Reverse logistics: Way forward to more profits

Reverse logistics process is in contrast to the forward supply chain, where merchandise takes a back turn and moves to the manufacturer from the retailer. Dean Eichorn, VP, DHL Exel Supply Chain says, “Reverse logistics is returned delivery and processing of goods and/or parts from user/consumer/buyer or retail outlet back to a distribution centre (DC) and/or direct-to-supplier.”

This backward movement of products caters to almost each and every sector, whether it is FMCG, apparel, automobile, agricultural or pharmaceutical.

Showing full confidence in reverse logistics, Vineet Kanaujia, GM-Marketing, Safexpress says, “Reverse logistics will be one of the key ways of reducing logistics costs in the times to come. It will help redefine the company’s strategy and, in turn, the company’s success in the coming years. It would also act as a differentiator, which would distinguish one company from another.”

Need for reverse logistics

Organised retailers are always willing to fill in fresh stocks in their outlets but maximum space there is occupied by unsold off-seasonal products. As a result, there is a scarcity of space due to faulty packaging, un-cleared seasonal merchandise and unsold and returned goods, which causes a great amount of loss to retailers. To overcome these losses, retailers are required to adopt the practice of reverse logistics.

 Eichorn says, “Retailers will have to clear products quicker for newer or faster selling lines, be it through a process of discounting or returning to the vendor.”

Says Kanaujia, “Returned or damaged products can have branding implications for companies and spell disaster. A well defined and planned reverse logistics operation could be used to secure favourable customer opinions.”

Indian logistics sector

Till 2010, the Indian logistics industry would reach a market share of over $125 billion as the organised retail sector is expected to grow to $427 billion in 2010. Kanaujia opines, “Companies can recover up to 0.3 per cent of the annual sales by following a planned reverse logistics system.”

For logistic players, this is the right time to tap this segment with the organised retail scenario changing with each passing day, and the coming up of more and more international organised retail players in the country.