Re­verse Lo­gis­tics: Key to suc­cess?

eCom­merce has changed the way sup­ply chain com­pa­nies func­tion. Re­verse lo­gis­tics is now cru­cial to the sur­vival of any on­line mar­ket­ing plat­form that banks on the loy­alty of its cus­tomers and makes re­turns a com­fort­able ex­pe­ri­ence for them.

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The idea of al­lur­ing shop­pers to shop from the com­fort of their homes at no ad­di­tional costs has changed the way sup­ply chain used to func­tion. Be­fore the onset of e-tail­ers, sup­ply chain was con­fined only to for­ward lo­gis­tics, the prom­ise of re­turns af­ter goods hav­ing been pur­chased and sold led to the need for ef­fec­tively man­ag­ing re­turn man­age­ment - a rel­a­tively un­ex­plored area of sup­ply chain. The process of lo­gis­tics in­volved in the re­verse process of sup­ply chain is what is termed as Re­verse Lo­gis­tics.

Re­verse lo­gis­tics pro­vides ut­most con­ve­nience by en­abling pick­ing up of the prod­ucts, right from the cus­tomers’ homes or of­fices and de­liv­er­ing them back to the seller.

Re­verse lo­gis­tics

Though eCom­merce com­pa­nies are vy­ing with each other to cap­ture a larger share of the mar­ket, the idea of per­suad­ing cus­tomers to buy on­line with­out the 'touch and feel' ex­pe­ri­ence also has an­other side to it. e-tail­ers, sup­ply chain com­pa­nies and con­sumers sense that the cost and ef­fi­ciency of re­verse lo­gis­tics is bad, as eCom­merce com­pa­nies tend to ig­nore it in the ini­tial stages. Su­mit Khandelwal, Co-Founder & Di­rec­tor, Giftx­ says, “Our fo­cus is to get the ship­ment de­liv­ered in the fastest pos­si­ble man­ner in proper con­di­tion. To en­sure cus­tomer sat­is­fac­tion and han­dle con­cerns, we work on tie-ups with part­ners to han­dle re­verse lo­gis­tics. This is done at a later stage.”

Adding to sus­tain­abil­ity

As eCom­merce can­not func­tion ef­fi­ciently with­out re­verse lo­gis­tics sup­port, the need for a ro­bust and ef­fi­cient re­verse sup­ply chain is be­ing felt strongly. Amit Ku­mar, Sup­ply Chain Spe­cial­ist, Amway In­dia En­ter­prises says, “Since the prod­uct life cy­cle has shrunk, re­verse lo­gis­tics is a ‘must-have in­stru­ment’ to make busi­ness prof­itable by prac­tic­ing re­verse-re­fur­bish-re­use cy­cle. It also adds en­vi­ron­men­tal and sus­tain­abil­ity di­men­sion to the over­all so­ci­etal com­mit­ment of com­pa­nies.”

Be­sides this, re­verse lo­gis­tics part­ners can also en­sure re­turn of the right prod­ucts in proper con­di­tion to en­able faster re­fund of the money to the cus­tomer's ac­count. Praveen Sinha, Man­ag­ing Di­rec­tor and Founder, opines, “An ef­fi­cient and re­li­able lo­gis­tic part­ner en­ables us to turn­around the re­turned in­ven­tory faster, thus free­ing up sig­nif­i­cant amounts of blocked in­ven­tory and other as­so­ci­ated costs.”

Low in list of pri­or­i­ties

There are few LSPs, who have been able to meet ex­pec­ta­tions. Ac­cord­ing to San­deep Pa­doshi, Co­Founder & Di­rec­tor, WOW Ex­press, “The fo­cus of most lo­gis­tics com­pa­nies in In­dia has been on for­ward and not re­verse lo­gis­tics be­cause for­ward lo­gis­tics is a big chal­lenge and de­mand for for­ward lo­gis­tics ex­ceeds sup­ply. Ob­vi­ously, com­pa­nies thought it was log­i­cal to set up a for­ward de­liv­ery net­work first. Hence, re­verse lo­gis­tics took a back seat. More­over, com­pa­nies did not want to spend as much on re­verse lo­gis­tics. Few LSPs have a ded­i­cated lo­gis­tics set up.”

