What Is Reverse Logistics?
What is meant by logistics in WMS and supply chain management?
The overall process, including acquiring, organising, and coordinating raw materials, products, and services along the supply chain, all the way from obtaining materials, manufacturing and production, warehousing, distribution, fulfilment, and delivery to the end user, is known as logistics, also called forward logistics.
Logistics management and warehouse management software aim to ensure the most efficient and cost-effective way to move inventory and find the best balance between supply and demand.
What is meant by reverse logistics in WMS and supply chain management?
In an ideal world, the supply chain would end happily once the customer has received their products. In the real world, products do not always meet customer expectations or can break down and are returned. That is when the traditional logistics process needs to be reversed in the opposite direction as an important part of supply chain management (SCM) inventory management and circular economy.
The definition of reverse logistics processes can involve anything from putting returned items back in stock for regular resale at full price or a discount price to repairing them, returning them anywhere along the organisation’s supply chain or to the original supplier or disposing of them in many different ways.
In some industries, returned packaging material, pallets, empty containers, or salvaged materials, are a major source of profitability by reusing or remanufacturing these items in a secondary market.
Instead of the traditional logistics process, a different reverse logistics process and procedure is required for other industries, such as leasing or renting, when products or equipment reach their end of life, redeploying tools and materials, or upgrades.
A successful business cannot allow returns to disrupt the effective “forward” flow of goods and will manage complex reverse logistics as an integrated part of its normal logistics processes. The extent of reverse logistics contributing to its importance is highlighted by the estimated annual value of more than 1 trillion US dollars of returned goods worldwide.
Advanced WMS software solutions such as ProSku, seamlessly incorporate returns management and reverse logistics with all other aspects of WMS and reverse supply chain management, to maintain normal business, build customer loyalty and achieve new heights of success.
Contact us for a demo or introductory chat online, call 0800 170 1161, or mail info@prosku.com.
Also ** Read more about the growth of reverse logistics on our sister site, https://www.principallogisticstechnologies.com/. **
What makes reverse logistics such a complex, but important, business challenge?
Unpredictability
Unlike the normal forward flow of goods, it is more difficult to forecast because it is often cyclical, for instance, after Christmas a lot of unwanted gifts are returned; at the end of a season, unsold and unsellable goods have to be stored or disposed of; when fads or fashions change; obsolete stock have to be disposed of, etc.
High volume
The volume and value of returned goods can severely impact the business’s cash flow and storage space for new orders and need to be managed carefully.
Multiple steps
Several steps are involved to recoup value and the environmental impact as it can be very difficult to keep track of returned goods and still keep products moving. Examples of these steps include processing, inspecting and classifying returns for repairs, recycling, repackaging for resale or sending them back to the customer, or disposing of the returned items in a way that recoups as much value as possible while demonstrating environmental responsibility.
Innovative procedures required
It is necessary to adapt business procedures to build an effective reverse logistics system which benefits the business in numerous ways, including minimising generic customer returns and building maximum customer loyalty.
Need for real-time data
Sophisticated WMS software is required to successfully integrate the reverse logistics processes into the normal business flow. Some companies prefer to outsource this function.
Understanding the reverse logistics process
The reverse flow is often referred to as the five Rs of the reverse logistics processes: managing returns, repairs, repackaging, reselling, and recycling.
The procedures are summarised in the following steps:
Administration and processing of the return request

- Efficient administrative processes and documentation will allow you to deal with returns effortlessly as part of the normal business procedure.
- As soon as the customer indicates that they want to return a product, via website, app, email, or telephone call, for whatever reason, the important process of reverse logistics starts.
- The return has to be authorised and a full or partial refund or replacement item approved.
- Then follows scheduling shipment of return items and replacement products if necessary.
- Follow-up operations, effective and friendly communication with customers, and careful documentation will complete the reverse logistics process and retain loyalty.
Dealing with the returned items
- A good reverse logistics process makes provision for collecting, receiving, inspecting and sorting the returned goods for further processing.
- Once the returned product arrives at your warehouse or processing centre, it is inspected to determine its condition and return category and sorted accordingly.
- Move the returned items to the appropriate destination as soon as possible to keep the process going.
Reverse logistics examples are:
- Send returned goods for repairs,
- Items are cleaned and repackaged to be returned to stock for resale,
- Items are sent back to third-party logistics providers up the aftermarket supply chain,
- Unsellable items are stripped for reprocessed parts,
- Unusable items are sent for recycling, destruction, or any other form of disposal.
Tracking and recording the returns process
Companies apply different metrics to measure each of the return options as an important part of successful and profitable business management. Data analysis provides valuable information to enable businesses to address underlying issues contributing to returns and thereby complicating the business cycle and reducing revenue.
To increase the recovery of asset value, these metrics may include return rate, return reason, return resolution, return cycle time, and return on investment.
Doing this manually will cost an inordinate amount of time and labour expenses, and will be vulnerable to errors and consequent customer dissatisfaction.
