Introduction
The evolution within today's global supply chain is more prevalent than ever with an apparent swing in bulk purchases to pick and pack; the development in web-based consumer purchases are palpable throughout the chain. Strategy in communication and the implementation of digital enhancements to both ends of the supply chain requires logistical expertise and an understanding of the components for each essential function. An increase in demand through World Wide Web commerce as well as the appeal for a more profound digital footprint has elevated this need for expertise in both forward and reverse logistics. From Amazon Prime to Walmart.com, the e-commerce world has exploded, leaving a mess to manage in the form of reverse logistics or returned goods. These developments have further beckoned how essential accuracy in a supply chain is as with the increase of outflow there is also an increase of the reverse. The internal workings of reverse logistics have seen numerous procedural improvements with technological advancements including lean operations, digitization, enhanced partner collaboration, and facilitation in the best response to the rapidly growing business of e-commerce.
Web-based purchases and the rise of the returned goods
Reverse chain logistics refers to the process of moving production from consumption point back to the end of origin to recapture value or for disposal. In the field of business logistics, this field is growing fast, and its scope and significance are changing as well. With the rise of e-commerce, the reverse supply chain is essential because it contributes to customer satisfaction and willingness to purchase in the future. Therefore, just as companies invest significantly in enhancing supply chain to deliver goods to the customers in the shortest period, the process of returning products from the customers need efficiency and speed as well (Morgan, Richey & Autry, 2016). The reverse supply chain is an inevitable part of online commerce because the product purchased might fail to satisfy customer description.
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Reverse logistics represent a significant part of the overall supply chain cost. However, most companies treat it as an afterthought and therefore fail to manage the process well. The failure is partly due to the challenges of reverse logistics that stem from its nature. Typically, forward logistics is orderly and involves methods such as labeling, packaging, loading, etc. The scale is also high, which improves efficiency and lowers costs. However, reverse logistics is also a consequence of failures in forward logistics. For instance, a failure during packaging or damage in transit often leads to product rejection. Thus, reverse logistics can gain from the optimization of the overall supply chain to reduce delays, wrong labeling, damage, and other logistical failures.
E-commerce purchases have increased in the last decade, and that implies waste and recycling management. In the United States, online sales crossed the $517 billion mark in 2018. With those numbers, e-commerce now accounts for 14.3% of total retail sales. Ten years earlier, online sales only accounted for 5.1%, meaning web purchases have more than doubled. In other markets such as China, the growth of e-commerce has been more spectacular. Consumer electronics such as smartphones and computers have driven much of the growth of e-commerce because they are suitable for long-distance transport without losing value or suffering damage. The downside is that they jeopardize waste and recycling management. Some e-commerce companies now use reverse logistics to handle e-waste by requiring customers to return damaged consumer electronics items. Under those conditions, reverse logistics has gained importance in supply chain management.
Business sustainability depends on many things among them efficient logistics. The role of efficient logistics is critical in the retail industry as the case of Wal-Mart demonstrates. Over the decades, the company has emerged as the biggest and most profitable retail company mainly due to the efficient logistics and supply chain. With efficient logistics, companies can keep the cost of goods and services relatively low and pass on the benefits to the consumer. In e-commerce, if the logistics, including reverse logistics, is too high, the operating costs might be too high, leading to high retail prices (Balcilar & Bolat, 2014). High prices might, in turn, drive consumers away, and that means that efficient logistics is critical in building a sustainable business.
Integrating communication and collaboration in the supply chain
As argued elsewhere in this paper, logistics is critical in establishing a sustainable business. The same case applies to the reverse flow of the goods. When customers order products online, sometimes, the items might not satisfy them due to damage, wrong quality, delays, and other mistakes. When customers return such orders, they expect a replacement at the earliest convenience or a refund. The efficiency in which the process concludes contributes significantly to the overall customer satisfaction (Chouinard, D’Amours & Aït-Kadi, 2005). The sustainability of any business depends on satisfying customers by meeting their needs and even exceeding their expectations. Therefore, reverse logistics is an integral part of building a sustainable business.
Closed Loop Supply Chain Management (CLSCM) is vital in the modern supply chain. Its goal is to improve the efficiency of the supply chain to deliver more economic benefits. One way of providing the benefits is reducing the consumption of resources and energy to lower pollution (Hazen, Cegielski & Hanna, 2011). Under this closed loop, the role of reverse logistics is vital because once the product reaches the customer that is not the end. The same product can return to the company for remanufacturing or modification to derive additional value. In that case, products returned from customers act as raw materials for the next production process. If a reverse logistics is not efficient, it means that production might suffer or the value delivered to society less than the goal. In the modern technology-driven world, CLSCM is made even more efficient through technology where the movement of products in the loop is tracked in real time, which makes it easy to identify bottlenecks.
However, despite the apparent benefits of CLSCM, especially after deploying technology to track reverse logistics, poor communication hinders reverse logistics. Communication is critical in managing inventory levels by managing lead times and the movement of goods across the CLSCM (Govindan, Soleimani & Kannan, 2015). In the absence of proper communication, the result is an accumulation of inventory, leading to the escalation of costs, but with collaboration, it is easier to manage inventory levels by refurbishing returned goods. Again, technology can play a role in this process. There are many technological solutions such as Slack, which is an application that enhances collaboration as well as communication. In supply chain management, specific tools exist to solve the problem.
Without the adoption of specific technological solutions, the reverse flow of goods can delay. Most e-commerce companies or logistics companies use real-time tracking to monitor the movement of products from the point of return to the arrival at the warehouse of the company in question. However, for companies that fail to adopt such a technological solution, delays often happen, leading to dissatisfied customers and slow reverse process. Therefore, integrating technology in reverse logistics is crucial for success.
