The processes of handling returned goods


The processes involved in dealing the return of orders and packaging from customers, better known as 'reverse logistics', is in many ways the neglected child in the extended family of the supply chain. For many firms the priorities are making sure goods get out, not on managing their return in an efficient manner. The majority of firms do not properly understand the value of returns to their revenues, or to their reputation. Most are diverted by the fact that returns can be expensive and hard to administer. All this has meant returns have traditionally been dealt with as exceptions within the normal operation of core supply chain processes and IT systems. However, as the desire to improve customer service intensifies, so reverse logistics has considered much more importance.

This best practice guide from LIS, one of the world's fastest growing supply chain execution companies, illustrates how changing market forces are driving reverse logistics up the supply chain agenda. It also examines how forward-thinking companies can rise to the challenges presented, both strategically and operationally.


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We can define Reverse Logistics as the handling of goods returned from consumers, which includes reengineering, reuse, readjusting and recycling of waste in controlled manner..

Flow of surplus or unwanted material, goods, or equipment back to the firm, through its logistics chain, for reuse, recycling, or disposal.( by Dekker,R and Fleischmann,M,2004)


The purpose is to cut short the cost and maximize the value from the products, or proper disposal. The purpose is to speed up this process. In fact, it is the opposite of logistics management. Stock moves opposite to supply chain, which means, from consumer to the supplier. Consumers return the goods for number of reasons to the manufacturer.

Usual causes are the warranty failures, obsolete products, wrong orders/shipment, and exchange of damaged products for good ones, recyclable packing materials, and product innovation and so on. For all reasons, products have to be made as good as possible.

Reverse Logistics has become very serious problem these days mainly because manufacturers have been stressed, due to increased competition, to take free steps regarding returns.

(By Enarsson, L, 2006)


Meyer Late in1999 was of the opinion that returns have grown to 30-50% in some situations. He discovers that it is possible for the returns to be as high as 50% of the material sold in line. He also refers to the experiments of Reverse Logistics, where American companies spend more than 30 billion dollars per year on the travelling and processing of the products returned from the customers. This figure do not takes into account the disposition management, time for administration, and the cost of converting raw material into finished products. This problem should be dealt with reasonable caution to implement the Reverse Logistics.

Though the concept of Reverse Logistics has been in existence since long time, it did not become popular. This field has forced thousands of people in terms of its long lasting effects on the business sector. People think of this subject in variety of ways. The next paragraphs shortly discuss some of the work done in the field of reverse logistics. It is a complex phenomenon which requires deep planning in terms of continuous audit returns, resulting in the best disposal of goods in terms of economy and technical feasibility, stores and transport management, recycling processes, and other related fields.( By Sadler,I,2006)


In the early 90s, the Logistics Management Council began publishing discoveries that reverse logistics was relevant for both business and society. Other discoveries followed emphasizing. Stock described in depth how to establish and perform reverse logistics programs. Rogers and Tibben-Lembke in late nineties produced a wide compilation of reverse logistics practices, emphasizing on the American practice. Latest observations and literature collection whether on models to backup reverse logistics or on the business point of view can be found at (Fleischmann et al., 1997). Earlier concepts are of the view that the processes, types of reuse and actors are related to describe reverse logistics (Fleischmann et al., 1997).


Launching of the XBOX

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In a certain case example of how complicated the condition can become and how provisions are made to guarantee appropriate services are provided, we can see what Microsoft did when it decided to launch the XBOX.  The particulars assist make the point about the significance of paying heed to the complete supply spectrum, which includes reverse logistics.  Microsoft Company determined that the main product should be produced by Flextronics.  Many other manufacturers will produce other accessories.  Marketing departments and electronics sellers were supposed to carry out storekeeping, marketing, and final users sales functions.  Solectron was utilized for post market guarantee and consumer fix services. Microsoft Company took its time to make sure the above characteristics were completely satisfactory before the first ever XBOX was given to the final consumer and that returns if any would be dealt with efficiently by the chosen party.

Cell Phone Reverse Logistics

In this real example, a mobile reverse logistics model proved very useful for a company retailing such goods under their brand.  This company had the mobile phones made by LG Industries, Motorola, Samsung and many others.  Accessories were again produced by a number of different firms.  Taking of the order and first end customer billing was carried out by Amazon.  Forward logistics, which includes storekeeping, order fulfilment and carrier service programming, were carried out by CellStar.  Cellular carriers like Sprint and Verizon offered the service.  Extensive guarantee and goods security insurance was carried out by lock/line.  The consumer call centre service and reverse logistics was carried out by CellStar.


These are:

•         Better customer approval and faithfulness

•         Minimized fix / replacing unit costs.

•         Minimum replacing turnaround times.

•         Response on hardware plan and easiness of use.

•         Response on OEM excellence.

•         Response on final consumer learning and first stage purchaser support.

•         Advance understanding of actual reasons for hardware returns.

•         Decrease on the whole stage of returns.

•         Even out returns processes crosswise enterprise where feasible/desired.

•         Handle greater volumes of returns because of new products and programs.

•         Allow request driven supply chain concepts for products returned.

•         Distinguish firm's services from the opposition.

(By Harrison, A and Van Hoek, R, 2008)


These sections studies and evaluate the RE strategies from the following decision-making focus: Relationships, Reverse Logistics Network Structure, Inventory Management, and Planning and Control. In addition, we provide an overview of deposition for handing out and transmitting ecological sensitive material.


There are many reasons of the returns of both products and packaging; however returns can be generally separated between those that are unintended and those that are deliberate and wanted. Unintentional returns are normally restricted to goods which clients have bought. The listing of purposes of return is long and each requires variety of physical handling. It is vital that the purpose of return is listed and used to transform future business performance.

Returns of new products

* The client altered his/her mind

* The manufactured goods were faulty.

* The client supposed the product to be faulty.

* The product was broken in shipment.

* A vendor error.


In short, reverse logistics must be taken out of the supply chain twilight and brought into the open, so it can turn into a field of opportunity, as contrast to being a essential evil. Firms have to choose one area of the industry, where they can check the idea and build up a model for using what takes place as a resource of information for better fulfilling clients and turning

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a spot of cost into an area of profit.

To explain the basics of a victorious reverse logistics strategy, companies have to understand that it is not exclusively a supply chain matter. Without the straight contribution of an organisation's client service and funding functions, the entire process will turn into ineffective and unresponsive. When the main beneficiary is better client service, this equals loss. A lot of supply chain systems are not in the situation to start greater levels of communication with the rest of the business. This led to the development of outstanding supply chain implementation systems that put forward good supply chain visibility and associated applications. These enable firms to share information and supervision control with varied parts of their organisation, improving chosen managers to streamline the management of returns and make a better contribution to client service obvious discrimination.