Why Is Reverse Logistics Important?

The term logistics is usually used for the operations undertaken to bring a product to the distributor or the customer. But, reverse logistics is the opposite of traditional or forward logistics in the sense that here, the product moves in the opposite direction. It refers to the process of moving products from the final destination back to the distributor or to the manufacturer. Reverse logistics takes place after the sale or delivery of the product.

For example, if a product is defective, it would be returned by the customer. Now, the manufacturer has to make arrangements for collecting and shipping the product and then testing it, repairing or recycling it, or disposing it. So, the product moves in the backward direction in the case of reverse logistics.

The term reverse logistics can also include activities like remanufacturing, refurbishing, recycling & waste management, as well as management and sale of surplus and returned equipment and machines from the hardware leasing business.

Although reverse logistics is not given the kind of attention it deserves, it has been observed that it can play a huge role in giving a competitive advantage to businesses, particularly those in the ecommerce domain. In the E-commerce industry, providing quality customer service is as important as delivering quality products. A flexible, efficient, and responsive reverse logistics process can improve customer satisfaction and thus, customer retention.

Due to its connection with customer retention, reverse logistics has emerged as a key component of Service Lifecycle Management (SLM), which is a business strategy employed for customer retention. However, reverse logistics is a complex process and businesses need huge investments and skilled human resources to conduct it efficiently. But, if done properly, it can not only increase customer satisfaction but also reduce storage and distribution costs.

Reverse logistics is not confined to only return management, but incorporates policies and activities that help in return avoidance, disposal, and other issues related to after-market supply chain. It serves as a crucial link between marketing and logistics. There is ample evidence to suggest that businesses can benefit hugely by designing and implementing a well-planned reverse logistics policy. This, however, requires not only better planning but also more efficient management and execution.

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