Why Reverse Logistics Systems and Transportation Management Should Be Considered Together

By Adam Robinson on Jun 29, 2015

Needs for efficient reverse logistics systems continue to increase as e-commerce claims greater market share, and as so many traditionally functioning businesses grow and inevitably incur increasing volume of returns. This presents opportunities for developing new revenue streams, an exciting challenge to logistics professionals.

However, forward logistics management skills (involving original production and distribution of new products) may scarcely apply to reverse processes of moving products from  buyers’ locations in order to recover remaining value or appropriately dispose of items. Product travel in reverse of their original paths from the seller to buyers’ locations, after which they may undergo disassembly and disposal or recycling, or repair or refurbishment, testing, packaging, warehousing, resale, shipping, customer support, and other reverse logistical processes executed by the seller outsourced services.

Need For Reverse Logistics Breeds Opportunity

Efficiently managing reverse logistics is a daunting challenge for many businesses. Quality, service, costs, environmental and legislative issues are strategic issues that must be managed in addition to the operational challenges mentioned above. Successful reverse logistics systems and programs significantly increase customer satisfaction, decreases necessary allocations storage, energy, and other resources. Program managers recognize the revenue potential of returned assets and strive to streamline processing systems in order to capitalize accordingly. Opportunities in this area of U.S. business are huge. The annual volume of returns in the U.S. is estimated to be as much as $200 billion, per theReverse Logistics Association.

Customers want results. So, many suppliers utilize outside logistics management to ensure customers remain fully satisfied and continue to repeat purchasing. Companies that integrate reverse logistics systems into their logistics systems distinguish themselves from competitors in:

• effective management of inventory availability and cost
• reverse logistic cycle time control
• meaningful and accurate performance metrics
• responsiveness to fluctuating market demands
• reputation for excellence in reverse logistical results
• customer satisfaction

Effective Cost Management Driven By Reverse Logistics Systems

A growing network of channels for disposition of product returns, regardless of condition, has opened up major opportunities. (Asset depreciation also offers significant profit potential to some companies.) Managing returns is a customer service fundamental requiring your company to balance your customers’ needs for competitive product and service value and your company’s need to yield profit. In the interest of both, businesses are increasingly tying reverse logistical operations to transportation management as a natural fit.

Managing all costs associated with moving, handling, and shipping returns and/or replacements, in conjunction with warehousing functions, amount to a logistical enterprise that often is not among a company’s core competencies. In such cases, it’s advisable to look to experts in freight management, logistics, and reverse logisticssystems implementation to optimize customer service and maximize potential profit.

Many companies now outsource transportation, logistics technology, accounting, and other systems management. Use the3PL checklist to identify your company’s resource needs.

Recapturing Value

The value of a product is more likely to decline and damage to it is likely to increase when movement through the reverse logistical process is unnecessarily prolonged. The speediest possible disposition is critical to recapturing the full remaining value from the product. Further, ability to accurately track movements of components and measure costs of returns to your company and supply chain members is essential to profitable reverse logistics management. TMS software in conjunction with a reverse logistics system provides necessary metrics, including:

• average travel distance per item
• energy expenditures, performance of sustainability initiatives
• total cost of the product, original acquisition, return, resale, or move to secondary market, or trash disposal
• continuous GPS tracking data regarding locations of return goods in relation to causes of delays, and routing adjustments for traffic, road construction, and convoluted routes
• scheduling to prevent route crossovers, increasing numbers of serviced locations per trip

Optimized Reverse Logistics Systems

Your company may have the resources and the will to invest in developing and maintaining optimal reverse logistics systems. However, it’s becoming more common for businesses to outsource these logistics services. Especially if your company does significant amounts of e-business, your reverse logistics services should offer your company these essential features.

Website

• Your site should be customized to suit your customers’ submissions of returns.
• Functionality should include custom text fields and/or dropdown menus that can contain whatever information your company and customer need to communicate.
• Entry fields should be fully compatible with any type of return being submitted.
• Mobile capability is increasingly becoming a basic these days.
• Data tracking should display for your customers the status of their returns
• The system should display the BOL (bill of lading) once a return is approved.
• Systems should be integrated with web or file upload functions so your company can send data to validate returns received.

Return center

• Your return management system must provide all functions necessary for your company to manage all returns.
• The system for entering new returns, tracking all returns, approving returns, and authorizing payment of approved returns should be fully integrated.
• Proof of Delivery receipts for returns should be closely tracked—checking carrier sites every 2 hours for POD documents.

Benefits

• Your reverse logistics provider should create BOLs using least cost rules for your company as a shipping customer.
• The service should ensure that multiple returns are consolidated into every shipment possible to reduce costs.
• The reverse logistics system software program elements and functions provided should be streamlined, centralized, coordinated to meet lean operating standards, and built for ease of use with thetransportation management system.

Going Forward with Reverse Logistics Systems

As your business grows, reverse logistics necessarily becomes more demanding. Turning this obstacle into an opportunity for  the establishment of an additional revenue stream requires managing this need to the satisfaction of the parties on both ends of the reverse transaction—your customer and your company. That presents overwhelming challenges for many companies that do not have resources or sufficiently developed competencies to sustain a viable program long-term. Obtain professional consultation as necessary to thoroughly evaluate needs. And, keep sight of the profit potential in making full commitment to optimal management of this critical business function.