Running head: REVERSE LOGISTICS IN A CLOSED LOOP 1

REVERSE LOGISTICS IN A CLOSED LOOP 7

REVERSE LOGISTICS OUTLINE

Introduction

Reverse logistics is a type of supply chain management that can be defined as the process in which goods move beyond their final destination and back to the seller or manufacturer. Reverse logistics is necessary for processes such as the return of goods from consumers to manufacturers, recycling, capturing value, or proper disposal. Supply chain management does not end with the end-users of the products. Consumers may return products to the manufacturers or distributors for various reasons such as buying the wrong products and buying damaged products. Products bought that don’t match the description or when a consumer no longer requires the products may call for the return of the products. In such situations, organizations should organize for shipment of the products back to them through various processes such as testing, dismantling, recycling, or disposing of the products. Therefore, reverse logistics processes begin at the end consumer of the products back to the distributor or from the distributors of goods back to the manufacturer through the supply chain. Reverse logistics may also entail processes where the consumer takes responsibility for disposing of the product through resale, refurbishing, or recycling of the products.

Many organizations implement reverse logistics where they move goods for their consumers back to the seller or suppliers through the supply chain. The main goal of reverse logistics is to recapture the value of the products sold or to dispose of them. According to Abby (2021), returns worldwide are worth trillions of dollars annually, and reverse logistics has become a common concept that has contributed to the growth of e-commerce. Most companies employ reverse logistics to earn consumer loyalty, minimize losses from goods returned, and repeat business activities. A well-designed supply chain and reverse logistics process can be flexible to any changes and can move goods one step back or back to the manufacturer.

Reverse Logistics Process

The reverse logistics process involves the management of goods and purchasing surplus goods. Reverse logistics also involves refurbishments and leases. Beverage industries employ reverse logistics of empty containers for recycling. In construction industries, reverse logistics are used to recycle salvaged construction materials to new sites to reduce waste and save on costs. In the food industry, reverse logistics is used to return packaging materials such as plastic containers. Industries that employ reverse logistics should have proper planning in place, transportation, and managing shipping containers. For reverse logistics to be successful, it follows a process of comprehensive steps (FreightSnap, n.d.).

1. Packaging and Product Retrieval

Reverse logistics starts when the consumer declares their intent to return the goods. The consumer should give authorization and the goods’ condition should be checked before moving the goods. This process also entails the organization of shipments of the goods back to the supplier, approving refunds to the consumers, and replacing the faulty goods

2. Deal with the goods returned

The next process occurs when the products are delivered to a specified location. Some companies improve consumer experience and loyalty by taking the responsibility of shipping the goods to the required destination. During this process, the goods are inspected and arranged systematically in various categories such as restock, discard, return to supplier or manufacturer, or priority goods. This ensures that the warehouses are kept organized, goods are easily identifiable for resale or repair, and the inventory system is regularly updated.

3. Repairing, refurbishing, and fixing

This is the most essential, valuable, and attractive process among many companies. This process involves sending the repairable goods to the repair department. It also involves repairing the returned packaging goods. Goods that cannot be reused or resold are recycled. This process recoups what would otherwise be lost or regarded as waste. This process is cost-efficient since it saves a company a lot of money that would have been used to purchase or manufacture similar products. Moreover, recycled products may be listed for lower prices thus attracting consumers who would otherwise be unable to purchase them at the regular prices. Companies also earn value when they resell refurbished goods.

4. State the company’s return policies

An organization needs to make its return policies known to the consumers. This ensures that the customers are aware of the policies before purchasing the products. The policies also guide consumers in understanding the return process, minimizing return delays, facilitating refunds, and ensuring that the products are returned in good conditions. Companies with such policies tend to attract consumers since they are assured of refunds or replacement of faulty goods.

5. Invest in durable packaging materials

Organizations with return policies should invest in durable packaging materials which can handle two trips. Use of cheap materials can easily be damaged when opening thus during return the products can easily be damaged. The use of durable packaging materials prevents the consumers from purchasing them to return the products. This in return creates consumer satisfaction and loyalty.

