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How will the global reverse logistics market break through the 100 billion mark in 2023?
Reverse logistics encompasses all operations related to the movement of products and materials upstream. The process of moving commodities from their typical end to another location to capture value or for proper disposal. With the rise of green ideas and the advancement of green supply chain management concepts and practices, reverse logistics has become increasingly important. According to relevant data, by 2023, the estimated value of the global reverse logistics market is approximately US$993.28 billion, and it is expected to continue to rise at an annual growth rate of 10.34% in the next decade.
The process of reverse logistics involves managing and selling excess products and returned equipment from hardware rental operations.
In the current market environment, many retailers treat merchandise returns as separate, disconnected transactions. The challenge in managing returns is handling these returned merchandise efficiently and cost-effectively. Customer demands force companies to improve the accuracy and timeliness of their services. Therefore, logistics companies are responsible for shortening the time link from the return origin to resale.
By adopting returns management best practices, retailers can implement a returns process that addresses both operational efficiencies and enhances customer retention.
Reverse logistics is more than just returns management; it also involves activities to avoid returns, gate management, disposal, and other post-market supply chain issues. Returns management is increasingly recognised as influencing competitive positioning and therefore provides an important link between marketing and logistics. The breadth of its cross-functional impact means that companies stand to benefit from efforts to improve internal integration.
One of the main factors when a business plans returns is the residual value of the returned material and how to recover that value. The study found that returned goods or product components can be returned to suppliers and supply chain partners for remanufacturing.
When implementing reverse logistics, companies must consider potential risks, including possible increased operating costs and management challenges.
Based on participant reports, third-party logistics providers estimate that approximately 7% of total corporate sales are eaten up by return costs. In fact, almost all reverse logistics contracts are tailored to the size and type of company. 3PL (third-party logistics provider) itself can achieve 12% to 15% profit in this part of the business. In the United States, for example, an average of 10% of physical retail purchases are returned, while this rises to 20% in e-commerce.
Statistics show that the return shipping costs in the United States are expected to reach 550 billion U.S. dollars in 2020. In addition, December is the busiest period for reverse logistics in the United States, with UPS processing more than one million returned packages every day during the Christmas season.
In addition, the study showed that 84.6% of US companies utilize the secondary market, while 70% believe that the market is their competitive advantage.
A research report from Taiwan pointed out that there are three main factors driving the need for reverse logistics in enterprises: economic demand, environmental demand and social demand. Through the survey of 12 environmental management experts, the study found that economic needs are the most important, with an importance weight of 0.4842, followed by environmental needs (0.3728), while social needs are relatively unimportant (0.1430).
In some industries, downstream members of the supply chain allocate goods with the understanding that the goods may be returned for credit if they are unsold. For example, the distribution of newspapers and magazines. This practice enables downstream members to hold more inventory, as the risk of obsolescence is borne by upstream supply chain members. However, this logistics concept also carries an obvious risk that some downstream members may take advantage of the situation, order large amounts of inventory beyond actual demand, and return goods in large quantities. This allows suppliers to essentially finance the inventory of downstream members, making it particularly important to analyze the hidden costs in customer accounts.
Reusable packaging systems require a closed logistics system. Examples include reusable wooden pallets, bulk boxes such as Euro containers, and reusable bottles for milk, soda and beer.
In e-commerce, many websites offer the flexibility of cash on delivery, and customers rejecting the goods upon delivery will force the logistics service provider to follow the reverse logistics process to handle the rejected goods.
This process is also known as ‘Return to Origin’ (RTO), where the e-commerce company adds the rejected goods back into the inventory after carrying out proper quality checks. The future of reverse logistics is full of challenges, but with the changes in consumer demand and the promotion of green environmental protection, this market is bound to become an indispensable part of business operations. In what direction do you think reverse logistics will develop in the future to meet consumer needs?
