Reclaiming Value Through Reverse Logistics

The term "reverse logistics" applies to the process of moving goods for the purpose of extending the product's lifecycle, recapturing value, or ensuring proper disposal. A key part of a company's inbound shipping, reverse logistics encompasses everything from returns policies and procedures to product repairs, refurbishment, recalls, recycling, and product disposition.

Recapturing profits is a big piece of the reverse logistics puzzle. How big? The electronics industry spends more than $14 billion on returns every year, yet those companies that do not have a well-managed reverse logistics program could be losing more than 50 percent of the returned inventory value. By not paying attention to the reverse logistics side of the supply chain, companies could be overlooking billions of dollars in missed opportunities.

Another key piece of the reverse logistics puzzle -- proper product disposal -- is a growing issue in the electronics industry. Not only can companies lose money by not having a properly functioning reverse logistics program in place, but they can also lose thousands or even millions of dollars through regulatory fines and penalties if they don't follow proper product disposal procedures. State and federal legislation has played a growing role in impacting the returns process. In fact, there are more than 35 states that have passed legislation around returns management and proper disposal.

According to a whitepaper, "Recovering Lost Profits by Improving Reverse Logistics," written by Curtis Greve and Jerry Davis of Greve-Davis and commissioned by UPS, knowing what products are returned and where they end up makes it easier for companies to deal with regulatory issues and evaluate those returned items for possible secondary sales channels, which can in turn lead to an increase in profit. The whitepaper includes a quote from a former Best Buy executive, who states: "Secondary market electronics sales represent an estimated $15B market in the United States."

Not only can electronics companies benefit from focusing on reverse logistics in terms of new opportunities, but they can also avoid carrying costs for excess inventory, minimize insurance and taxes, and better manage company staffing.

High-tech and electronics companies should never underestimate the power of a customer's positive returns experience. Not only are returns not an afterthought for consumers, but they are also increasingly becoming a crucial factor in the overall online shopping experience. According to comScore's 2012 Online Shopping Customer Experience study, commissioned by UPS, 63 percent of online shoppers look at a retailer's returns policy before making a purchase, and 48 percent would shop more often with that retailer if it were to offer a lenient, easy-to-understand returns policy. That is powerful data on the significance of returns.

Overall, today's online shoppers know what they want and when they want it. They are much savvier than they were just a few years ago, and with the continued growth in e-commerce, they are expecting both ease and control when it comes to their online shopping experience. Considering the fact that the electronics industry is one where demand quickly ebbs and flows, making the returns process easier for customers is critical, as it creates an opportunity to improve customer satisfaction and drive greater brand loyalty.

Here are some additional returns data points from the comScore study that may surprise electronics manufacturers and retailers:

• Forty-two percent of consumers want to see ease of returns and exchanges improved by retailers.
• More than 60 percent of online shoppers want a return label in the box or an easy-to-print return label.
• Forty-eight percent would recommend a retailer to a friend if that retailer offered a lenient, easy-to-understand returns policy.
• Thirty-two percent would focus less on prices and more on quality of service if that retailer offered a lenient, easy-to-understand returns policy.

One thing is clear: Consumers do not consider returns an afterthought, and therefore, neither should companies. The beginning of a new year is a good time to re-evaluate your reverse logistics processes and returns policies. Rather than waiting for an issue to arise, be proactive in identifying and addressing potential challenges. A strategically managed returns process not only can uncover hidden profits and increase customer satisfaction, but it can also give your company a competitive edge in the marketplace.