Reverse Supply Chain- Make Your Returned Products More Profitable

Many a times for most of the production organizations material supplied to the market are returned through the reverse supply chain function. Most distribution networks are not set up to manage products that come back from the field.  Now what is a reverse supply chain? It is a set of activities required to get back a product that can be products return, damaged goods or service depot returns etc., either to dispose it of or reuse it.

And for a growing number of manufacturers, reverse supply chains are becoming an essential part of business with product returns management statistics indicating that the overall cost of product and scrap material returns to manufacturers is continuing to increase. The Aberdeen Group estimates that high-tech companies alone spend approximately 8% of revenue just to manage their reverse logistics function.

Earlier companies used to spend more time, effort and money on timely supply of the products to their customers using the forward supply chains, while ignoring the backward supply chains. However, in today's competitive business environment, companies can no longer ignore reverse supply chains bringing many benefits to the companies.  

Apart from benefits companies establishing a reverse supply chain also face many challenges. They have to establish new points of contact with customer; decide which activities to outsource and what not. In general with these costs adding to overall operating expenses, they need to discover innovative ways to recover value from material returns - and keep costs to a minimum. Reverse supply chain process is still treated as a back end process of a logistics.  Compliance laws are becoming more stringent and fines increasing, companies need returns goods management program to keeps them compliant.

Operations Cost – Reverse supply chain reduces operating costs as products or components can be reused. The returns need to be carefully managed else companies may find their warehouses flooded with returned products. Companies often will need to work closely with retailers and other distributors to coordinate collection.

Inspection and Disposal - The returned products need to be tested, sorted, and graded. The returns process needs to be streamlined using RFID sensors, bar codes, and other technologies to automate tracking and testing. Companies should dispose of the product based on quality and product configuration to eliminate logistics overhead costs and get remanufactured or refurbished products to market faster.

Refurbishing - Damaged products in the reverse supply chain get a new lease on life, through test and repair methodologies, companies can provide testing, depot repair and refurbishment services for products to create an “all in one” reverse logistics solution.

Distribution and Sales – Once the product has been refurbished it can be sent back to the market. To sell a recycled product, organizations need to create a market for it, invest in consumer education and other marketing efforts. Potential customers for remanufactured products or components include not just the original purchasers but also new customers in different markets.  

Thus by using reverse supply chain management system, returns are transformed from assets gathering dust into cash.

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