The role of reverse logistics to enable a sustainable future

Across the world, enterprises are seeking new ways to integrate more sustainable practices into their supply chain operations and so better achieve their sustainability goals. With research indicating that around 70 percent of an organization’s greenhouse gas emissions are attributable to supply chains, the pressure is on supply chain managers to adopt greener practices.

In addition to risk management and regulatory requirements, consumer expectations are a significant consideration. A recent study found that 64 percent of consumers across Asia Pacific strongly believe climate change is an emergency and 52 percent have changed their purchasing behaviors in response to climate concerns.

Building greener supply chains requires a multifaceted approach. However, one option – reverse logistics – is growing in popularity.

What is reverse logistics and why is it important?

Standard ‘forward logistics’ focuses on the flow of goods from the supplier to a factory or distributor, and then on to retailers and customers. Reverse logistics management moves in the opposite direction. Starting with the customer, it deals with the return of products back to the retailer, supplier, or manufacturer. This includes managing recalls and exchanges, and ensuring customers have easy access to drop-off points.

With an efficient reverse logistics system in place, companies can offset the costs associated with returns while boosting customer satisfaction. That is critical in today’s business environment, where providing a seamless, hassle-free return experience is increasingly seen as a differentiating factor for companies to attract and retain customers. In a recent survey of 600 respondents across six Southeast Asian countries, 83 percent said they would increase their online purchases by at least 30 percent if a smooth return logistics flow was available.

E-commerce’s rapid rise over the past few years is also intensifying the importance of getting reverse logistics right. When consumers buy products online without physically inspecting them for defects or trying them on for fit, the likelihood of returns grows.

Globally, at least 30 percent of products ordered online are returned, compared to around eight percent in brick-and-mortar stores.

How does reverse logistics contribute to sustainability?

Driving cost savings and enhancing customer satisfaction are not the only benefits associated with reverse logistics. It is also an approach intrinsically aligned with environmental sustainability. For a start, greater energy efficiency can be a major gain. Streamlining the processes associated with product returns can result in more efficient transportation and distribution networks, reducing energy consumption.

At the same time, failing to comply with environmental regulations regarding the disposal and recycling of certain products (electronic devices, for instance) can lead to legal consequences and damage a company’s reputation. An effective reverse logistics system can reduce business risk by ensuring companies adhere to environmental policies.

What are the ‘5 Rs’ of reverse logistics?

Many different types of reverse logistics can come into play. A major focus of the approach involves companies sending their returned goods to places where they can be reused or recycled, enabling them to contribute to a more sustainable and circular economy.

The ‘5 Rs’ – returns, reselling, repairs, replacements, and recycling – are useful principles that summarize how reverse logistics can create value for businesses in this way. When retailers set up their supply chains to forward return shipments to their repair, recycle, or resell channels, it can also help to alleviate storage costs and related requirements.

Adopting the 5 Rs in a circular supply chain means companies can put processes in place for collecting and recovering materials from returned or end-of-life products. This can help to keep precious resources in use and out of landfills and incinerators.

Embracing repairing or remanufacturing processes as part of a reverse logistics system can also extend product lifespan – thus reducing the need for new manufacturing, which can often involve significant resource consumption.

This is especially relevant in our post-pandemic world, where hybrid work is becoming the norm. Businesses need to evolve their device lifecycle management processes, among other things, to ensure a seamless hybrid model. Companies are taking advantage of this shift to adopt effective ways to deal with the disposal, recycling, and refurbishing of company devices. For example, with the right reverse logistics strategy, 20 to 50 percent of electronic devices returned can be categorized as ‘no fault found’ and resold.

Making returns more efficient with an integrated solution

Looking at examples of successful reverse logistics in action, it is clear that a growing number of companies are turning to experienced outsourced third-party logistics providers to help them overcome challenges and meet their goals.

For instance, a leading provider of satellite-based television services in South America wanted to improve its repair and service operations to take advantage of the huge growth in high-definition (HD) television viewing. To achieve this, the company needed to reduce unit repair costs. It also wanted to integrate its returns and repair operations with forward logistics and transportation in collaboration with a single provider.

As its service provider, DHL Supply Chain built a repair and service area for the operation and staffed it with 17 specialist electronic technicians. The logistics firm also accelerated its adoption of regional and global best practices, including a new benchmarking system that accurately tracks productivity.

The result is a simplified repair function operated by DHL Supply Chain, integrated with the company’s forward logistics services. Productivity has increased from an initial target of 5,000 equipment repairs to 7,000 per month in less than two years – a 40 percent increase.

These gains have translated into better customer service. The integrated logistics system encompasses warehousing, inventory management, customer service, receiving and shipping as well as repairs. The system improves supply chain visibility and puts the company in a stronger position to implement sustainable practices such as recycling.

Understanding the risks of reverse logistics

There are also specific challenges associated with reverse logistics. If the supply chain network is not well optimized, transportation costs, delays, and damages during transit can impact the efficiency of the process.

At the same time, limited supply chain visibility can make reverse logistics difficult to manage. Companies may struggle to track returned items, assess their condition, and make informed decisions about refurbishing, recycling, or reselling.

For a reverse logistics strategy to fulfill its potential, goods should flow efficiently in both directions. By planning outbound and inbound flows simultaneously and gaining complete visibility of the entire process, companies can boost overall efficiency and gain more value from their logistics.

However, they must also implement the right infrastructure for this approach to be effective. This can involve investing in technologies to plan, track, and monitor every step of the process, adopting clear policies, and using data-driven insights to continually enhance efficiencies.

Towards a sustainable, circular future for all

By paying proper attention to reverse logistics and working with an expert partner to hone their approach, supply chain managers can boost their enterprise’s ability to cope with issues such as growing customer expectations, intensifying cost pressures, and regulatory compliance.

At the same time, they can better align with broader sustainability initiatives and so accelerate progress towards a greener future.

Find out more about how reverse logistics can help enable the circular economy.