What are the different types of reverse logistics?
Returns management
- The most common reverse logistics process involves items returned to the seller by a customer because they are defective, missing parts, do not meet expectations, do not fit (either in size or purpose), unwanted gifts, deliveries fail, etc.
- eCommerce businesses are typically affected more than walk-in stores. Worldwide statistics show that as much as 30% of products ordered online are returned.
- In the majority of cases, the client wants the item to be replaced, repaired, store credit, or refunded in full.
- Businesses require a clear-cut policy and procedures (RPP) for returns, which needs to be clearly communicated to the client at the ordering stage and care should be taken to avoid returns as much as possible by satisfactory business procedures, good quality products and service, and effective communication.
- All staff need to understand the procedures to follow to minimise costs and ensure customer retention, satisfaction and loyalty. The procedures should be simple, speedy, well-regulated, consistent, and transparent.
- Automated reverse logistics can ensure returns are managed with the same efficiency and avoid fulfilment failures.
Remanufacturing, reconditioning or refurbishment
- Items that have broken or failed, could sometimes be repaired to extend their life. These could be returned to the client or resold.
- Remanufacturing or refurbishment often occurs when high-value products reach their end-of-life but can be rebuilt or reworked for extended functionality.
- Some products that can no longer be sold or repaired, may still contain materials, parts or components that can be recovered and used to repair or rebuild later models of the product.
- This process usually consists of the following steps:
- Inspection and testing for fitness to be reused,
- Dismantling, cleaning, and sorting,
- Categorising and inclusion in inventory,
- Reconditioning, refurbishment, or remanufacturing of another product,
- Testing of refurbished products,
- Valuation and estimation of market value,
- Remarketing.
Packaging management
- This process centres on salvaging reusable packaging material to reduce waste and costs, maximise customer value, and protect the environment.
- The most common types of packaging materials that can be reused are:
- Primary packaging such as bottles, jars, plastic containers, etc.
- Secondary packaging bundles or stabilises packaged materials, such as pallets, wooden boxes, bins, tanks, trays, etc.
- Tertiary packaging is used for shipping or storing, such as pallets, cases, shipping containers, etc.
- The most common types of recyclable packaging materials are paper bags, corrugated cardboard boxes, glass, wood, aluminium, and tin. Plastic and polyethylene packaging can also be melted down and formed into new items.
- Different creative techniques and tactics can be developed to reclaim and reintegrate packaging materials in the business cycle. These could include:
- Sustainable materials and design to make packaging reusable, recyclable, and biodegradable.
- Optimised processes for collecting, sorting and reintegrating packaging materials.
- Recording and tracing reclaimed packaging materials.
- Your WMS system can manage the reverse logistics with the same efficiency as the forward logistics. Without such software, this can become a nightmare.
Unsold goods
Unsold goods can be a business’s biggest headache, although it is mostly preventable.
Overstocking is generally a result of supply chain disruptions, market saturation, overly optimistic forecasting (especially of seasonal requirements), misjudging the product or customer demand, better quality or prices at competitors, poor inventory or operational management, poor auditing, insufficient data, and ineffective marketing.
How can the problem of overstocking be tackled?
- All of these can be improved by investing in advanced WMS software and leveraging up-to-date data and predictive analysis.
- Adopt just-in-time inventory ordering.
- Develop effective and profitable relationships with supply chain partners.
- Foster a strategic approach to sales and marketing, particularly with automated and personalised customer communications.
How can you recoup some of the value of unsold goods?
- Return them to the supplier if this is part of the contract.
- Discount sales and promotions.
- Discounted liquidation to third-party sellers.
- Bundling unsold products with other popular items.
- In some instances, a tax reduction can be obtained by donating items to charities.
- Cannibalise compatible parts and materials for use in other products.
- Remanufacture certain products to upgrade their value.
- Recycle items as far as possible, or sell them to recyclers.
Delivery failure
- Failure to deliver products on time, or at all, can be caused by faulty addresses or other authentication issues, weather, industrial actions, customs, ignoring customer feedback, etc.
- A sophisticated WMS software solution will go a long way towards eliminating errors.
- Effective customer communication can help to persuade the customer to still accept a late delivery caused by physical factors.
Rental equipment
- Rental equipment or leased products have to be returned to the supplier or manufacturer at the end of a defined contract term.
- Both the lessee and lessor require an efficient automated system to plan properly for returns and/or replacements.
- The original supplier will either rent the equipment to another customer once refurbished, recycle the products, or dispose of them in an appropriate and environmentally friendly manner.
Repairs and maintenance
- This process is handled either as part of the returns process or in a similar way.
- This may happen even after several years in terms of product or service warranties.
End-of-life
- Products that have either broken down, cannot be repaired economically, or have become out of date, can be remanufactured as described above or need to be disposed of responsibly, or recycled to reclaim some value.
Benefits and challenges of reverse logistics
Cost savings
- A software-driven reverse logistics system will significantly impact the bottom line by reducing the expense of returns, repairs, failed deliveries, and disposal of unsellable products.
