Today's consumers demand more flexibility and satisfaction than ever before. If they aren't happy with a product, they want to be able to return it for credit or ideally a full refund. Consumers are becoming more educated with the growth of e-commerce and research a company's return policies before shopping. Companies have begun to offer more generous return policies to keep up with this shift in consumer habits. Now, they're receiving more returned merchandise than ever before, which trickles down to the supplier. Suppliers and manufacturers must now deal with an influx of returned goods, which can be costly if not managed properly.
What Is Reverse Logistics?
Essentially, reverse logistics is the term for any operation that is related to the reuse of materials. Typically, this includes breaking down returned merchandise to salvage still-usable raw materials and using those materials to create new products to recapture value. Reverse logistics does also include proper disposal of materials that are damaged or cannot be salvaged, but good reverse logistics management practices minimize disposal as a whole and keep the cost of actual disposal down.
The History of Reverse Logistics
Reverse logistics goes as far back as the American Civil War. General William T. Sherman was faced with the challenge of supplying his armies during movement through hostile territory and had to make use of everything available to him. He reused as much as possible, and very little of what they had was discarded. During World War II, shortages of materials made it necessary to rebuild automobile parts from what would typically be considered "waste," officially creating what would become known as reverse logistics.
These early efforts to reuse and repurpose materials weren't optimized, but the initiative was there. This would even set the stage for modern recycling efforts, as companies, plus the public, began to see that waste wasn't always something to discard and value could still be extracted by finding ways to reuse materials. The creation of processing facilities began, where certain types of waste were cleaned and processed back down into raw materials, which could then be used for another purpose.
While recycling still has a long way to go, more value is being extracted from used and discarded materials than ever before. In addition to setting up a reverse logistics program within their own manufacturing facilities, some companies even source their initial raw materials from processing facilities that have recycled the material from waste.
Why Reverse Logistics Management Matters Today
Reverse logistics management matters for two primary reasons. First and foremost, reverse logistics simply cuts down on the amount of waste generated by the general public. Second, a well-managed reverse logistics program can save manufacturers and warehouse facilities significant costs.
As landfills grow and oceans become polluted with garbage, it's more important than ever to salvage all potential raw material from products that have been used and discarded. Extracting value from previously-used consumer goods is easier today thanks to awareness and technology. Some resources used to create products are finite, such as neodymium, terbium, and dysprosium used in smartphones to make them vibrate. These rare earth metals aren't so "rare" yet, but once they're gone, they're gone. This is why refurbishing electronics such as phones and tablets are so critical to sustainability.
Consider the smartphone industry again for a moment, looking at it from the first perspective. A smartphone manufacturer must source these rare earth metals, which is costly and time-consuming. Users upgrade their smartphones every year or two years on average, creating millions of unused electronics on a regular basis. Many of these unused electronics simply need to be "reset" or wiped clean for another user. Others need simple fixes, and then the refurbished device can be sold to another consumer at a discount. The manufacturer incurs significantly less cost during the refurbishment process, creating a higher profit margin. Other electronics that are too damaged to be reset or refurbished can be disassembled and the finite raw materials within can be harvested and used for a new device, eliminating the need to use newly sourced rare earth metals.
The electronics industry is just one example—reverse logistics can be employed in most industries to cut down on costs, reduce waste, and add value to already existing resources. Manufacturing facilities that have good reverse logistics management programs in place increase revenue and contribute less to global waste, creating sustainable practices that benefit everyone.
About Michael Wilson
Michael Wilson is AFFLINK'S Vice President of Marketing and Communications. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time, Michael enjoys working with the Wounded Warrior Project, fishing, and improving his cooking skills.