Why Outsourcing Your Reverse Logistics Program Makes More Sense Than Keeping It In-House

By Editorial Team | Published On September 28, 2021 | Last Updated On September 28, 2021

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 supply 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 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 customer satisfaction. Reverse logistics is one of the most important decisions a company can make. The failure to administer an efficient returns process will cost customers and may adversely affect overall profitability.

As a result, several supply chain executives make the wise decision to outsource the entire reverse logistics program of their organization. It is a strategic move that can streamline internal operations and improve over a;; supply chain 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 drive a better identity of their brand and thereby maximizes 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 leads the organization to believe that its reverse logistics program ensures customer satisfaction.

Improved communication

Having an in-house team for streamlining your reverse logistics operations ensures facilitated communication. An in-house team understands the values and systems of the organization as well as the expected level of communication. As a result, the loss of important information from poor communication is minimized.

However, when an organization becomes bigger, it becomes quite challenging to maintain the efficiency of an in-house reverse logistics program with ease. Scalability is one of the primary issues which compels a company to look outside for help with their reverse logistics processes.

Challenges Associated With Managing in-House Reverse Logistics Programs

When an organization starts growing, the in-house reverse logistics processes result in significant issues. Reverse logistics have an abject need for a wide range of resources, and prioritizing forward logistics to meet sales targets can detract from those resources and compound the problem. Unfortunately, customers have an expectation regarding hassle free returns driven by companies such as Amazon regarding returns. It affects the entire supply chain and has a negative effect on customer satisfaction and brand image in turn.

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 a consumer concern but a USD 1.75 trillion headache for companies!

The report says that every year, an average of 15% of goods are returned or deemed excess. Since a lot of retailers do not have the necessary infrastructure to manage this flood of returns, a lot of returned goods don’t end up in the hands of another consumer. The traditional supply chain is long and complicated and as a result returns inventory can lose value along the way and a whopping 30% of them end up in landfills.

Another pressing issue that exists with management of internal reverse logistics programs is the amplified need of moving goods. A report by DC Velocity shines light upon a recent study conducted by CBRE. It shows that companies which decided not to outsource their reverse logistics program ended up needing 20% more space. This proves that the attempts to handle in-house reverse logistics by supply chains result in limiting their abilities to fill orders and maintain profitability.

Why Would You Outsource Your Reverse Logistics Processes?

There are several clear benefits that a third-party logistics provider can deliver to your business. Outsourcing your reverse logistics program to an acclaimed 3PL provider can improve profits, flexibility, customer service, level of control and many more.

Since 30% of all returned goods (assuming 15% are returned) end up in landfills, there is significant value to be recaptured. Hence, turning to outsourcing helps a company to streamline all operations and handle resources efficiently to manage reverse logistics as a complete outbound function. The simple model of outsourcing minimizes any upfront hassles in managing reverse logistics operations for a company. Along with it, there are several other upsides:

  • Increase in efficiency and productivity
  • 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
  • Expertise and experience of established 3PL providers
  • Adherence to reverse logistics regulations
  • Improved routing and inventory management
  • Staying current with the logistics industry
  • Customized 3PL services including value-added services access
  • Improvements in customer relationships and networking
  • Business scalability

How to Select an Ideal Reverse Logistics Provider?

Finding a quality provider with efficient reverse logistics management can be troublesome for companies. Hence, we have tried to make the final plunge easier for them. Every organization 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 that business to become stronger by increased focus on the core operations. There is a greater sense of productivity, and lesser resources to handle in maintaining operations that are not central to the organization. All of these result in improved profitability and better customer service. Hence, outsourcing your reverse logistics program to an efficient provider can ensure you are generating maximum value recovery while minimizing the negative effect returns can have on the environment.