The Secrets to Successful Reverse Logistics Management for Your Warehouse

Updated on 22 December 2022

Reverse logistics and its management are one of the big challenges within supply chain industries. As a result of increasing e-commerce returns, packaging and waste are increasing as well. So, this is causing disposal costs that come with further costs like warehousing and storage costs for storing returns. There are more reasons for having good reverse logistics management, so what can be the value of it?

The Value of Good Reverse Logistics Management

Good reverse logistics management is crucial to run any warehouse or logistics service today successfully. In 2017, the reverse logistics supply chain was valued at $415.5 billion and is expected to be worth $603.90 billion by 2025

Reverse logistics is different from traditional, forward-moving logistics. Well-performed reverse logistics can also build a more environmentally sustainable supply chain — by cutting down on unnecessary transportation and lowering your total carbon emissions. Another key benefit is that you can strengthen manufacturers’ customer relationships with quick and efficient returns operations. This protects your business by building trust between your warehouse or logistics service and the manufacturers. 

The term “reverse logistics” includes every aspect of a company’s involvement in its product’s life after the point of sale. These value-added services and activities can be everything — from warranty management to repair, refurbishment, or recycling to the many physical steps needed for moving post-sale items from one place to another. 

When leading companies estimated the percentage of their total supply chain costs devoted to reverse logistics, companies with well-managed reverse logistics operations spent as little as 1 % of their total supply chain costs on processing returns. On the other side, companies with poorly managed reverse logistics processes spent as much as 10 % of their total supply chain costs on returns. The lesson is clear: When you invest in the proper training and procedures for a successful reverse logistics supply chain, you can save significantly more money and resources. 

Well-performed reverse logistics processes rely on good warehouse worker training programs and standard procedures. It helps to guide warehouse workers through the many complex tasks associated with processing returns. By ensuring warehouse employees have the skills and education they need to process returns successfully, companies can reduce their reverse logistics costs and protect their reputation. 

Forward Logistics vs. Reverse Logistics

You should avoid combining reverse logistics operations with your existing forward-moving logistics supply chain. This is a common and costly mistake. Firstly, returned goods increase a company’s base expenses. Additionally, returns logistics also presents challenges that are unique to post-sale goods. While forward-moving logistics deals with new products and customer experiences, reverse logistics includes returns, repairing, refurbishing, remanufacturing, recycling, or reselling goods. 

Warehouse managers and logistics services providers must consider reverse logistics’ overall shipping, handling, and storage costs. Moreover, good reverse logistics management relies on careful monitoring of the volume of returns, the percentage of returned sales, the condition of the returned product, and the financial value of the reverse logistics supply chain to the company. Furthermore, a return can mean that a customer is already having a negative experience with the brand. How well a company handles, the returns process can impact a customer’s overall experience with the brand and determine whether they purchase from that seller in the future.

To efficiently process returns, warehouse workers must understand and successfully perform many complex activities not found in forward-moving logistics operations. You, the warehouse workers, and the manufacturer will benefit much more if you invest in specialized reverse logistics training for your employees and standardize your reverse logistics operations.

Amazon and Reverse Logistics Management in the E-commerce Era

All over the world, e-commerce logistics is dramatically shaping market standards. E-commerce logistics is currently expected to soon be worth US$ 524.1 billion by 2025. Within the next 5-6 years, Germany alone with add over US$ 41 billion to the global e-commerce market, with growing Eastern European markets adding another US$ 32.6 billion

To stay competitive in the e-commerce era, sellers use fast and free return shipping to attract customers, but it comes at a cost. Around 30% of all products online are returned, compared to about 9% for traditional brick-and-mortar stores. The volume of returned goods companies must process can range from 3 % to 50 % of their total shipments. In 2019, the number one reason for online purchase returns was “faulty or damaged goods or products not being as described as online”. 

Amazon is a great example of how a leading company can use warehouse worker training programs and standardized procedures specific to reverse logistics processes to provide excellent service. The Amazon reverse logistics process is built around two key points. 

The first point is saving money by reducing shipping and storage costs with state-of-the-art automation, standardized processes at every fulfillment and innovation center, and reverse logistics training for its employee. 

The second thing Amazon does well is it recovers profits through its Amazon Warehouse Deals reverse logistics policy. Through its repair or refurbishment and repackaging operations, Amazon can resell used products instead of losing money on failed or unwanted items. 

Amazon warehouse training is swift and highly organized, lasting up to two days to prepare new-hire warehouse workers for the high volume holiday period.

Third-party Logistics Companies

Because the e-commerce market share will continue to grow, reverse logistics operations will become even more crucial to companies’ supply chain management in the future. These trends have already driven growth in the Third-Party Logistics (3 PL) market. The 3 PL market allows manufacturers to outsource logistics and distribution activities to 3 PL companies that have the infrastructure and labor capacity to process packages for online retailers. Experts project the 3 PL market to be worth US$ 1,789.94 billion by 2027. 

However, 3 PL companies must also face challenges and costs linked to setting up a well-managed reverse logistics supply chain. As with forwarding logistics, mistakes made by a 3 PL service provider reflect negatively on the manufacturer and potentially damage its reputation and customer relationships

Additionally, a 3 PL company may be able to quickly hire many warehouse workers to process returns for a manufacturer. But good warehouse worker training programs and education for temp workers about the reverse logistics supply chain are necessary to ensure the reverse logistics operations are successful. Moreover, 3 PL companies that rely on temporary workers to meet demand must ensure that standardized procedures are in place for every step of the reverse logistics process to keep operations moving.

Useful Next Steps

In this competitive market, well-performed reverse logistics management can be crucial to the success of your warehouse’s operations. Standardized procedures and quality warehouse worker training programs will enable your employees to deliver their best work. Among 3 PL services, these steps will ensure warehouses can keep up with high volume. It will also help earn the trust of manufacturers who may be worried about putting their brand’s reputation in the hands of a 3 PL company.

For long-term warehouse workers, your investment in their skills can also strengthen the social sustainability of your warehouse. This helps to prevent high fluctuation’s negative impact on your warehouse’s productivity and profits. Ensure your warehouse delivers the best reverse logistics service by providing your employees with the right training, education, and standardized procedures needed to succeed.