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What is reverse logistics?

Photo of three young women who appear to shop together on tablets or a laptop while sitting outside of a department store fitting room.

You put a lot of effort into getting your technology products into your customers' hands. But what happens after your customer accepts delivery, and then needs to return it?

That's where reverse logistics comes in. The term describes the processes that sits at the crossroads of transportation, customer service, and refurbishment and recycling. Getting it right can improve financial performance, efficiency, customer experience and sustainability.

Here are three surprising benefits that can come from effectively planning and integrating reverse logistics into your sales cycle.

Refund: Create delighted and more-loyal customers

Returns represent an enormous opportunity for companies. Well-executed product return experiences may encourage customers - even disappointed ones - to give you another chance to impress them so they stay loyal to your brand.

Forbes reports that more than 85 percent of consumers want to shop at a store with a convenient returns policy, with 55 percent targeting the most affordable return shipping option.

One example of the benefits of a customer-friendly return policy for online retailers is Zappos. The online shoe retailer offers unlimited free returns on any product and, according to Fast Company, realized years ago that their most profitable customers are also the customers with a 50 percent return rate. There are parallels in the tech industry: the 2016 How to Click with High-Tech Online Shoppers report indicates 42 percent of shoppers prefer to ship returns back to the original retail store, and 48 percent of those will make a new purchase.

Learn more about UPS's reverse logistics management services

Repairs and resale lower the cost of returns

When a customer returns a product, its status and destiny should be identified quickly. A quality assurance process should determine whether the product can be resold as-is, repaired and resold, or taken out of inventory. Due to the relatively rapid obsolescence of tech goods, many retailers opt to condemn many thousands of dollars' worth of perfectly good, returned products.

In some cases, there's a contractual obligation to destroy unsold merchandise. But before you engage the dumpster or destructive means, keep in mind that the secondary market for high-tech products in the United States has been estimated by a former Best Buy executive to be worth $15 billion. It is therefore worth choosing a service like retail returns specialist Optoro to repair or resell returned or faulty products. But a competent logistics provider should also be able to carry out the same work for you, reducing the number of entities to manage, and helping you recapture some product value.

If your company oversees a large number of returns or exchanges, consider developing a field repair program, which will allow you to carry less inventory and lower the overall cost of returns.

Supply chain sustainability builds a trustworthy brand

Integrating reverse logistics that refurbish electronics or pull out valuable materials to recycle benefits both your bottom line and the environment. In 2015 alone, Apple reclaimed $40 million in gold and $6 million in copper through device recycling programs.

Resale and repair can do more than bring you higher profits - they can also help you cut down on landfill waste and improve your company's reputation for social and environmental responsibility. Furthermore, the better your logistics management, the better you can reduce carbon emissions and contribute to efforts to improve air quality - true supply-chain sustainability.

For some tech products, offering end-of-life recycling and refurbishment incentives also increases product value for your customer. After all, what customer wouldn't want to receive a $150 credit for a smartphone they were planning to throw away? Or, in power tool manufacturer DeWalt's case, a $100 credit for trading in used tools.

Reverse logistics isn't just a cost of business; it's an opportunity to improve your business. A properly organized reverse logistics process (or, even better, a turnkey reverse logistics solution), can help retain more customers, and increase profitability and sustainability. Consider whether you can apply any of these critical lessons to the way your company does business. You have nothing to lose, and - potentially - much to gain.

Find Out More

  • UPS Customer Solutions

    UPS supply chain consultants draw from hands-on supply chain experience to help UPS customers solve their business challenges.

    Learn more about UPS customer solutions
  • UPS Contract Logistics

    Global network of facilities and expertise helping UPS customers meet business opportunities through contract services in warehousing, distribution, order fulfillment and service-parts logistics.

    Learn more about UPS contract logistics
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