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The Impact of Reverse Logistics

This article originally appeared in Supply Chain Technology News. Click Here to access the original article. 

The retail industry faces a growing challenge in managing the billions of products consumers return every year. These returns can result in both financial losses as well as potential negative environmental impact such as waste. With the increase in online shopping, return rates have increased exponentially. As painful as it is for retailers, returns have been absorbed as a cost of doing business and until recently, the environmental impacts have been ignored.

Reverse logistics is used to describe the way a company handles products that get shipped backward through the supply chain. Customer returns are a form of reverse logistics, but so is the unsold merchandise sent back from a store.

The challenge is that reverse logistics is complex and unpredictable. Items come back to the retailer in an assortment of conditions and retailers have little information about which products will be returned or become overstock. Numerous retailers still use a manual system to track and manage returns. Without physical and operational capacity, the majority of returned products are liquidated, returned to the manufacturer or discarded. It is not uncommon for a manufacturer to instruct retailers to dispose of a returned product on-site for cost or brand protection reasons.

New innovative technology offers retailers a solution. There is inventory management technology that can determine the best channel for an item once it returns to the warehouse. Additionally, the inventory management technology allows retailers to quickly process and track merchandise, boosting efficiency and helping to keep items out of landfills.

With the inventory management technology, one channel that can be utilized by companies is to donate returns and overstock products to charitable intermediaries. It is typically more cost-effective for companies to donate the products instead of liquidating or disposal. Donations of returns and overstock provide invaluable assistance to those in need.

A charitable intermediary is a nonprofit organization that collects donated products from corporations and disperses them to qualified charities in need. Charitable intermediaries specialize in handling every aspect of product donations, including providing a set of professional services that make the entire process as easy as possible for the corporate donor.

The IRS 170(e) tax code allows corporations to receive significant tax benefits by donating goods to qualified nonprofit organizations including charitable intermediaries. In many cases, the enhanced deduction is double when compared to disposal.

In addition to the financial benefits reverse logistics can provide, there is also the element of establishing a good reputation in the eyes of the corporation’s customers and society at large. Corporations that are embracing both green initiatives and charitable initiatives often experience added esteem by customers and society.

Reverse logistics is a lot like recycling. It allows companies to resell, refurbish or repurpose products. If a product is being returned in good shape and isn’t faulty, the product can be donated to a charitable intermediary. Reverse logistics keeps more goods out of the landfills and in circulation to help organizations and communities in need among many other benefits.



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