What is Reverse Logistics?
By: John Haber
January 20, 2015
To begin to define reverse logistics, we should start by pinning down logistics as a general term.
Logistics is the process of planning and executing the efficient flow of raw materials, in-process inventory, finished goods and related information from a point of origin to a point of consumption.
Logically, reverse logistics includes all of the activities we just mentioned as they operate in reverse, meaning that the processes start at the point of consumption and move back to the point of origin. Other terms used for reverse logistics (RL) are Aftermarket Logistics, Retrogistics and Aftermarket Supply Chain. The purpose of reverse logistics is often to recapture value where value has been lost. In some cases, remanufacturing and refurbishing activities also may be included in the definition of reverse logistics but here at Spend Management Experts, we focus on the shipping aspect of RL.
Manufacturer’s products move through the supply chain network to reach distributors or customers. Any process or management performed after the sale of the product involves reverse logistics. If the product is defective and the customer wanted to return the product, the manufacturing firm would have to organize shipping the defective product, testing the product and lastly, disassembling or disposing of the product. The defective product would travel in reverse through the supply chain network in order for the manufacturer to retain any use from it. The logistics necessary for this sort of return is simple reverse logistics. RL practices vary based on industry and channel position. Now more than ever, retailers have made larger investments in technology to improve their reverse logistics systems because they see that successful retailers manage reverse logistics effectively and enjoy a huge positive impact on their bottom line as a result.
When you combine the theory of reverse logistics with powerful software and general financial prowess, the supply chain can be analyzed to find deficiencies in the chain itself rather than in the products. This is where a transportation spend management expert can help. With the right skills and tools, spend management experts can find your supply chain’s inefficiencies using reverse logistics. The ultimate goal is to optimize aftermarket activity to save money and environmental resources. It is important to audit your shipping carrier bills and even renegotiate your original contract to refund you money in any areas in which you overspent in the past and to continue to save you time and money in the future. Having fewer resources tied up in transportation frees them up to be reallocated for things like labor and quality control.