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Don’t Get Stuck in Reverse: Is It Time to Evaluate Your Reverse Logistics Practices?

Reverse logistics is becoming an integral part of operations for manufacturers, distributors and service providers so they can minimize lost revenue when moving products, parts and subcomponents back into inventory. Recent Statista research shows that returned goods cost $246.3 billion per year in North America and span customers, service organizations, supply chains, receiving departments, and even repair depot operations or subcontractors. For organizations to minimize this lost revenue, they must assess their approach to reverse logistics.

Here are three common reverse logistics scenarios. If any of these ring true for your organization, then it may be time to evaluate whether your reverse logistics strategy is costing you time, money and customer satisfaction.

The field service process alone includes multiple reverse logistics steps. The technician pulls a component out of a repairable piece of equipment at the customer’s site and replaces it with a part out of truck inventory. In a situation where the technician does not have a spare part, an inventory order needs to be placed. The field technician must have complete visibility as to whether the part is under warranty or if the customer is entitled to special pricing as a result of a contractual commitment.

Without an integrated end to end service platform, you are relying on a technician to communicate with separate field services, reverse logistics, warranty management, contracts and installed base systems to get the answers he or she needs.

Obviously, some type of communication between field service and reverse logistics software is necessary, if only to prevent losing track of parts or components pulled from equipment in the field. But in these situations, there needs to be a seamless way to track whether or not the part is going to be repaired, who owns the item as it enters the reverse logistics process and whether the part or repair is billable. Then, the part must be tied with a return material authorization (RMA) through the original field service order.

Regardless of whether an environment is focused entirely on reverse logistics or in the field, companies should expect their software platform to handle knowledge transfer. A technician in the field should be able to access tutorials on various repair processes, which, in turn, makes those with less experience more productive while increasing first-time fix rate. Reverse logistics software can now embed in the workflow detailed videos designed to walk a worker on the repair bench through the workflow. The result is increased productivity and putting knowledge into the hands of technicians where and when they need it.

In most organizations, the reverse logistics process can be delineated by new products and after use returns. In an after use environment, the reverse logistics process involves multiple stakeholders. This means that a software product used to manage this value chain must encompass all, not some, of these stakeholders. Here’s why:

The customer service department generally authorizes the service and repair work through the call center or, increasingly, digital customer portals, chatbots, or even social media.

If a replacement part is due for shipment, the customer service representative checks inventory availability and may have to contact purchasing. If the product replacement requires a build order, the customer service representative may have to involve manufacturing or supply chain departments. If the defect is being received for repair, logistics needs to be engaged to receive the defect and route it for repair. Each of these stakeholders has a role to play and each has its own specific process to follow. This gets even more complicated when there is a field service component to the reverse logistics process.

Throughout this process, there is a set of rules that must be followed. These rules cover everything, such as the asset or product itself, which parts are sent to which repair facility or depot, whether the part is covered by warranty or contract entitlement and whether a customer has a replacement for the part in inventory or you need to ship one, to name a few. Clear communication, starting with the task of defining processes to ensuring the correct business process is followed, perhaps with a configured workflow, is very difficult without some enterprise reverse logistics and repair software. Check yours out.

Combining reverse logistics with field service is challenging enough when relying on your own employees. But, more and more organizations outsource field service work to subcontractors for specific tasks or in peak demand times. Subcontractors introduce several new logistical steps into a reverse logistics process. Reverse logistics software needs to account for multiple subcontractor types and reimbursement policies in order to manage the complex situations caused by subcontracting.

First, in order to delegate tasks to subcontractors, you need to establish their availability given time constraints and ensure they have the parts and expertise needed for the job. The contractor must provide a not-to-exceed cost figure, receive a purchase order and perform the work.

But what if the subcontractor removes a part from a customer’s equipment for return? This is where things can get very, very complicated. If part A is replaced with part B, what happens to part A? The subcontractor may send an invoice and want to get paid for the part used out of its inventory. Depending on the arrangement, the subcontractor may get paid for the new part only when you receive the returned original part. Or, if you have a strong relationship and have built trust over the years, the subcontractor may be paid once a material return is authorized or when shipping confirmation is received by the contractors. All of this can change by individual subcontractor, customer, product line, or geography.

If the work and part are covered by a warranty, the subcontractor bills the vendor for the part. But, if the part and work is out of warranty and the subcontractor owns the relationship with the customer as an independent service provider, you, as the reverse logistics organization, may only get back parts if there is a core credit involved.

Looking Back to Go Forward

It’s clear that reverse logistics operations span a complex network of players, parts and, in some cases, organizations. If you are encountering these common challenges on a regular basis, it might be time to reassess your approach to reverse logistics as a discipline.

The next step is to see how enterprise software can alleviate reverse logistics pain points. The right solution should be able to help your organization handle large supply networks and reduce costs.

Tom DeVroy

Tom DeVroy is Senior Product Evangelist, North America for IFS. Tom has over 30 years of experience in high-tech service operations, including working with hardware, software and consulting firms, as well as premier global service organizations like Ericsson, DHL, Xerox, and Ingenico.

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