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Importance of reverse logistics: 6 Reasons it’s overlooked -  Part 2

08 November, 2011

This is Part 2 of this series on Reverse Logistics. Here we will take a look at why Reverse Logistics is overlooked. The importance of reverse logistics is often overlooked by organisations; many organisations believe that reverse logistics is only an expense.

However, this doesn’t have to be the case; for example, Cisco systems make a profit from their reverse logistics strategies such as screening all returns for embedded value and reusing parts. These strategies have contributed to financial, environmental and social benefits for the organisation.

Here are 6 reasons why organisations overlook the importance of reverse logistics:

  1. Reverse logistics is only seen as an expense to an organisation. But it can be profitable; reusing and recycling can often reduce costs.
  2. Reverse costs are less clearly visible and therefore not looked upon as a priority; often organisations avoid difficult problems.
  3. It is difficult to forecast for reverse flow of the product and to know exactly what and how much merchandise will be returned by the customer, therefore return flow needs to be recorded and planned so it can be estimated and managed effectively.
  4. Organisations only look at faulty customer returns, not the total volume of returned products such as end-of-life strategies for products that are perfectly functional but replaced with newer versions of the product. Therefore these organisations miss the total volume of reverse flow which if managed properly can lead to large gains.
  5. Many organisations do not have the expertise, manpower or infrastructure for processing returns and expanding to start up a new operating system of returns. These organisations should consider outsourcing to a qualified third party logistics organisation (3PL).
  6. Reverse logistics is often seen as more complicated and less structured than the normal supply chains due to variation in product quality, defect rates and maximum life span. This doesn’t mean organisations shouldn’t try and tackle the challenge. By creating structured flow path ways for different product scenarios most of these problems can be handled.

 

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Next entry: What is Drive-In Racking? Warehouse Racking Guide: Part 4

Previous entry: What Is Reverse Logistics? Understanding the Basics -  Part 1

2

Comments

Kay Winsor
February 09, 2012 - 6:16 pm

Its really important to know the importance of reverse logistics just like IT outsourcing. I think that reverse logistics would help you earn profit just like what Cisco system did. I know that many people should not overlooked it as an expense but a new strategy.

Shrink Wrapping Machines | Cryovac Shrink Films
December 20, 2012 - 8:53 pm

Thanks for the explanation.

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