Reverse Logistics

Reverse logistics includes, for example, customer returns, warranty and maintenance services, and recycling.

In reverse logistics, the product flow moves from the customer to the supplier. However, reverse logistics is not the opposite function to supply chain management. The transportation or distribution system or route for reverse logistics is often not the same as for company’s departure logistics, where delivery time and speed are crucial. In the field of trade, however, product returns, packaging materials, trolleys and pallets are usually collected in the car at the time of distribution. Customer returns can be caused by, among other things, defective or incorrect products. Therefore, it is difficult to anticipate return logistics.

Well-managed and instructed reverse logistics improves business results and customer satisfaction. 3–6% of the operating result is committed to reverse logistics. In the US, on the other hand, it is estimated that ten percent of logistics costs come from reverse logistics. The multi-stage and laborious nature of reverse logistics is illustrated by the fact that one step in departure logistics corresponds to 12 steps in reverse logistics.

The outsourcing of reverse logistics is believed to improve the organization’s competitiveness, and reverse logistics is one of the most outsourced logistics functions among Finnish industrial and trade companies.

Reverse logistics management is especially important when defects or deficiencies are detected in products that have already been delivered. If left untreated, they can cause accidents or damage to health. Sometimes end customers need to be warned through the media in order to collect defective products from the distribution channel and end customers. For example, defects in the accelerator pedal mechanisms and engines of some car brands have been detected, which led to car manufacturers having to send repair calls to car owners. This resulted in significant reverse logistics costs for the manufacturers.

Bottle returns are a good example of recycling and reverse logistics, as beverage packaging material can be recycled and reused. In Finland, as many as 97 percent of bottles are returned from consumers.

Reverse logistics is also currently being developed in numerous industrial companies. Among other things, they study the reorganization of warranty returns, which would take into account the storage and handling of defective products returned from customers, as well as the onward delivery of goods to the importer or manufacturer. Care should be taken to instruct staff in the renewed reverse logistics policy in order to avoid incorrect operating procedures.