What is reverse logistics?
Reverse logistics is the set of activities that is conducted after the sale of a product to recapture value and end the product's lifecycle. It typically involves returning a product to the manufacturer or distributor or forwarding it on for servicing, refurbishment or recycling. Reverse logistics is sometimes called aftermarket supply chain, aftermarket logistics or retrogistics.
The aftermarket processes that a product can undergo in reverse logistics are numerous and include the following:
- remanufacturing -- rebuilding the product with reused, repaired or new parts;
- refurbishment -- resale of a returned product that has been repaired or verified to be in good condition;
- servicing -- a broad category that includes customer service, field service and product returns, such as issuance of return merchandise authorizations;
- returns management;
- recycling and waste management;
- warranty management; and
- warehouse management.
Improving reverse logistics
Like other supply chain management (SCM) processes, reverse logistics can be made more efficient and profitable with better planning, management and execution, and is a key component of service lifecycle management (SLM).
Reverse logistics can have a significant impact on a company's bottom line, in good and bad ways. For example, generous return policies can encourage distributors and retailers to order more stock than they expect to sell, which can increase inventory costs for manufacturers. Proper disposal of products can minimize penalties from noncompliance with environmental regulations.
The same SCM and e-commerce technologies involved in moving products to consumers (known as forward logistics) are used in reverse logistics, including barcodes and scanners used to track returns, materials handling systems in warehouses and Electronic Data Interchange (EDI) for transmitting documents between supply chain providers.
SCM and ERP software vendors were initially slow to support reverse logistics, according to some experts, but most sellers now include some reverse logistics features in their suites. A number of niche vendors specialize in it. Third-party logistics providers (3PLs) also offer reverse logistics services.