Industry Insights From Renewal Logistics:
5 Key Metrics with Reverse Logistics
Brands should make data-driven decisions at every step of their supply chain and reverse logistics management. When it comes to reverse logistics there are 5 key metrics to be aware of.
These 5 metrics are:
- Volume
- Condition of Returned Products
- Percent of Costs
- Financial Value
- Errors
From sourcing materials through final distribution these useful metrics will help lead decisions that that ultimately will result in growth and revenue, better margins, and control capital.
Volume
The volume of products returned and subsequently resold, reused or recycled is a top metric to monitor. Brands should use these measurements to identify missed opportunities as well as to assess problems. Accurate data is key to determining where process improvements can be made to increase your bottom line.
Condition of Returned Products
Some products come back in perfect resale condition and companies can easily turn them around for resale at their full value. This not always the case and some products require some sort of refurbishment.
One option for these returned products that brands should consider are other sales channels such as an off-site off-price sellers or a value chain.
It’s important to have an understanding of the cost of materials and workmanship in order to really determine the value of the product. It’s also very important to review the percentage of goods that are coming from each sales channel in order to make sure that the company is recouping enough money and charging enough money for the products that they’re selling.
Percent of Costs
Another metric that’s important is the percent of cost. The way you calculate this is with your costs attributed to resale as well as refurbishment, recycling and reuse and then you compare that to the total supply chain cost.
From there you determine the difference in the price of the activities versus the cost of the returns. The most important piece of this is to calculate the percent of expenses that are recovered by the item.
For example you want to make sure that you’re spending $5 but you’re actually going to bring $65 in value. Ultimately you just want to make sure that your whatever you’re spending on that returned product process is actually bringing value on the i the final sale.
Financial Value
Every part of the supply chain has an economic value. Understanding what stake your brand has in each step of that supply chain can lead to better and more efficient processes.
The more you have those numbers fine-tuned and the more you have visibility as to what each individual step costs you in the supply chain, the more you can do to manage that. With the ultimate goal being to streamline your operations so that you can bring those costs down.
Errors
Every step in the supply chain also has potential for errors. You have unaccepted deliveries, defective, products and consumer remorse just to name a few.
Leadership should review the total cost of all the mistakes plus the frequency with which they’re occurring in order to identify all the opportunities for improvement.
The future of reverse logistics and by default the success and well-being of your brand will rely heavily on understanding these metrics to minimize disruptions from returns.
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