Most of the LSPs do not have di­rect pres­ence at all lo­ca­tions, but rather sub-con­tract their ship­ments through a net­work of small-time agents. Ajay Khosla, Deputy Gen­eral Man­ager – Sales, Jaipur Golden Trans­port adds, “Re­verse lo­gis­tics has his­tor­i­cally been over­looked and many LSPs viewed this as only ex­pense and re­cur­ring ex­as­per­a­tion be­cause of un­cer­tain­ties and com­plex­ity in im­ple­men­ta­tion. Due to th­ese com­plex­i­ties, the num­ber of LSPs, who have re­verse sup­ply chain in their prod­uct list, gets re­duced.”

Seek­ing at­ten­tion

eCom­merce com­pa­nies are fo­cused on bring­ing cus­tomers and sup­ply to their side, rather than spend too much money on ware­houses nec­es­sary for e-ful­fil­ment and last minute de­liv­ery. This re­sults

in LSPs play­ing a key role. Cit­ing the pos­si­ble rea­sons for in­ad­e­qua­cies and in­ef­fec­tive­ness by re­verse sup­ply chain com­pa­nies, San­jeev Sax­ena, Co-Founder & Di­rec­tor, Ecom Ex­press points out, “The in­stances of in­ef­fi­cien­cies in re­verse lo­gis­tics are due to in­ad­e­quate pack­ag­ing. This causes dam­ages to prod­ucts on re­turn jour­ney, less quan­tity or mis­match of prod­ucts lead­ing to re­fusal of ship­ment by the por­tal.”

Stress­ing on the same, Sub­bra­ma­nian, As­sis­tant Gen­eral Man­ager Re­verse Lo­gis­tics, ProCon­nect Sup­ply Chain de­scribes, “The courier, trans­porta­tion and doc­u­men­ta­tion charges are high. Each state has dif­fer­ent rules and reg­u­la­tions and there are no spe­cific guide­lines from the gov­ern­ment for car­ry­ing out re­verse lo­gis­tics func­tions. Many cus­tomers are re­turn­ing their prod­ucts tak­ing the ad­van­tages of the poli­cies, which re­sults in losses.”

Re­verse sup­ply chain

There are some sup­ply chain com­pa­nies with a sep­a­rate ver­ti­cal for re­verse lo­gis­tics. Sub­hash Mendi­ratta, Gen­eral Man­ager – North In­dia, Fly­jac Lo­gis­tics re­veals, “Fly­jac has a na­tion­wide net­work, good ven­dor base of pack­ag­ing com­pa­nies, trans­porta­tion ven­dors, trans­par­ent process of dis­pos­ing the ma­te­rial as per cus­tomer's guide­lines, IT sup­port sys­tem to man­age the re­verse lo­gis­tics and ad­e­quate in­fras­truc­ture to man­age the in­ven­tory and for com­plete re­pair and re­fab­ri­ca­tion process.”

Man­ag­ing costs

Re­verse ship­ments cost more than that of for­ward ship­ments. Hi­ten­dra Chaturvedi, Founder and Man­ag­ing Di­rec­tor, GreenDust ex­plains, “In 70 per cent of the cases, cost to process (trans­porta­tion, ware­hous­ing, peo­ple cost, de­pre­ci­a­tion, call cen­tre, over­heads) a re­turned item can be higher than the value of the prod­uct and ab­so­lutely higher than cost of for­ward ship­ment.”

But Ku­mar has a dif­fer­ent take on the sub­ject. Elu­ci­dat­ing on three dif­fer­ent meth­ods of re­verse lo­gis­tics Ku­mar says, “If the com­pany has de­liv­ery in the same area of pick up, then the cost of re­verse lo­gis­tics will be less. Also, if one ded­i­cates a spe­cial agency for this, it is less since they con­sol­i­date pickup of var­i­ous com­pa­nies and plays on scale. If the cus­tomer de­liv­ers at the shop or ware­house, cost will be lesser.”

