In ecommerce, we spend a lot of time talking about logistics. ShipMonk does too; after all, we are a 3PL third-party logistics provider. But just as we must constantly evolve to provide ecommerce businesses the best, fastest, most cost-efficient solutions for order fulfillment, so must we prepare brands for when items get returned. Here, the process of reverse logistics gets started.
The term “reverse logistics” on its own can be a bit confusing, so we’re taking the complexity out of this aspect of logistics for you. Read on to not only learn the answer to “What is reverse logistics?” but also find out what products undergo reverse logistics, the steps involved in the process, and the multifaceted effect it has on ecommerce businesses.
What is Reverse Logistics?
Reverse logistics is what happens to a product when a customer sends an ordered good back to the seller or fulfillment center it came from, i.e. when a customer returns something. Maybe this return was for a product that is perfectly good, but something about it didn’t fit the customer’s needs (like a pair of shoes that isn’t comfortable on their feet). Maybe this is for a product that arrived defective, broken or damaged. Or maybe it is (worst-case scenario) for a product being recalled by a company or manufacturer.
Regardless of the reason for the return, a fulfillment center helps ecommerce businesses make the most out of what customers don’t want. This is a three-fold process:
1.) Recovering perfectly good products safely so they can be restocked back into inventory, thus protecting your bottom line as much as possible.
2.) Minimizing the environmental costs of that return shipping, and possibly faulty product disposal.
3.) Handling the returns processing, and reshipment if necessary, as easily and swiftly as possible to maximize customer satisfaction.
Types of Products That Go through Reverse Logistics
Expanding on the above definition, there are five situations where a reverse logistics process is activated.
1.) Failed Delivery: When an ordered item fails to be delivered to a customer and shippers return the product to a fulfillment center (from there the product may also be returned to the ecommerce brand source).
2.) Damaged Orders: This involves the repairing, rebuilding, refurbishing, and/or remanufacturing of returned products that can be resold or resent OR products that can’t be fixed and must be disposed of while a replacement is sent.
3.) Unwanted Items: A customer wishes to return an undamaged item to the ecommerce brand because they do not want it for one reason or another.
4.) Unsold Goods: In this aspect of reverse logistics, the fulfillment center is handling the return of unsold merchandise from brand to manufacturer.
5.) End-of-Life Products: Merchandise is no longer useful, expired, doesn’t work, doesn’t meet customer needs, or an ecommerce business replaces it with a newer version.
Reverse Logistics Steps
Although returns and reshipments are a sore spot in the margins of every ecommerce business, if reverse logistics are handled well you can keep costs down while keeping customer satisfaction (and as a result brand loyalty) high.
1.) Claim: A post-purchase suite that makes it easy for customers to file claims is essential to any ecommerce business. At ShipMonk, we have MonkProtect. This fully-integrated platform allows customers to simply file a claim for a product they want to send back. MonkProtect also drastically reduces manual labor for ecommerce businesses by processing these claims quickly and only requiring review of special cases.
2.) Return: Once a claim has been filed and approved, customers send ecommerce businesses back a product vis-à-vis their fulfillment center. Upon arrival, returns are categorized by merchant, condition, reason for return, and destination they came from.
3.) Inspection: Products that arrive at a fulfillment center for a return are thoroughly assessed to determine if they can be resold, refurbished, recycled, or have to be thrown away. This identifies product value. That product value lets ecommerce businesses owners know what options they have for how to handle the returned item (refurbishment, disposal, donation, etc.).
4.) Repair: In some cases, returned goods may land in an in-between zone—not ready to be resold, but not beyond repair. In this case, an ecommerce business may have systems in place to refurbish a product to make it acceptable for resale. Every brand could have a different process (that they’ll need to make clear to the fulfillment centers they utilize). That being said, the point is that this step focuses on getting returned goods into that shape, i.e. cleaned, repaired, and/or repackaged for resale.
5.) Recycling or Disposal: Sometimes returned goods are beyond help, and in this case (when they can’t be resold) an ecommerce business will have a directive for the fulfillment center to recycle or throw away those products. Responsible disposal is a very important part of the reverse logistics process, as eco-friendly ecommerce is something all brands and fulfillment companies should get behind.
6.) Logistics and Shipping: Fulfillment centers must coordinate with the appropriate repair centers, recycling facilities, or ecommerce business resale channels (depending on brand directives) to ensure products get where they need to go next.
Why Reverse Logistics Matters to Ecommerce Businesses
One word: Impact. The reverse logistics methods your ecommerce business uses have an impact on your margins, customers, brand strength, the environment, and company standing.
1.) Monetary Impact: An optimized reverse logistics plan can help your ecommerce business recover the maximum amount of returned products by using smart shipping solutions, recover value on returned products that can be resold, and dispose of unsellable returns in the most cost-friendly way possible.
2.) Customer Impact: All customers love efficiency. On the onset that comes from speedy, yet inexpensive shipping that gets them what they want quickly. When it comes to returns, efficiency revolves around how fast a claim is filed and approved followed by how fast a return is processed (and possibly a replacement is sent). The success of all these matters comes from a fine-tuned reverse logistics process put in place by your 3PL fulfillment partner.
3.) Brand Impact: If the above standards are met in terms of customer satisfaction, your brand loyalty will maintain, and even increase. In other words, a smooth reverse logistics set-up gives your ecommerce businesses a competitive edge in the market because your customers know you take care of people.
4.) Environmental Impact: In today’s ecommerce industry, eco-friendly ecommerce is a huge priority. There are many ways brands can reduce waste/carbon footprint, protecting the planet without taking down the budget. Effective returned product shipping, repair, recycling, and reshipment comes down to the standards your ecommerce business and fulfillment partner have in place for handling reverse logistics.
5.) Company Impact: You, as an ecommerce business owner, care about what customers think, but what about what the industry and larger entities like the government think? Regulatory compliance related to the handling and disposal of certain materials, like electronic waste, and other environmental regulations is closely tied with reverse logistics. Meaning, complying like a champ is rooted in reverse logistics.
Ecommerce Business Must-Haves
We’ve had a lot of different lists in this blog detailing key components in the main areas that define reverse logistics. But you, the ecommerce brand, must be aware of the most important elements. You need an RPP (Return Policy and Procedure) and a Returns Management system in place.
1.) Return Policy and Procedure: The policies that ecommerce businesses share with their customers from the onset (on the website) regarding returns, refunds, and reshipments.
2.) Returns Management: How your fulfillment centers handle returns and how they prevent returns (the damage-related kind) from happening in the first place (types of dunnage, proper shipping methods, etc.).
Reverse the Damage of Returns
“What is reverse logistics?” is a loaded question. If you’re an ecommerce business, this means thinking about how to best handle products, minimize returns resources to not hurt margins, and make customers’ lives easier. That’s a lot of balls to juggle. The good news is that as the industry’s leading third-party logistics provider, ShipMonk’s job is to make your life easier.
Our 12 state-of-the-art fulfillment centers are fully equipped to handle reverse logistics as smoothly as the initial logistics of your order fulfillment (including DTC, B2B and retail, FBA prep, etc.). Moreover, our 3PL software ensures all the info you need to keep an eye on your fulfillment center management is always at your fingertips.
We are proud to represent a wide array of ecommerce businesses, and set ecommerce business owners up for success with tools like these, as well as our dedicated logistics experts who handle order fulfillment and returns. If that streamlined, efficient means for managing your brand sounds appealing, contact us today. We’d be happy to work with you on all aspects of logistics to best accomplish your ecommerce goals!