Digitization of reverse logistics
As mentioned earlier, a lag in reverse logistics is harmful, but a technological solution can address the problem. One creative solution is the digitization or integrating a digital solution into reverse logistics. Digitizing reverse logistics would take the form of deploying it into the cloud, connecting to business intelligence, and making it accessible via smartphones, tablets, laptops, and other devices, anytime and from everywhere. The digitization means that the business leaders can track the movement of goods in real-time and visualize that journey (Juhong, Di Wu & Peng, 2018). The benefits of digitization would include reducing delays and improving customer satisfaction and loyalty, tracing vendor and carrier performance, integrating returns with inventory management systems for predictive analysis, improving visibility to understand the real causes of returns, and better utilization of assets.
Perhaps the main benefit of digitization of reverse logistics is the ability to visualize the movement of returns; hence, making it easier to optimize — any effort to improve an existing process demand data as the first step. The data provides critical information about the process, its efficiency, delays, bottlenecks, and similar information that would aid in implementing optimization. For many organizations, they are unable to address inefficiencies with reverse logistics because they treat merchandise returns as individual and disjointed transactions (Asif, 2011). They fail to understand the link between the returns and inefficiencies in forward logistics. For instance, if forward logistics leads to delays, the goods might spoil or are damaged, leading to more returns. Thus, returns are inherent parts of all logistics. The inability to make that critical connection makes it impossible to address failures within the overall supply chain and logistics. Digitization can help identify the weak points along with the reverse logistics for optimization purposes. The information or data could form the foundation of training employees to handle returns better because as highlighted earlier, most companies do not invest in the management of the merchandise returns or reverse logistics.
With technology tools to manage reverse logistics, it is possible to streamline return management with digitized online return and exchange service. Return management is a critical element of CLSCM but often prone to chaos (Ait-Kadi, Chouinard, Marcotte & Riopel, 2012). In forward logistics, goods are prepared from a central location and sent to the customers. However, returns, lack that centralized handling. The customers decide to return goods on their own, so businesses cannot use existing tools to lower costs. However, digitization allows companies to monitor returned goods through an online platform and exchange service. The tool not only provides monitoring, but interaction with the customer to understand their reasons for returning the goods. The management or the company can solve common problems quickly, as well as reach an understanding with the customer.
Reviewing digitization returns against the need for collaboration and lowering costs
With digitization, the company can use the benefits to position itself in the market. The benefits of the digitizing reverse logistics exceed the costs of acquiring the technology. The ability to track returns is critical in optimizing the whole process of accepting merchandise returns. However, it is vital to review the tracking solution periodically to ensure the system is up to date and delivers value for money. In the highly competitive environment, no business can afford to lag behind others technologically hence the need for periodic review. In particular, companies should make such review in the context of existing collaboration tools such as ERP system for partner-managed inventory.
Most enterprise resource planning (ERP) systems are capable of handling reverse logistics, but often, improper set up robs companies of the benefits of that service. The first principle with ERP is to avoid creating an inventory that is likely to return. Preventing the flow of such goods in the first place will optimize reverse logistics by reducing the volume of returns. The second principle is to establish gatekeeper rules to automate the registry of returned inventory. If ERP is connected to a digital system that tracks returns, it is easier for the employees to re-label such returning items and forward appropriately for repair, refurbishment, the trash, or recall processing.
However, if the business considers that the cost of managing reverse logistics is too expensive, outsourcing is still an option. From the discussion above, reverse logistics requires investment in technology to track items and link the system to the ERP. However, for most companies, they lack the resources to invest in such systems. In such a scenario, the only viable option is to use 3PL Providers with the skills and experience needed. Their main benefit is they have ongoing industry expertise and therefore, knowledgeable in industry best practices. They have the technology, manufacturing capability, the skills needed for managing logistics. Their solution is also scalable, and companies often pay what they use. Thus, a small company can benefit from the latest technology without necessarily investing colossal investment. A more established company gets the benefits of advanced solution at a fraction of the cost it would take to build it from scratch. Finally, with third parties dedicated to reverse logistics, continuous optimization is possible while focusing on core competencies, which is serving customers.
Conclusion
The importance of the effectiveness of a supply chain is evident through each stage of forward logistics and as demonstrated, a more recent focus through the reverse logistics sector of the supply chain. The collection of evidence supports that determining the timing of insertion with precision to each process is essential to ensure the efficiency of technology. Although the technology advancement is evident in the field, there is an ongoing need for sustainability to identify pain points and skilled analysis on a continuation of integration. The frequent changes in commerce trigger field experts to keep a similar pace with an examination of an appropriate strategy for placement of technology to assist in managing the influx of the flow of goods back through the supply chain. Increased communication through the channels and improved partner collaboration resources prove to be critical for supply chain efficiency and sustainable progress. Grasping the management and tracking of small parcel purchases on the front end will not only improve upon the management of monitoring, but also identify habits of consumers, further identifying whether to destroy or recycle goods. There is an increase in visibility with technological advancements throughout the industry today with the implementation of such high tech systems as RFID and the collaboration software to help the overall design of the reverse logistics system structure.
The next step in fine-tuning the process towards a sustainable future in the reverse logistics sector for the supply chain lies with integration for processes in consumer returns. In the interest of lean reverse processes and a green environment with waste control, field experts continue to vamp up the technology in the growing sector of reverse logistics. Ultimately, consumers drive the communication through technology, helping to identify the appropriate time and points to insert tools for a controlled and cost-effective flow of finished goods and reverse logistics process finalities.
References
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