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.
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.
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, Giftxoxo.com 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, Jabong.com 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.”
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.”
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.”
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, Infibeam.com 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.”
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 Giftxoxo.com
Praveen Sinha Managing Director & Co-Founder Jabong.com
Sandeep Padoshi Co-Founder & Director WOW Express
Hitendra Chaturvedi Founder and Managing Director GreenDust
Girish Singhal Vice President - Electronics Infibeam.com
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