- Tight control of refurbishing, remanufacturing, repairing, and recycling redundant stock can also help businesses save money.
- Real-time management information, visibility of stock levels and stock movement, sales patterns, and returns will assist with forecasting and maintaining optimum inventory. It will avoid overstocking and ordering problematic products.
- Reusing packaging materials will increase profitability.
- Streamlined processes and automated cross-checking of information will prevent delivery failures and stock losses.
Customer satisfaction
- Data analysis can quickly identify problem areas, poor-quality products, and inefficient procedures that lead to customer dissatisfaction and loss of business.
- Automated communication and the return process processes will improve after-sales experience and contribute greatly to customer confidence and satisfaction.
- Factors such as quick turn-around times, a clear understanding of the process, and tracking progress will build trust and ensure repeat business.
Environmental responsibility
- Reverse logistics and returns management plays a significant role in environmental sustainability.
- Plan and promote the reduction of waste generated by reusing, recycling and extending the lifespan of products.
What strategies can be implemented to optimise reverse logistics?
Design a return policy and procedures (RPP) and regularly review them
- Adopt a holistic approach that comprises the entire lifecycle of products and materials to create a balanced, sustainable, flexible, and resilient supply chain
- An effective RPP (return policy and procedures) can optimise productivity and profitability by reducing costs and losses, and improve efficiency.
- It improves customer experience and satisfaction.
- Effective return policies can reduce the risk of customer dissatisfaction.
Automate and outsource
- An advanced WMS software solution can automate and streamline reverse logistics as an integrated part of business procedures, increasing efficiency and reducing costs.
- For some companies, outsourcing the returns process in whole or in part to a 3PL may be a more cost-effective way to manage reverse logistics.
- For others, a centralised return centre that processes and manages reverse logistics may be the best solution.
Supply chain partnerships and vendor agreements
- Optimise reverse logistics through agreements with supply chain partners.
- Partner with businesses that can salvage, remanufacture, refurbish, repair, recycle, or dispose of excess inventory.
Technologies for reverse logistics
- Technologies such as automation and data analytics can be used to optimize reverse logistics.
- Effective logistics processes can be achieved through the use of technology, such as automation and data analytics.
How reverse logistics affects the supply chain
- Reverse logistics provides another critical opportunity for supply chain optimization.
- A solid reverse logistics plan reduces waste and increases efficiency.
- Combining shipping and returns can increase efficiency.
- A lean supply chain can reduce inventory costs and increase customer satisfaction.
Which are the key industries requiring reverse logistics?
Food and beverage industry
- Recovering and reusing valuable product returns or unused ingredients will bring direct economic benefits.
- Food wastage impacts the environment by increasing pollution and greenhouse gases. Responsible disposal is crucial to environmental responsibility.
- Recovering and reusing empty bottles or containers can recapture substantial value.
Manufacturing industry
- Manufacturers can gain a sizeable economic benefit from salvaging materials and components for remanufacturing or creating new products.
- Product support, repair, refurbishment, reverse distribution, and warranty repairs open secondary revenue streams and build brand loyalty.
- De-kitting often becomes necessary when manufacturing or assembly priorities change and inventory items have to be put back in stock.
- Minimising wastage and responsible and economical disposal of waste products promote sustainable practices.
Pharmaceutical Industry
- Reverse logistics processes help the pharmaceutical industry to keep medicines safe.
- Expired or damaged pharmaceutical products have to be safely returned to the manufacturer for proper disposal.
Cement industry
- Particularly in coastal or high rainfall areas, cement hardens and needs to be returned to the manufacturer, or more frequently, needs to be disposed of properly. Improper disposal will lead to environmental imbalances.
Software industry
- Software solutions are constantly updated, with a shorter product life cycle, and overstocking by retailers can become costly to both the retailer and software developer if not managed right.
- New titles often force returns and strategies to reduce returns and improve inventory management and turnover are crucial.
Retail industry
- Profit margins are often slim in the very competitive retail and eCommerce markets and returns can eat into revenue.
- Innovative reverse logistics solutions such as reclamation of components or ingredients, selling to economy stores, repackaging and promotional sales, bundling, etc. can help them recoup some of the value.
Service industry
- Quick and reliable turnover of repairs and replacements is critical to the success of the service industry, making a robust reverse logistics procedure essential.
eCommerce organisations
- eCommerce companies statistically have a higher return rate than most other types of business, making it essential to build reverse logistics into the supply chain and warehouse management systems.
What is the ultimate solution to effectively managing reverse logistics?
As the markets get exponentially more complex and competitive, a robust reverse logistics system and supply chains that will minimise returns and disruptions, and expedite efficient fulfilment will become increasingly more important.
Only the smallest businesses will be able to cope successfully without advanced software solutions and technology. For expert advice and the best reverse logistics solution, contact us online or by telephone at +44 (0) 161 888 2580.
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