Reverse logistics programs have proven to be a money maker for companies. Therefore, more and more industry leaders are outsourcing their reverse logistics programs to ensure maximum profitability.
Companies that have a reverse logistics process in place can recover value and have a neat and efficient value chain that trumps their market competitors. Ecommerce is continuing to grow at a breakneck pace, making up for 8% of all retail sales in the US. Although the COVID-19 pandemic dealt a heavy blow on industries worldwide, the resultant increase in online sales has generated an equivalent increase in returns and the need for a tight, efficient reverse logistics program.
The increase in online sales has led to increase in competition and businesses must do everything to ensure The increase in online sales has led to increasing in competition and businesses must do everything to ensure customer satisfaction. How to implement reverse logistics is one of the most important decisions a company can make. The failure to implement a consumer-friendly and cost-efficient returns process will likely affect overall profitability.
Because of the importance of reverse logistics, many brands have made a strategic move to outsourcing to streamline internal operations and improve overall efficiency.
Staying in-House for Reverse Logistics
Many businesses might feel that staying in-house for their reverse logistics program is the best decision. 74% of shoppers choose to buy from a retailer again based on a pleasant shopping experience. This might influence businesses to keep their reverse logistics program in-house to have better control their brand reputation and maximize customer retention.
According to several supply chain executives, there are certain advantages of an in-house reverse logistics strategy.
Control
When an organization chooses to handle its own reverse logistics program, it has complete control over its operations. Complete control of a reverse logistics program can ensure customer satisfaction.
Improved communication
Having an in-house team for your reverse logistics operations can help improve communication. An in-house team can better understand the values and systems of the organization so they can better represent the brand. As a result, the loss of important information from poor communication is minimized.
Challenges Associated With Managing in-House Reverse Logistics Programs
When an organization starts growing, the in-house reverse logistics processes can experience significant issues. Scalability is one of the primary issues that compels a company to look outside for help with their reverse logistics processes. Reverse logistics have a need for a wide range of resources. Internal competition for those resources can result in reverse logistics processes becoming strained. Customers have an expectation regarding hassle-free returns driven by companies such as Amazon regarding returns. Not having a strong, hassle-free returns process has a negative effect on customer satisfaction and brand image.
According to a report by Tobin Moore in Multichannel Merchant, deprioritizing reverse logistics can create an insurmountable problem for retailers. Irrespective of the demand for fair return policies, the reverse logistics process is not only a customer experience concern but also a contributor to a $1.75 trillion headache for companies.
The report says that every year, an average of 15% of goods are returned or deemed excess. Because a lot of retailers do not have the necessary infrastructure in place to manage this flood of returns, a lot of returned goods don’t end up in the hands of another consumer. The returned inventory can lose value along the way and a whopping 30% of returns end up in landfills.
Another pressing issue that exists with the management of internal reverse logistics programs is the amplified need for moving goods. A report by DC Velocity shines light upon a recent study conducted by CBRE. It shows that companies that decided not to outsource their reverse logistics program ended up needing 20% more space. Expanding current facilities or moving to new, larger ones can greatly reduce profitability.
Why Would You Outsource Your Reverse Logistics Processes?
There are several clear benefits that a third-party logistics (3PL) provider can deliver to your business. Outsourcing your reverse logistics program to a capable 3PL provider can improve profits, flexibility, customer service, level of control, and many more.
As noted above, 30% of all returned goods end up in landfills, meaning there is significant value to be recaptured. Outsourcing helps a company to streamline operations and handle resources efficiently. The simple model of outsourcing minimizes hassles in managing reverse logistics operations with several advantages:
- Increase in efficiency, productivity, and scalability
- Lowering unforeseen expenses
- Access to updated warehouse and logistics technology like warehouse robotics, transportation management systems, real-time tracking platforms, etc.
- Maintaining flexibility in operations
- The expertise and experience gained by using established 3PL provider
- Adherence to reverse logistics regulations
- Improved routing and inventory management
- Staying current with the logistics industry
- Additional customized 3PL services including value-added services access
- Improvements in customer relationships and networking
How to Select an Ideal Reverse Logistics Provider?
Finding a quality provider with efficient reverse logistics management can be a challenge. Organizations looking to outsource their reverse logistics program should look for the following in a provider:
- A global reach
- Transparency in price and rates
- Willingness to go the extra mile to recapture revenue
- A diversified carrier network
- Clear accounting practices
- Compliance records with every applicable regulation
- Integrated modules that plug into the transportation management system (TMS)
Closing Thoughts
Outsourcing different aspects of a business helps the business to become stronger by allowing them to maintain focus on their core operations. This results in improved profitability and better customer service. That is why outsourcing your 3PL program to an experienced provider like PTS Corp can make a lot of sense for many businesses.