The true cost of reverse logistics for new businesses

Any good business owner knows the value of a solid forward supply chain, but what about the reverse logisticsopposite: reverse logistics? Reverse logistics can cost big companies millions and because of the complex nature of their supply chain, it’s often hard to pinpoint exactly where these costs come from.

There are certain unavoidable expenses when it comes to reverse logistics, and these can be heavy for new businesses.

Returning an item back to a bricks and mortar store is still generally the most cost-effective method for a small company, although this can be inconvenient for customers. With online or catalogue purchases, however, the cost of returns increases.

Although companies may want to cut their monetary losses in this area, successful reverse logistics is a fine balancing act that involves weighing up profits and customer attitudes. A returns policy that forces the customer to pay for postage and packaging for example, has a short returns period or only offers store-credit can lower costs but upset customer relationships. Having a returns policy that bends over backwards for unhappy customers will often counteract any negative options, but will end up costing the company more.

One of the biggest expenses in reverse logistics is the additional labour required to deal with the huge numbers of goods returned each year. Whether it’s staff that have to sort out where the item needs to go, or customer care teams who have to process refunds and complaints, in-house staff are an expensive asset.

Certain items such as weekly or monthly magazines and computer and electronic goods can quickly depreciate in value when returned. Unless repackaged and sold elsewhere, either as new, refurbished or even scrap, they can cost a small buisness triple their retail value. Other expenses can come from customer expectations. When an item is sent back through the supply chain as a return, a customer will generally expect a full refund or a replacement.

With such a delicate operation, reverse logistics is a process that’s better handled in expert hands in order to provide your customers with a simple returns solution. Outsourcing to a third party logistics company can far outweigh any expense, and will often reduce any unnecessary costs when processing returns.

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