Reverse logistics

Reverse logistics is the logistics process of removing new or used products from their initial point in a supply chain, such as returns from consumers, over stocked inventory, or outdated merchandise and redistributing them using disposition management rules that will result in maximized value at the end of the items' original useful life. A reverse logistics operation is considerably different from forward logistics. It must establish convenient collection points to receive the used goods from the final customer or remove assets from the supply chain so that more efficient use of inventory / material overall can be achieved. It requires packaging and storage systems that will ensure that most of the value still remaining in the used good is not lost due to careless handling. It often requires the development of a transportation mode that is compatible with existing forward logistic system. Disposition can include returning assets into inventory pools or warehouses for storage, returning goods to the original manufacturer for reimbursement, selling goods on a secondary market, recycling assets, or a combination that will yield maximum value for the assets in question.

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For example, T-Shirts with minor flaws like improper logo print of the manufacturer or unnoticeable stitching flaws are often sold at discounted prices by specialized retailers. The collection of the flawed clothes from the various stores and reselling them at the discount shop is an example of reverse logistics.

Additionally, 'no quibble' returns policies adopted by retailers often mean that the goods returned are not damaged and can simply be re-conditioned to go back into the system.

Professionals of different disciplines view reverse logistics in different ways.

Design and manufacturing engineers look on returns from a product quality perspective. Failure rates for products tend to follow a statistical distribution called the Bathtub Curve. Return rates are associated with the first two stages of the bathtub curve called 'infant mortality' and 'constant failure rate'. During the third stage of the bathtub curve called 'end of life' products are not usually returned to the manufacturer but are disposed of or recycled.

Sales and marketing professionals view returns as a warranty management issue. Warranty is usually a legal requirement but extended warranty can be either a marketing tool or a product to be sold to consumers.

Materials and financial professionals tend to look at reverse logistics from the viewpoint of minimising the cost of returns by maximising the asset value recovered from returned product.

Governments and ecologically motivated persons and companies use the principles of reverse logistics to reduce the environmental impact of product disposal and recycling.