Outline
This essay describes the reverse logistics in e-commerce. The study deals with how reverse logistic and e-commerce relate and the importance of reverse logistic in the e-commerce sector. It also studies what type of industries will suffer more because of the reverse logistic. Because every industry is producing different kinds of products, reverse logistic strategy will change in accordance with the product produced.
E-commerce and logistics are inter related. The statement tells that: E-commerce is a commercial activity through the internet. Logistics is an integral part of commerce. Likewise when e-commerce takes place logistic happens like all other business activity.
E-commerce is the new version of logistic: Logistic or supply chain management is the link between customer and the business centre. A customer will get his desired item through the logistic activity. When e-commerce came into the business arena, a customer can purchase any item from any distant place. That means logistic happens when button is pressing. When the online shoppers increasing, the majority of the logistic operation will takes place to cater the demand of this online people. Thus we can say that e-commerce will be the new version or it will be the future of logistic or there will be a combined effort.
Reverse logistic strategy can be implemented on the basis of type of the product: or service in which a firm provides. That is reverse logistic will yield benefit only in some cases only. But if a firm is recognizing that there is a possibility of reverse logistic, it will be a value addition to the company. And thus there is risk involved in implementing such strategy, as you pointed out. There is required a lot of background arrangement such as market research about the customer, -whether the complaint of customer is genuine, type of the product, reusability of the product. Etc. should be inquired. And you have to make further arrangement to recover the product such as employment of new personnel, documentation process etc. are additional steps. I.e., one firm cannot enter into reverse logistic service unless and otherwise they had fulfilled all the pre-requisite condition. And if the conditions are fulfilled the customer should informed about new move. Otherwise it will be a risk. Financial risk and customer handling will be such type of risk. Even if they are following either the in house production or outsourcing option, the risk will be the same.
A firm which decided to follow a good reverse logistic strategy, should incorporate it in to the after sale service. Reverse logistic is also an after sales service. If we are neglecting the customer after the purchase takes place, he will also neglect us after his purchase. Thus reverse logistic is not only logistic operation; it is a customer care strategy. A firm which is following a good after sales service, it can easily incorporate the reverse logistic strategy in a well manner. The reverse logistic strategy should not be a stand alone strategy; rather it will be an additional service from the part of the company.
Reverse logistic got attention because of its environment friendly dimension. The world is now focusing on green technology and green business. The rules and regulation will be tougher and tougher when the countries are trying to fulfill the environment norms. Thus in order to be a sustainable corporation, they have to meet the green challenge.
Introduction
E-commerce is booming in recent years with the rapid development of information technology. Even though E-commerce helps to purchase goods and services from a distant place, the purchaser cannot feel the presence of the article. So when the purchaser gets the ordered item, he may be dissatisfied because the item may not be in the level desired by him. It will lead to rejection of the item. Reverse logistic comes in the scene in such a scenario. When a customer rejects the order, the firm will pack up the item from the customer.
Reverse Logistic
According to the Reverse Logistics Executive Council (www.rlec.org), “reverse logistics is the process of moving goods from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.: (Barry 2003).
E-commerce and logistics are related to each other. When e-commerce occurs, logistic will take place while e-commerce is the new version of logistic. Both are growing with the help of e-commerce.
Need for reverse logistic in e-commerce
Laws and Regulations in cyber world: Many countries made it compulsory to have reverse logistic policy in all websites in order to protect the online customers and standardizing the websites. Another aim is the environment protection through recycling of used product.
Customer Retention
With the development of e-commerce, return rate is also at a high rate of 36%. As per some survey, a good reverse logistic strategy will boost the customer retention.
85% of customers say they will stop buying from a retailer if the return process is a hassle (Harris Interactive). 95% of customers say that they will like to shop with a catalogue or internet retailer again if the return process is convenient (Harris Interactive). 40% of shoppers don’t buy online due to return difficulty (Jupiter Research). Customers who have their complaint resolved quickly have a re-purchase intention rate of 82% (McKinsey) (Reverse Logistics within eCommerce 2009). These studies show the importance of return policies in e-commerce. A firm which has a strong return policy can retain its customers for long. Reverse Logistic helps the firm to reduce the cost. Building customer loyalty will be another competitive advantage for them.
Problems in Reverse Logistic
Misunderstanding about Reverse Logistic: Even though reverse logistic plays a vital role in retaining the customers, many firms do not understand its benefit fully. They consider the reverse logistic is unnecessary since it adds to the cost. And thus they consider it as a burden.
High complexity: Since timing of return, quantity etc. are uncertain, the system will need more comprehensive ability. And the system cannot predict the return level, or the condition of recovered item. There may be additional cost for relocating the product in the range of products. They have to formulate new production and operation policies also. The uncertainty will also prevent from using the existing models of the supply chain management.
Lack of experience: Reverse logistic is a newly developed concept. Even though many firms are applying reverse logistic, the ever changing customer behaviour also makes it difficult for the reverse logistic practioners.
Problems Related to product Return: When a product is returned it makes lots of problems for the producer. They are high cost of recycling, surplus item in the warehouse, space management in the warehouse, separate logistic management for returned product, crediting the customer account, cost incurred due to repackaging, rework etc. As per the industry standard, companies have to recover the product within 48 hours and return back their money within 7 days. (Barry2003).
Effect of reverse logistic on industries: The return rate will differ from industry to industry. It will range from 3% to a higher rate of 50%. From several studies it is found that product which has a less consumption age doesn’t have much effect of reverse logistic. Product which is aimed for one time consumption is an example for this. Heavy and complex industries, on the contrary, have more effect of the reverse logistic. Most companies suffer from poor after-sales service. Apart from information technology the other companies are consumer electronics, food and beverage, medical/pharmaceutical, publishing etc. Reverse Logistics is very important in food industry, because returning back food to a supplier, the food becomes waste. “By streamlining reverse logistics procedures, however, companies can increase both customer loyalty and bottom line profitability. Managing inventory more effectively, largely through new applications of technology, is easing the strain that handling returns can have on both warehouse personnel and the environment.” (Return to Sender 2008).
Conclusion
Since customer retention is the best strategy in order to remain in a competitive market, companies now understand the importance of reverse logistics. Reverse logistic is not only recovery of an unused product but it has now become a consumer retention strategy. Beyond that the reverse logistic is now associated with the recycling and reusing concept which is related to the environment protection. The rapid growth of e-commerce and supply chain management helped a lot for the development of this management science. In e-commerce where customers can select the item through a computer screen, it may sometimes create problems in future. Thus it is essential to have a good consumer tracking strategy. Thus the reverse logistic integrates several other departments of the organization.
Bibliography
Barry, Curt 2003, How to Develop a Reverse Logistics Strategy, Catalog Success Magazine, Web.
Reverse Logistics within eCommerce 2009, Buzzle.com, Web.
Return to Sender 2008, ESCM, Web.