Reverse Logistics In Ecommerce – The Last Mile Problem And Its Solutions

Introduction

As e-commerce sales continue to climb exponentially, another metric rises alongside them: the inevitable occurrence of order returns, replacements, and refunds. Unless a company's reverse logistics are set up to handle these efficiently and with minimal cost, it will quickly become difficult to retain customers and run a profitable operation.

Growing Returns in E-commerce

A point that often gets overlooked from an overall business perspective is that the incidence of order returns, the inevitable reality of the e-commerce business, is also growing. Today, the e-commerce industry witnesses an average order return rate of about 10 to 11 percent.

Numerous research studies have shown that about 90 percent of today's consumers review the return policy of a site before making their decision. A satisfactory return policy gives consumers the requisite confidence before making a purchase, even before they actually review a product.

Reducing Costs with Reusable Packaging

An effective way to reduce the cost of last-mile delivery due to order returns is by using reusable packaging and returnable handling units. This approach saves costs and helps maintain ecological logistics practices, promoting corporate responsibility.

The Challenge of Reverse Logistics

Make no mistake: building logistical processes and systems to handle order returns is challenging, especially as it overlaps with another difficult part of a logistics network—last-mile delivery. However, a strong return policy can significantly aid in retaining customers and achieving customer satisfaction.

Managers are now setting up their delivery networks to guide returned orders back to the fulfillment center when a customer requests an order return.

Last Mile and Reverse Logistics

Last-mile logistics handles the material supply for the production process, including parts and spare parts. It also supplies inventory to both offline and online stores, including third parties like 3PLs (Third-Party Logistics), from where goods move directly to customers. Last-mile delivery is responsible for the direct delivery of parcels to the end customer for orders made online or at offline stores, or to a chosen pickup point.

Managing order returns in the world of online retail is more complicated than in an offline store. There needs to be an equally well-planned process for reverse logistics as there is for outbound logistics. This is a time-consuming and cumbersome process that involves elements like refunds, returned inventory management, and related checks and balances.

The Role of Automation

Without the necessary automation in your logistics processes—both outbound and reverse logistics—it would be impossible for logistics companies to manage delivery schedules and operations across geographies. E-commerce operates 24/7 on a massive scale across global geographies, dealing with multiple tax regimes and regulations; thus, the complexity of order delivery and reverse logistics is heightened.

Modern automated dispatch software enables logistics managers to automatically optimize delivery routes by considering constantly fluctuating elements such as traffic, weather, and delivery windows. Importantly, it schedules routes to include both parcel drop-off and parcel return.

Dispatch software includes reverse logistics while scheduling product delivery, helping logistics companies initiate the return process faster and utilize company resources—fleet vehicles and drivers—as best as possible, thereby better serving customers.

Implementing Dispatch Software

Implementing dispatch software to manage your supply chain and logistics processes brings all ecosystem stakeholders online. This generates a wealth of data, including the category of SKUs (Stock-Keeping Units) that are being returned, the reasons for returns, customer comments, etc. The vast data-crunching ability of dispatch software provides logistics teams with deep insights into key reasons and enables informed decisions.

Growth and profitability are objectives of all businesses. Notably, one of the top challenges for growing retail businesses is managing order returns. Robust dispatch software equips you to handle this with efficiency, speed, and requisite transparency.

Choosing a 3PL

When selecting a 3PL, several important elements need consideration such as reputation, charges, geographical coverage, and scale. Ensure that you investigate the reverse logistics process, as failure to do so could result in a poor choice that becomes your Achilles' heel.

3PLs with sound reverse logistics typically store returned parcels in their third-party warehouses and manage the entire order return, refund, and replacement process, including inspection, restock, rejection, refund, and replacement. The dispatch software they use directly influences their capabilities to do so.

As is evident from the above, a robust reverse logistics operation is critical in managing the inevitable problem of order returns. Therefore, logistics companies would do well to deploy best practices, including using modern technology like the latest automated last-mile delivery software.

Keywords

Ecommerce
Order Returns
Reverse Logistics
Last Mile Delivery
Return Policy
Reusable Packaging
Automated Dispatch Software
Customer Satisfaction
Supply Chain Management
3PL (Third-Party Logistics)

FAQ

Q: What is reverse logistics in e-commerce? A: Reverse logistics involves the process of handling product returns, replacements, and refunds efficiently and cost-effectively.

Q: How can companies reduce the cost of handling order returns? A: Companies can reduce costs by using reusable packaging and returnable handling units, which also help maintain ecological logistics practices.

Q: Why is a strong return policy important for e-commerce? A: A strong return policy boosts consumer confidence and helps retain customers, enhancing overall satisfaction.

Q: What role does automation play in reverse logistics? A: Automation is crucial for managing delivery schedules and operations efficiently, helping handle the complexities of 24/7 global e-commerce operations.

Q: What should businesses consider when selecting a 3PL? A: Businesses should look into the reputation, charges, geographical coverage, and particularly the reverse logistics process of the 3PL to avoid potential issues.