As we’ve explained before, all manufacturers need reverse logistics. In this article, we’ll discuss 5 things all manufacturers need in their reverse logistics strategy in order to avoid the excessive costs and the missed revenue that can occur in reverse logistics.

When implemented well, reverse logistics can be competitive advantage. When done badly, however, reverse logistics can lead to several nightmare scenarios. Here are some tips on how to avoid them.

What’s your plan for when a customer orders a product online, has that product shipped to a store, but then returns it to that store? If it’s an SKU that the store doesn’t carry, you will need a fast and cost-effective way for dispositioning that item. In some cases, the best route will be to mark it down and sell it. In others, transporting it to a return center so that the maximum value can be extracted from the product will be the optimal path. Much of that decision depends on the demand—both local and global—for that item. To know that demand, you must have relevant data and make it accessible to all those who receive returns, regardless of channel.

By instituting a smooth RMA process, you can determine the reason for the return (defective, wrong product ordered, etc . . .) as well as gather important information about the merchandise (e.g. specific defect, how to reproduce the malfunction, whether the item was ever actually used or worn) which can greatly assist those downstream in the reverse logistics process who will have to quickly inspect, disposition, and possibly refurbish the returned merchandise. One of the keys to generating the most revenue out of your reverse logistics program is to minimize the amount of time and transportation costs invested in each returned item. When RMAs aren’t utilized—or aren’t used effectively—every incoming box becomes a black box, requiring lots of man hours to determine how to process it.

How much value you can extract from a returned item depends on what condition that item is in. RMAs can help greatly with this, but ultimately the disposition falls on those who have to unbox, inspect and disposition the item. Clear grading criteria covering all relevant categories, especially cosmetics and function, must be documented and those doing the dispositoning have to be extensively trained according to those criteria and on the products they will be inspecting. Less ambiguity and second guessing directly leads to less costs involved in moving and processing the return. This also prevents a major reverse logistics nightmare: restocking unsaleable merchandise on the shelf and sending resaleable items in great condition to a landfill.

Every returned item should be tracked from the moment the RMA issued all the way through the entire reverse logistics flow. Otherwise, valuable merchandise can disappear into a logistical “black hole” or end up in “shadow inventory”–the industrial equivalent of being lost to the Sock Monster. Hunting down and properly routing these items is costly and time-consuming, even more so when your reverse logistics organization has many geographically scattered “black holes.”

For merchandise that can’t be resold as new, yet possess too much value to be scrapped, refurbishing is an economical way to convert returned items into resaleable items. Depending on their condition, refurbishment may just entail re-performing quality inspections and tests. For other merchandise, part replacement and preventative maintenance may be required. To cover the full range of cases, manufacturers need qualified inspection and rework technicians, in addition to a reliable supply of service parts. The recaptured value of refurbished parts adds revenue, while enticing customers with quality merchandise at discounted prices.

Many OEMs are turning to full-service contract manufacturers and 3PLs like RiverSide Integrated Solutions in order to put these tips into practice and avoid reverse logistics nightmares. Our focus is the refurbishment, repair, inspection, test, and servicing of electronic and electro-mechanical products. By leveraging our skilled team of in-house technicians and supplier network of refurbished parts, we drive reverse logistics value for our OEM customers every day.