Reverse logistics. It’s the big, untalked about part of the service industry that was nonetheless worth $563.2 billion in 2021.
That figure is expected to grow substantially in coming years; by 2027, the market is expected to reach $812.6 billion.
A big reason for this sharp spike in growth is the rise of sustainability initiatives and the circular economy. Businesses everywhere are looking for opportunities to become more sustainable (both in terms of greener choices and improving their own supply chains).
Reverse logistics feeds into the circular economy by helping to close the service supply chain loop — but, the way it’s traditionally done is perfectly imperfect.
In this blog, we explore the current landscape of reverse logistics — what it is, how it’s done, what it looks like in principle and how it actually tends to go — and explore some of the ways it falls short of actually meeting the needs of the sustainable circular economy.
We’ll also explore the better path forward: a way to optimize asset recovery operations in a manner that maximizes resource recovery and minimizes waste (of not just parts but journeys and costs).
What is reverse logistics and how does it work in B2B?
Reverse logistics is the process of retrieving goods from their typical final destination for the purpose of capturing value or proper disposal. It plays a key part in value recovery — and it has an important role in helping companies become part of the circular economy.
In the world of B2B, reverse logistics and parts and equipment recovery is usually baked into SLAs and contracts.
Companies that provide equipment provisioning services will have processes in place to cover:
- the delivery of equipment to clients,
- ongoing maintenance (including the dispatch of field engineers and replacement parts),
- retrieval at product end of life or contract conclusion.
Reverse logistics plays an important role in most of these stages. Even initial delivery, in cases where the equipment or parts being delivered were recovered and refurbished for reuse.
To be effective — and truly sustainable — businesses need to be able to manage recovery, refurbishment and delivery from a single point of control. So you have clear visibility across the entire service supply chain.
The pros and cons of reverse logistics in a circular world
Reverse logistics is an important part of the product cycle. But it does have significant limitations in the real world — led by either a lack of data and insight, a lack of resources, or legacy systems incapable of handling changes in real-time.
A big part of the issue is the fact that reverse logistics often falls low on the priority scale for businesses. In the pursuit of meeting and exceeding customer expectations, companies often prioritize the delivery and maintenance arms of the business.
|● Save costs on new materials and parts by recovering and refurbishing or repurposing old parts
● Reclaim value from parts and end-of-life by stripping out valuable materials and components and recycling responsibly
● Improve sustainability of the business — both ecologically and in terms of supply management
● Lengthen the product life cycle and get more value out of assets
|● May lead to reliance on third-party operators like 3PL and FSL services — which can drive up costs and lead to a loss of control
● Outsourcing to 3PL can also lead to poor communication and a lack of transparency with end customers — leading to irritation and tricky customer service interactions
● Longer cycle times, if the process is improperly or inefficiently managed
Most of the downsides that come with reverse logistics are a result of inefficient planning. Reverse logistic management is usually left to chance or considered only as an afterthought. A lot of the time, the entire process is outsourced, leading to information silos and opaque processes.
Executives in the industry will often readily admit reverse logistics deserves more attention than it gets — however, with limited time and resources at hand, other issues often take priority and demand more immediate focus.
But that’s a big missed opportunity. Done right, asset recovery fuels greater contract fulfillment, saves costs, improves supply resilience, and feeds back into better processes.
The answer lies in a better service supply chain management partnership — one made possible through greater data understanding, predictive technology, and transparent communications across the board.