021). Automation addresses logistics concerns such as labor costs and response time. Automation might be costly during the initial stages but could potentially minimize losses and expenses in the near future (Prajapati et al., 2021). Outsourcing is arguably the most efficient and convenient process in reverse logistics. Any business can quickly implement this strategy, especially with a robust supply chain structure (Prajapati et al., 2021). Once a business has identified its reverse logistics capabilities, it selects a convenient implementation strategy. Many firms prefer outsourcing their reverse logistics processes to other strategies (Curtis et al., 2013). Regardless of the strategy used, companies must ensure that reverse logistic processes are set up separate from the forward supply chain activities.

In conclusion, reverse logistics is a sector in the supply chain that deals with anything traveling backward through the supply chain. Traditionally, the concept of reverse logistics was ignored by many businesses due to; uncertainties in the value of the recaptures, associate costs of setting up the reverse logistics processes, inadequate support from legislative organizations, and burdensome end-of-life products. With the increasing competition and unpredictability of the global market, many businesses have implemented reverse logistics processes to remain competitive and profitable. Nonetheless, environmental activists have pushed governments to make laws regarding the proper disposal of end-of-life products which has influenced organizations to adapt to reverse logistics practices. Businesses benefit from reverse logistics practices: discover hidden profits in returned products, build better customer-brand relationships, and protect their revenues from government fines. Businesses looking forward need to evaluate their worth before embarking on reverse logistics practices. Outsourcing is the most convenient reverse logistics strategy. Regardless of the strategy used, reverse logistics implementation systems should be set up separate from the organization's forward supply chain processes.

Boost your business operations with our expert Marketing Services, Call Center Solutions, and Virtual Assistant Support. Whether you need to increase sales, enhance customer service, or streamline daily tasks, we’ve got you covered. Let’s take your business to the next level. Browse the services we offer to see how we can help your business grow.

References

D'Amico, Emanuel. (2021). Analysis of Challenges and Potentials of Reverse Logistics. https://www.researchgate.net/publication/354551628_Analysis_of_Challenges_and_Potentials_of_Reverse_Logistics 

i, Y., Kannan, D., Garg, K., Gupta, S., Gandhi, K., & Jha, P. C. (2018). Business orientation policy and process analysis evaluation for establishing third-party providers of reverse logistics services. Journal of Cleaner Production, 182, 1033-1047. https://www.sciencedirect.com/science/article/abs/pii/S0959652617332353

Sellitto, M. A. (2018). Reverse logistics activities in three companies of the process industry Journal of Cleaner Production. https://pubag.nal.usda.gov/catalog/637115

Curtis, Greve., & Jerry, D. (2013). Recovering Lost Profits by Improving Reverse Logistics. Available on. http://www. ups. com/media/en/ReverseLogistics.pdf. https://www.ups.com/media/en/Reverse_Logistics_wp.pdf 

Maheswari, H., Yudoko, G., Adhiutama, A., & Agustina, H. (2020). Sustainable reverse logistics scorecards for the performance measurement of informal e-waste businesses. Heliyon. https://pubag.nal.usda.gov/catalog/5897393 

Prajapati, H., Kant, R. and Shankar, R. (2021), "Selection of strategy for reverse logistics implementation", Journal of Global Operations and Strategic Sourcing, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JGOSS-04-2021-0034 

KeyWords:

Business strategies, Business growth, Business planning, Doctors In Business Journal, Business development, Entrepreneurship, Business trends, Business management, Corporate innovation, Digital marketing, Social media marketing, Content marketing, Lead generation, Marketing automation, Branding for businesses, SEO for online businesses, Cash flow management, Business investment opportunities, Business profitability, Financial forecasting for businesses, Effective business management, Organizational development, Strategic decision-making, Business operations efficiency, Technology solutions for business, AI in business, Digital transformation in business, Business tech trends.