Reverse Logistics Best Practices

Reverse logistics is a strategy many organizations use to remain competitive and increase their consumer loyalty and experience. This is done by utilizing reverse logistics best practices that help organizations' processes become more efficient and improve their customer service. Johnson Stephens Consulting (2020) outlines the best practices that companies should employ.

1. Use of Smart Labels

Shipping packages should be well labeled to make returns easy. It is more efficient if companies utilize smart or scannable labels on the packages. Smart labels increase consumer experience and royalty. Around 85% of the consumers are likely to purchase goods from organizations with easy-to-understand return processes.

2. Sort Products by Categories

Companies should employ a comprehensive sorting process to ensure that the products are systematically arranged. This ensures that the warehouse is organized and the goods are available for resale. It also ensures that the inventory is easy to identify thus processing becomes quick.

3. Organized Workstations

Organizations should have well-organized workstations and personnel responsible for receiving, auditing, repairing, and replacing the returned goods. The workstations should be organized and structured to cater to the various categories of products. Proper organization and management allow faster return and delivery processes and ensure inventory optimization for the refurbished goods to be resold.

4. Smart Staffing

Organizations should employ smart staffing to cut operational costs thus saving on labor. Staff members should be organized accordingly and based on the volumes of returns to maximize efficiency.

5. 5S Methodology

Organizations should utilize and implement the 5S best practices in the entire reverse logistics process and departments involved. Companies should practice good reverse logistics to reduce administrative, transportation, and support costs. This also increases product velocity, consumer loyalty, and creates companies' value.

Value Creation by Reverse Logistics in Secondary Markets

Reverse logistics creates value in an organization by turning the collected waste into sales through recycling. Reverse logistics also enhance consumer satisfaction and loyalty by developing policies and processes that are attractive and easy to the consumers. Businesses repair and resell, reuse, and recycle the returned goods thus avoiding any wastage. Effective reverse logistics is essential in minimizing storage capacity, reducing operation and distribution costs (Newcastle Systems, 2021).

Many small businesses often avoid reverse logistics in the secondary market since it is time-consuming, and can be expensive. However, when properly utilized, it can become rather profitable. Small organizations often operate in highly competitive environments and thus they should cut operating costs. Small firms implementing reserve logistics earn profits through reselling their products without involving contracting vendors. It is essential to analyze and understand the secondary markets and the consumers’ needs. For example, used books may be resold to students. Used gadgets may not be suitable or attractive to professionals. Organizations may target amateurs who wish to try out the fun gadgets. Organizations should therefore undertake thorough market research before undertaking reserve logistics. They should also ensure they have enough storage space for the purchased products, identify the important channels of marketing, and availability of transportation (Harrison, 2008). Organizations should also take concerned about the pricing of the products to be resold. The prices can depend on the condition of the products and the added values. Apart from using effective reverse logistics patterns, companies can also employ charity as a secondary market channel. This involves sending the goods returned to charitable organizations and public facilities. This strategy does not earn the company profits but enhances its publicity and positive image. This creates value for the organization (IvyPanda, 2020).

Conclusion

It is important to note that reverse logistics may benefit greatly an organization by increasing its overall performance. Reverse logistics as a supply chain management concept involves the process of moving products beyond the final consumer back to the suppliers or manufacturers due to various reasons. Reverse logistics entails different components of recycling, reusing, disposal, and redistribution of goods. Many large companies have implemented this strategy but small firms are rather reluctant. However, reverse logistics is a key strategy that small firms should employ to become competitive since they operate in highly competitive markets.

Harrison, A., & van Hoek, R. (2008). Logistics management and strategy: Competing through the supply chain. Essex, UK: Pearson Education, Ltd.

IvyPanda. (2020, May 10). Reverse Logistics Strategies on Secondary Markets. https://ivypanda.com/essays/reverse-logistics-strategies-on-secondary-markets/

Johnson Stephens Consulting (April 7, 2020). 5 Best practices for reverse logistics. JSC A Division of Hy-Tek Integrated Systems. Retrieved from:

Newcastle Systems (June 22, 2021). The importance of reverse logistics in your supply chain. Retrieved from: