Reverse supply chain management is a process of managing returned products from the customer to the warehouse or manufacturer. A business can improve brand reputation and enhance customer satisfaction by efficiently managing the return management process.
The market size of global reverse logistics was valued at $731.9 billion in 2023. It was expected to reach $1.2 trillion by 2033. This rapid growth highlights the increasing demand for efficient and reliable reverse supply chain solutions. To meet this demand, supply chain management companies are stepping in to provide streamlined and effective reverse logistics services for businesses.
What is Reverse Supply Chain​?
The reverse supply chain is a series of processes involved in managing returned products. The main goal of the reverse supply chain is to move the products efficiently from the end customer to the warehouse or origin of the supply chain. It is essential for enterprises that usually deal with a high rate of returned products, or the products typically get damaged during transit.
The reverse supply chain is even essential for ecommerce businesses. It can reduce costs and enhance customer satisfaction through the return process.
Types Of Reverse Supply Chain​
There are usually two types of reverse supply chains.
1. Green Reverse Supply Chain
A customer returns the product to the ecommerce Company because of defects. The business does not throw the product. It undergoes environmentally friendly and cost-effective repair and recycling processes.
2. Resell
Here, the business restocks the returned product in its warehouse. For example, a customer returns a pair of shoes because of the wrong size. The business will restock the returned shoes in its warehouse.
Reverse Supply Chain Process
Reverse supply chain process involves a series of steps listed below.
1. Return Initiation
Traditional supply chain involves the movement of goods from the warehouse of the business to the customer. But sometimes customers do not like the ordered product, or they receive a damaged product. Hence, the customer places a return request on the website of the company or marketplaces. The customer has to mention the reasons for the product return. The company verifies it issues an RMA number and provides a date and time for the pickup.
This return information is then reflected in the warehousing company’s Order Management System (OMS) or Warehouse Management System (WMS), enabling the warehouse partner to prepare for the next step in the reverse supply chain.
2. Order Pick Up
The transporter picks up the product from the customer on a scheduled date and brings it back to the warehouse. The warehouse provider will inspect the product thoroughly and decide whether to resell or repair it. The warehouse staff will restock the product if it is in good condition.
3. Repair, Recycle Or Refurbish
The product is sent to the manufacturer if it cannot be resold. The manufacturer decides whether to repair, recycle, or dispose. The product is sent to the recycling center if it cannot be repaired. The product is broken down into various reusable parts in the recycling center. Thus, a reverse supply chain reduces wastage and conserves resources.
Benefits Of Efficient Reverse Supply Chain Management
The benefits of efficient reverse supply chain management are as follows.
1. Improves Customer Relationship
Today, most customers expect timely and accurate responses to their return requests. They want the refund to be credited to their account as soon as possible. Businesses can enhance customer satisfaction by efficiently managing the reverse supply chain.
2. Increases Life Cycle Of The Product
When a business manages the reverse logistics process efficiently, then it can identify the defects or problems during manufacturing that it has not paid attention to in the initial quality process. A business can then start improving the quality of the products and improve the life cycle of the product.
3. Competitive Advantage
When a business offers a hassle-free reverse supply chain process, then it gets distinguished from its competitors. It expands its customer base and increases revenue and profitability.
4. Improves Sustainability
Businesses can reduce wastage and attract environmentally conscious customers by efficiently managing the reverse logistics process.
How To Choose The Right Reverse Supply Chain Partner?
The demand for ecommerce products has been increasing over the years. People are doing more online shopping today. Reverse supply chain management plays an essential role in an ecommerce business; choosing the right storage and shipping partner can enhance customer satisfaction and improve sales and profitability. You need to keep a few factors in mind while selecting the right supply chain partner.
1. Expertise And Experience
A reverse supply chain partner needs to have experience and expertise, particularly in your industry and product category. The reverse supply chain partner should understand your business goals and objectives. It should have knowledge and certifications for handling the reverse logistics process of your business efficiently.
Let’s discuss this with an example. The reverse supply chain partner should have experience in handling shipping hurdles for cross-border returned goods.
2. Technology And Innovation
You should choose a supply chain partner who has access to advanced technology, like a return management system. This software should be compatible with your existing system, like ERP and WMS. Simultaneously, it should be real-time tracking of the returned products.
3. Network And Scalability
You should choose a partner that has a wide and reliable network with various carriers and shipping partners who can handle your reverse supply chain from multiple countries or localities. Simultaneously, it should scale its resources and facilities up and down according to the fluctuations of the returned products of your business.
4. Cost Effective
You should choose a partner that offers transparent pricing. Its main goal should be to reduce the reverse logistics expenses of your business. Simultaneously, it should always try to improve customer loyalty, minimize environmental impact, and enhance operational efficiency.
Challenges In Reverse Supply Chain Management
There are few challenges of reverse supply chain management. Here is a list of them below.
1. High Processing Cost
Processing a returned product involves sorting, inspecting, remanufacturing, or recycling. A business needs to set up a recycling plant or repair station to maintain these processes, which is not possible for every small and medium enterprise.
2. Complex Logistics
Customers return the product for various reasons like defects, improper quality or because of warranty. Each reason needs a special handling procedure, which can be difficult for a business to manage efficiently.
Final Words
Reverse supply chain plays a vital role in an ecommerce business. It can reduce costs and enhance customer satisfaction by streamlining the reverse supply chain process. If it cannot handle it solely, then it should choose a reverse supply chain partner. However, the business needs to check its experience, expertise, technology access, and a few more factors before selecting a partner.
AAJ Supply Chain Management