Sax­ena in­di­cates, “Avail­abil­ity of con­signee at lo­ca­tion and en­sur­ing ship­ment pack­ag­ing is in­tact, takes more time and at­tempts.”

Re­cov­er­ing costs

Re­verse lo­gis­tics is the key to pro­vid­ing su­pe­rior af­ter ex­pe­ri­ence. eCom­merce com­pa­nies need to take into ac­count the costs in­curred dur­ing both for­ward and re­verse ship­ments, es­pe­cially, in case re­turns lo­gis­tics cost more than tra­di­tional lo­gis­tics. Girish Sing­hal, Vice Pres­i­dent– Elec­tron­ics, In­ stresses, “The first at­tempt should go in re­duc­ing in­stances where prod­uct needs to be brought back to our ware­house. This can be achieved by em­ploy­ing strin­gent qual­ity checks. In cases where re­verse pickup can’t be avoided, cost of re­verse lo­gis­tics can either be re­cov­ered from the ven­dor, who sup­plied the faulty prod­uct or has to be ab­sorbed in case the prod­uct has no qual­ity is­sue.”

Khandelwal con­firms, “It is taken care of in the cost­ing of busi­ness. As an e-tailer you in­cen­tivise cus­tomers at low price or find ways to avoid re­verse lo­gis­tics. The cost of ser­vic­ing this is re­ally high. In cases where it’s reg­u­larly hap­pen­ing we tend to move out of sup­ply­ing in those ge­og­ra­phy for spe­cific set of cus­tomers.”

Re­turned goods

The op­tion of re­turns has led to more con­sumers re­turn­ing prod­ucts due to dam­ages in­curred in ship­ments, dif­fer­ence in re­ceipt and pur­chase or­ders. Sax­ena con­veys, “Mostly elec­tronic items be­ing used for in­ter­nal pur­pose, gar­ments and house­hold items are do­nated to char­ity.” Mendi­ratta com­mu­ni­cates, “SCM com­pa­nies are adapted to dis- pose the gen­eral goods but in case of any spe­cial re­quire­ment like dis­pos­ing chem­i­cal, medicine, elec­tron­ics and haz­ardous ma­te­rial, SCM com­pa­nies take the ser­vices of spe­cialised or­gan­i­sa­tions. SCM com­pa­nies work with man­u­fac­tur­ers or cus­tomers to dis­pose off as per gov­ern­ment and en­vi­ron­men­tal guide­lines.”

A long way to go

Sub­bra­ma­nian com­ments, “The prod­ucts that are im­ported in In­dia have dif­fer­ent war­ranty pro­cesses and due to var­i­ous dif­fi­cul­ties in cum­ber­some pro­cesses ex­chang­ing the prod­uct and cou­pled with var­i­ous hec­tic doc­u­men­ta­tion pro­cesses, re­verse lo­gis­tics in the coun­try is not at par with in­ter­na­tional stan­dards.” Re­verse lo­gis­tics has a long way to go in terms of costs and ef­fi­ciency.

Amit Ku­mar Sup­ply Chain Spe­cial­ist Amway

Ajay Khosla Deputy Gen­eral Man­ager – Sales (NCR) Jaipur Golden Trans­port

Su­mit Khandelwal Co-Founder & Di­rec­tor Giftx­

Praveen Sinha Man­ag­ing Di­rec­tor & Co-Founder

San­deep Pa­doshi Co-Founder & Di­rec­tor WOW Ex­press

Hi­ten­dra Chaturvedi Founder and Man­ag­ing Di­rec­tor GreenDust

Girish Sing­hal Vice Pres­i­dent - Elec­tron­ics In­

San­jeev Sax­ena Co-Founder and Di­rec­tor Ecom Ex­press

Sub­hash Mendi­ratta Gen­eral Man­ager - North In­dia Fly­jac Lo­gis­tics

Sub­bra­ma­nian As­sis­tant Gen­eral Man­ager Re­verse Lo­gis­tics ProCon­nect Sup­ply Chain

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