Dumping items in a landfill is no longer a sustainable business model or something that consumers are willing to accept. This has been generally entrenched thinking in Europe for several years, whereas in the USA, we are still some ways away from full-scale recycling at the collection points of homes and businesses.
As a result, billions of pounds of usable products and materials still find their way into landfills every year, causing irreparable harm to the environment. It will take hundreds of years to biodegrade these items, and some will never be broken down.
The good news is that sustainability has entered the boardroom and the consumer’s psyche. It has become one of the most important discussion points of our generation, and millions of dollars are being spent on making the economy green. But how to keep track of the flows of all these goods?
In Europe, for example, there is a strict set of compliance laws for environmental, social, and governance (ESG). In the USA, there are currently no mandatory ESG disclosures at the federal level, although the SEC requires all public companies to disclose information that may be material to investors, including information on ESG-related risks, and requires disclosure of whether and how diversity is considered a factor.
Many companies are now following what is called the 5 R’s of the “circular economy”:
- Refuse to buy
- Reduce waste
- Reuse where possible
- Repurpose
- Recycle as a last resort
EVOLUTION OF THE CIRCULAR ECONOMY
Before the circular economy, the manufacturing and production world typically consisted of businesses that harvested the Earth’s materials, created marketable products from them, sold these, and consumers used them and then threw them away. It was a linear process – and bad for the environment.
In the circular economy, we address the issue of waste at every stage of the process, eliminating pollution and waste by choosing better design and production methods. When done right, it reduces harmful pollution and carbon emissions and can provide job security and social benefits to low-income economies that will be able to remain competitive locations for ecologically aware companies. It also ensures more resilient supply chains and saves money through material reuse.
As time went on, these developments resulted in the logistics process becoming divided into two distinct parts:
- Forward Logistics – anything to do with getting product from its origin to the consumer
- Reverse Logistics (RL) – getting product back from the consumer and disposing of it accordingly
A whole industry has grown around Reverse Logistics, driven by a huge increase in e-commerce, but also because of the increased focus on appropriate recycling and repurposing. In fact, it begins with responsible or sustainable procurement. As Supply Chain Quarterly reports: “It’s well documented that as much as 80% of a ‘buying’ organization’s impact on air, land, water, biodiversity, and geological resources is not from its own internal operations but from those of its supply chain.” Due to the ESG standards dictated by OEMs, Tier 0 or Tier 1 suppliers are slowly integrating environmental and ethical principles into the procurement process as well.
Reverse Logistics has become a struggle for e-commerce businesses – both B2B and B2C – and the financial impact is enormous. In 2020 alone, approximately $428 billion worth, or 10.6%, (National Retail Federation) of products sold online were returned. That figure is only expected to continue to rise in the coming years, with a continued transition from traditional to online retail.
We can define Reverse Logistics as all activities, such as repair, refurbishment, warranty management, recycling, scrap management, remanufacturing, reuse, call center management, and all of the physical activities associated with the movement and processing of returned goods in all of these areas. The industry even has its own association already: RLA.
Looks like sustainability and environmental conservation are here to stay!
VITAL ELEMENTS OF REVERSE LOGISTICS IN A CIRCULAR ECONOMY
So, RL required some steps to ensure proper alignment with the circular economy:
Design products with RL in mind
Most products aren’t designed with reverse logistics in mind. If your business has a say in the design of its products, consider the materials, ease of assembly (or disassembly), and packaging you choose. Can the packaging be reused when a customer wants to make a return? Is the item easy to assemble and disassemble? Can it be done at home? Are the materials recyclable?
Repair, reuse and resell
There are several things you should take into account in your returns routine: inspect products on arrival, test them, replace parts or repair where possible, then relist and resell. Liquidate only as a last resort and break down as much as possible for the future reuse of parts. Select liquidators who are certified and follow established processes.
One example is recycling plastics, which are melted down and are reused in other manufacturing processes. Each returned item that is either properly repurposed or returned to market can create carbon credits for the retailer or manufacturer. These are often overlooked due to the complexity of calculation.
Become a certified RL provider
Just as some industry certifications and approved processes have been developed under the ISO standards barrier, or with 6 Sigma and 5S process adoption, the RL industry has its own standard: R2 requires full track-and-trace down to the last step in the recycling process, meaning providers must attest an auditable trail of when and where every recycled part ended up. Not an easy task!
Create a frictionless collection program
It should be simple for customers to return a used product instead of purchasing a new one. Ideally, they should be given a choice between various drop-off or collection points. Some brands even offer free packaging and labeling or product disassembly and installation as part of the service. Can you even avoid a return?
Analyze data to identify trends
Your warehouse management system (WMS) should be able to identify why your business is getting returned products so that you can address the issue and work on reducing those numbers. Is there a problem with a certain product or manufacturer? Maybe one of your shippers is breaking too many items before they get to customers. This data can help reduce returns, save the environment, and salvage your brand’s reputation.
TECHNOLOGY ENABLEMENT OF THE PROCESS
E-commerce businesses are now using technology solutions and robotics to advance their forward logistics. So, why wouldn’t they do the same for reverse logistics? The same solutions can help a business achieve more efficiency and visibility throughout the process as well as improve the customer experience.
For example, a WMS can track the flow of returned merchandise from the customer back to the warehouse and final disposition. Automation tools to sort incoming items can help to send fewer products to landfills, as more items are placed back into inventory or sent for refurbishment or breakdown and recycling. All these items are measured by systems against agreed standards, and the landfill becomes a last resort.
MAKE ENVIRONMENTAL AWARENESS A PRIORITY
To truly create a circular economy, everyone needs to be on board. This includes your customers, employees, and business partners. Make environmental awareness and sustainability one of your company’s core values and train your employees on these issues. Let customers know how you plan to protect the environment with specific initiatives. And, finally, only hire business partners who share your vision and commitment to these issues.