Reverse Logistics In The Wholesale Business


The reverse logistics (also called return logistics or reverse logistics) is the branch of the ' logistics engineering which deals with traced backwards in the production chain of a product or for the purpose of "system recover value ."

This is an especially important process that allows mass retailers to salvage some of their product cost while enabling small retailers and online sellers to purchase brand name and designer products at below the regular wholesale price.

While "direct" logistics focuses on making a system or resource available when needed (and for this reason it focuses on both design aspects, production and refinement, as well as maintenance and disposal aspects ) the reverse one tries to find out how to recover the value backwards back along the chain of direct logistics. It is evident that return logistics focuses, therefore, with the management of disposals, scraps and returns.

Department stores and discount stores such as Macy's, Sears, Walmart, and Best Buy, use reverse logistics to liquidate merchandise returned t their stores.

There are many players in the wholesale industry that focus on liquidating store return merchandise on behalf of retailers.

Genco, BidStock Solutions, and, all have online platforms through which they facilitate the liquidation of merchandise on behalf of these retail chains.

Importance of reverse logistics

The ability of a company to handle reverse logistics is certainly a very important point of contention that avoids having to follow the primitive "uncontrolled disposal" mechanism, a method that prevents any advantage from selling an object or, worse, from its yield.

A company able to recover its products (and any byproducts, whether or not they are) is certainly a company that can improve its income statement through the return of value deriving from reverse logistics. More importantly, however, for many companies, the ability to manage a product's yield, which can be done for a number of reasons, from the simple change of idea of the end user to the serious manufacturing defect.

If a company is able to recover value from unproductive products or from those made for sure it will have a greater chance to emerge than its competitors unprepared from that point of view.

For example, the recent WEEE Directives (Directive 2002/96 / EC) and ROHS (Directive 2002/95 / EC) have exacerbated the return logistics of manufacturers and electronic resellers.

In Italy, such directives (in particular the first one) were the origin of the WEEE (Waste Electrical and Electronic Equipment) legislation , summarized in Legislative Decree 151/2005 and DM 65 of March 8, 2010 , and resulted in a huge volume of "return" (and consequent important work on reverse logistics) of goods of great potential value (for example, consider the numerous possibilities of recovering valuable materials such as gold, copper and so on). In this context (in Italy still in the start-up phase) there is a clear need for a serious reverse logistics.

The importance of reverse logistics has grown, in addition to environmental issues and regulations, ranging from a mere occasional need to a true strategic lever to the business.

The reasons for the strategic importance of reverse logistics are many and can be summarized in the following list:

  • Create new sales space
  • Need for competition with the competition
  • Protect your profits
  • Disposal legal issues
  • Recover valuable goods
  • Recover value from returns and products at end-of-life

Create new sales space

To withdraw from a customer a product allows you to sell it a new one. This withdrawal has a cost that can be reduced, cleared or even converted into revenue if effective reverse logistics is implemented.

A classic example is the " scrapping " of cars, a mechanism practiced by all car manufacturers. With the scrapping the customer frees his vehicle at a zero cost, gets a discount and buys a new one. The same is done now, often with state incentives, large household appliances and more.

However, it is evident that the large number of objects that are returned to these campaigns are a problem that is far from negligible, a problem that needs to be transformed into an opportunity for the company through inverse logistics.

Need for competition with the competition

Following (but not limited to) legislation that guaranteed the consumer the right to withdraw within a few days of purchasing, many companies have defined commercial policies based on the possibility of rethinking by the customer, policies that have led to increased returns from part of the clientele.

The typical customer returns the products purchased for two basic reasons: either the product does not work or does not meet it. The two cases will have to be treated differently because in the second the product is perfectly functional and therefore, after an appropriate check and a restoration phase of the packing, it can be sold quietly to another consumer.

In the first case, however, it is necessary, for example, that the actual defect in the product should occur before deciding what to do.

It is evident, however, that in both cases, efficient and efficient return logistics is needed to manage what is now a key phenomenon in competition in the sale of consumer goods.

In other cases, the advantage of reverse logistics for the company is not in terms of money but image: the company recovers outdated and obsolete products and directs them to philanthropic activities from which they gain an advantage by advertising them.

In both cases, it is obvious that this is a strategic leverage from a business point of view.

Protect your profits

Many companies use return logistics to provide an adequate margin, typically with the technique of creating new sales space, but also with the mechanism of modernizing their inventory so that they have always new (or fresh) products, thus obtaining the possibility to ask for better prices and to increase (or defend) the expected earnings margins. That's how Marshalls and TJ Maxx are able to stock their stores with brand name clothing by designers such as Calvin Klein, Nine West, and Polo Ralph Lauren. Their buyers are purchasing stock that is either overstock or store return from the big retail players.

All this, of great strategic importance, would be very difficult without adequate reverse logistics.

Disposal legal issues

Disposal by law is a phenomenon that worries more and more the industries, also following the introduction of environmental crimes in Legislative Decree 231/01 on the administrative liability of legal persons, who see in these obligations a risk and a cost not to underestimate.

All this, along with other factors, served as a push to put the logistics back into strategic business factors in order to reduce the impact and risk of disposal.

Recover valuable goods

Always on the example of scrapping, it is important to consider that the returned car is any good that has a certain value. Although many may think that the vehicle returned as scrap is being disposed of in order to recover its raw materials, it is true that it is tried to postpone such disposal as soon as possible, being a value that is not subject to significant devaluation over time and which can be increased if the "scrap" becomes a "used" vehicle for resale on the market, especially on the foreign market.

More generally, a value asset recovered by one to be disposed of (recapturing it in full or in part) is a good thing at no cost and therefore, as many companies have been able to find with pleasure a good that can significantly increase the company profits.

Recover value from returns and products at end-of-life

Last but not least, the strategic factor is the tension towards the ability to recover value from objects rendered or reached at the end of the life cycle. Regardless of how you can think of recovering this value, the strategic vision of a company that excludes this factor is, today, a myopic vision that will have difficulties in meeting with more prepared competitors.