Reverse logistics: how to best deal with materials and goods that customers return

Reverse logistics refers to the flow of everything that is returned to your warehouse from customers. It can be returned or claimed goods, packaging or used products. With the growing e-commerce market, reverse logistics is becoming more important than ever - e-shops are dealing with increasing returns, recycling and automating the entire process. Read how companies use reverse logistics and how to manage it.

What is reverse logistics for?

The goal of reverse logistics is to reuse products and materials that the customer has already used or at least ordered. Ideally, reverse logistics should be set up in a way that makes sense for you both economically and environmentally .

Properly set up reverse logistics most often brings the following benefits to companies:

• cost reduction,
• cash flow improvement,
• higher customer satisfaction,
• increasing customer loyalty,
• faster and better service,
• brand reinforcement,
• reducing waste production and improving sustainability,
• selling goods before they are returned to the warehouse by the customer.

A reverse logistics chain typically looks like this:

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What does reverse logistics solve (types of returns)?

1. Returned goods – In the case of returns, the task of reverse logistics is to process returned goods as quickly and efficiently as possible so that they can be sold again. However, the goal of reverse logistics is also to minimize the amount of returned goods. This is addressed, for example, by fashion e-shops, where the return rate of goods is high.
2. Refurbishment of goods – Some companies allow customers to return goods that have outlived their purpose. The company then refurbishes and resells them, or removes usable parts and recycles the rest. IKEA is famous for this, encouraging customers to return used furniture and give it a new life. Or Apple, for example, offers a discount on a new product when you return an old product.
3. Packaging material – Reusing or ecologically recycling excess packaging is profitable for companies. A classic example is Rohlík.cz, which offers ecological reusable bags or processes returnable bottles and packaging.
4. Unsold/Unused Goods – This may involve returning unsold goods to manufacturers, for example due to poor sales, obsolete goods, or errors discovered during receipt of goods. Another example is construction companies that move unused material from one construction site to another, where they are reused.
5. Undelivered goods – Every e-shop must deal with this type of reverse logistics. For example, when a customer ultimately does not pick up the goods from the carrier.
6. Exchanges of goods – Situations where customers want to exchange purchased goods for other goods.
7. Loans and rentals – If a company also loans goods, it must also handle the return process through reverse logistics.
8. Repairs and maintenance – In some contractual terms, customers are entitled to regular maintenance or repair of goods in the event of damage.

What does properly set up reverse logistics look like?

To make the reverse logistics process run smoothly, you need to streamline the following two steps in particular:

1) Goods/material return process

The reverse logistics process begins when a customer decides to return a product or part of it. The first step must therefore include authorization (acceptance of the request to return the goods) and assessment of the product's condition. As well as planning the shipment of the returned goods (with carriers or your own collection depending on the type of shipment), refunding money or replacing damaged parts. If the customer wants to exchange the goods, you can arrange this when returning, which is beneficial for both you and the customer.

2) Processing of returned goods/materials

Once a customer physically hands you a piece and you send it off for processing, you have to decide what to do with it—for example, whether to repair it, recycle it, or put it back on the market. Ideally, you know this before the piece arrives.

The following methods will help you optimize the reverse logistics process:

1. Use data

Collect data about returned goods, such as the type of goods, reasons for return, or how long the customer has been using the product. Then you can adjust your business process, product design, or logistics processes accordingly.

2. Set up processes with suppliers

Reverse logistics is not just up to you, but also to your suppliers and business partners. For example, if you need to send goods to the manufacturer for repair, find a way to speed up the process together.

3. Handle returned products in as few places as possible

In other words, centralize. Large companies often process returns in specialized centers to be as efficient as possible. Smaller companies set aside a special space in their warehouse for this purpose. It is important that the processing of returns does not interfere with normal operations.

4. Evaluate regularly

You can never set up reverse logistics right away. Monitor it and look for new ways to reduce costs. Try to compare with your competitors and be better (for example, in the percentage of returns, repairs or complaints). Ideally, for example, drivers will deliver the goods to the customer and bring back the returned pallets and packaging. This will save you time and money.

5. Automate

Automation is the cornerstone of cost reduction in reverse logistics, especially the warehouse management system (WMS)

WMS in reverse logistics

In a warehouse managed by a WMS , returns are handled in the following way:

• the warehouse worker uses a reader to read the code on the returned shipment,
• The WMS asks the warehouse worker via the reader whether all items from the original shipment have been returned,
• The warehouse worker puts the goods in the return position and the e-shop is automatically informed that the goods are back in stock. The return rack is ideally located next to the reception, so the warehouse worker does not have to distribute the goods throughout the warehouse. Returned goods have maximum priority in the picking process.

In practice, the warehouse worker only needs to make one beep and place the goods on a predetermined shelf . The next time an order is placed, the system already knows that the goods are in the return position and will send the warehouse worker to pick them up first when picking.

The process of returning undelivered goods, packaging materials or damaged goods works in a similar way with a WMS. The WMS always registers the item and gives the warehouse worker instructions on where to move it. A managed warehouse tracks the movement of each item and packaging, which improves overview and simplifies data collection and evaluation .

You can learn more about how WMS helps to solve returns in a separate article . If you are struggling with returns and are looking for a solution, contact us . Since the returns process is specific and different in each company, we will first analyze your processes and then find the optimal use of LOKiA WMS , which will significantly facilitate your work with returns.