This is a topic very much on the minds of today’s retailers, manufacturers and distributors because the business processes of reverse logistics directly impacts how satisfied today’s customers are with your products and services.
Managing reverse logistics as a core competency drives competitive performance because improved customer satisfaction leads to improved customer relationships, sales performance and ultimately revenue.
In recent discussions with clients during ERP selection, it became clear that a focus on reverse logistics would drive business process improvement and enable significant value realization. Because when it comes to the evaluation, selection and implementation of enterprise solutions, technology that optimizes the reverse logistics process is a key factor for business process improvement.
Reverse Logistics Defined
To take a closer look at the concept, definitions are in order. The industry group Reverse Logistics Association defines Reverse Logistics as ”all activity associated with a product/service after the point of sale, with the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources.”
Further industry sources describe the term as “the management of all the activities involved in the flow of goods, demand information and money in the opposite direction of the primary logistics flow, a reduction in the generation of waste, and the management of the collection, transport, disposal, and recycling of hazardous as well as non-hazardous waste in a way that maximizes the long term profitability of the business.”
Other sources phrase the concept in clearer terms. They see reverse logistics as more than an organization’s return policy. It involves not just returns but all activities associated with moving “backwards” in the supply chain.
In the work Ultra’s ERP consultant team has done for manufacturers, we make the case that reverse logistics impacts a wide cross-section of the business, including customers, suppliers, partners, service providers, environment, as well as earnings and ultimately shareholder value.
Reverse logistics programs involve management of the company’s published returns policy, disposition guidelines to assess condition, determining the best way to process assets to maximize net contribution and other key business processes including accounting, production and preparation of assets for their secondary destination.
A reverse logistics program also involves strategic partnership agreements with suppliers as to which goods can be returned, determining liquidation arrangements, and establishing recycling and/or disposal guidelines as appropriate.
Current State of Reverse Logistics
Given that an optimized reverse logistics process provides a critical opportunity to improve customer satisfaction, it’s imperative that retailers, manufacturers and distributors operate with effective reverse logistics processes.
But for many organizations, the reverse logistics process is far from optimized.
An industry study by Aberdeen Group revealed that 60 percent of the organizations surveyed are somewhat or not satisfied with how they manage reverse logistics. The most commonly cited causes of dissatisfaction are generally attributed to process-, time- and measurement-related factors.
To illustrate challenges that come with poor management of reverse logistics, think of the wasted resources and expense when an organization does not effectively process returns, handle restocking, disposal/recycling, accounting processing as well as other key areas. Poor management of reverse logistics involves error-prone manual processes, reduces customer satisfaction and worse yet, wastes company resources.
We guide our clients to map out reverse logistics processes to be covered by integrated ERP, field service, Warehouse Management Systems, as well as CRM systems.
Strategies for Success
The most successful companies implement fully integrated enterprise technology to better manage a strategic reverse logistics program that drives both reduced costs and increased customer value. The goal is to streamline reverse logistics to improve cycle times – the time it takes the organization to routinely fill customer orders and related activities — both on the inbound and outboundlogistics sides. Technology should integrate and link data across reverse logistics functional areas such as receiving, refurbishing, replenishment, inventory tracking, shipping, and accounting.
We guide our clients to look carefully at the current state of reverse logistics activities, and map out processes to be covered by integrated ERP, field service, Warehouse Management Systems, as well as CRM systems.
Effective reverse logistics management is proven to result in increased revenues, lower costs, improved profitability and enhanced customer service.
In fact, it could be argued that the most important benefit is an improved customer experience.
Given the pivotal role enterprise solutions can play in optimizing reverse logistics performance, project teams can contact Ultra to consider business process improvements as they embark on an ERP selection project.