What is obvious when you think about ecommerce is the supply chain that always ends up with the delivery of goods to customers. However, there is another leg of the supply chain which deals with the flow of products back to the manufacturer. This is referred to as reverse logistics and is an inevitable evil in the ecommerce industry.
Thus, reverse logistics refers to the process involved in moving goods from the final destination either to capture value or dispose them properly and remanufacture or refurbish. In reverse logistics, products move at least one step in the supply chain.
The concept of reverse logistics is best explained with the help of an example. A manufacturer makes products and reaches it to the end consumer through the supply chain of wholesale distributors and retailers. If the product happens to be defective, the end user will return it to the manufacturer through the retailer and wholesale distributor.
In this case, the product is moving in the reverse direction in the supply chain. The manufacturer will have to manage the reverse logistics and test, repair, recycle or dispose the product as is deemed fit.
Some of the common reasons that contribute to the management of goods after they are sold are as follows:
1) Product returns
2) Products that are not delivered (address not traceable or wrongly delivered)
3) Damaged products
4) Products that malfunction
5) Product exchange programs
In the ecommerce industry, many products are sold on cash-on-delivery (COD) basis. Sometimes, customers refuse these products at the time of delivery.
In such a case, the logistics service provider will follow the reverse logistics procedure to return the product to the manufacturer who then adds it to the inventory after proper quality checks.
Reverse logistics is of utmost importance to ecommerce businesses, as it is a value proposition that goes above as well as beyond just cost reduction.
Some of the key aspects related to value addition are as follows:
It provides a strategic advantage to the ecommerce business as it forms a very important part of order fulfillment. The two windows that are open to customers to get a feel of the business are the website and order fulfillment. If customers perceive that there is something lacking on these fronts they will lose confidence.
Customers who are able to return defective products or exchange products without hassles are likely to feel happy about the service and buy again. Such people are also likely to remain loyal for a long time.
In this era of environmental awareness and regulations, the importance of reverse logistics goes beyond just customer satisfaction. It helps the ecommerce business disposal of damaged products keeping in mind environmental safety and meeting regulatory compliance.
In these times of thin profit margins in ecommerce businesses, an effective and efficient reverse logistics system will help the business become more profitable. In the absence of a sound plan, the business will not be in a position to take advantage of the products that fall out of the supply chain.
Ultimately, it is the responsibility of the ecommerce business to deliver value to its shareholders. It is, therefore, very important that the business cashes in on the several opportunities provided by reverse logistics.
Thus, reverse logistics is much more than just management of product returns. It involves activities related to avoidance of returns, disposal, gatekeeping as well as all other supply chain issues after the sale of a product.
(About the Author: Rajesh is the CEO & Co-Founder of Cbazaar.com. He has Launched one of the earliest E-commerce venture in India called Chennaibazaar.com in 1998 with COD. His vision is to create a “Worldclass E-commerce business focussed on Customers Delight on Top”.)
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