8 KPIs for Successful Reverse Logistics Process

Reverse Logistics Process

Reverse logistics has become an essential component of supply chain management, particularly in industries where product returns, recycling, and refurbishing are commonplace. To effectively manage and optimize the reverse logistics process, businesses need to track and analyze specific Key Performance Indicators (KPIs). These KPIs provide critical insights into the efficiency, effectiveness, and overall performance of the reverse logistics process. In this article, we outline eight crucial KPIs that contribute to a successful reverse logistics operation.

1. Return Rate

The Return Rate is one of the most fundamental KPIs in reverse logistics. It measures the percentage of products that are returned by customers relative to the total number of products sold. A high return rate can indicate underlying issues such as product quality problems, inaccurate product descriptions, or customer dissatisfaction.

How to Calculate Return Rate

Return Rate =Total Number of Returns/Total Number of Units Sold×100

By monitoring the return rate, companies can identify patterns and take proactive measures to reduce returns, such as improving product quality or enhancing customer support.

2. Cost per Return

Cost per Return is a critical KPI that measures the total cost associated with processing a returned item. This cost includes expenses related to transportation, labor, inspection, repackaging, and restocking or disposal. Understanding the cost per return is vital for managing expenses and identifying areas where cost efficiencies can be achieved.

How to Calculate Cost per Return

Cost per Return=Total Costs of Returns/Total Number of Returns ​

A high cost per return may signal inefficiencies in the reverse logistics process, prompting businesses to explore cost-saving opportunities such as automating return processes or renegotiating contracts with logistics partners.

3. Average Time to Process a Return

The Average Time to Process a Return KPI measures the time it takes to complete the return process from the moment a return request is initiated to the time the product is restocked or disposed of. A shorter processing time is generally preferred, as it reflects a more efficient reverse logistics operation.

How to Calculate Average Time to Process a Return

Average Time to Process a Return=Total Processing Time/Total Number of Returns Processed

Reducing the average time to process returns can lead to faster restocking, improved customer satisfaction, and better inventory management.

4. Recovery Rate

The Recovery Rate KPI measures the percentage of value recovered from returned products. This value can be recovered through various means, such as reselling refurbished products, recycling materials, or selling parts. A high recovery rate indicates a successful reverse logistics process that maximizes the value extracted from returned goods.

How to Calculate Recovery Rate

Recovery Rate = Total Value Recovered/Total Value of Returned Products×100

Tracking the recovery rate helps businesses evaluate the effectiveness of their refurbishment, recycling, and disposal strategies, allowing them to optimize these processes for better financial returns.

5. Customer Satisfaction Rate

Customer satisfaction is a crucial metric in reverse logistics, as the returns process can significantly impact a customer’s overall experience with a brand. The Customer Satisfaction Rate KPI measures the percentage of customers who are satisfied with the returns process.

How to Calculate Customer Satisfaction Rate

Customer Satisfaction Rate = Number of Satisfied Customers / Total Number of Customers Surveyed × 100

High customer satisfaction rates indicate that the reverse logistics process is smooth, transparent, and customer-friendly. Conversely, low satisfaction rates may require businesses to re-evaluate their return policies and improve communication with customers. 

6. Percentage of Products Disposed of

The Percentage of Products Disposed of KPI tracks the proportion of returned products that are not resellable or recyclable and must be disposed of. A high disposal rate can indicate inefficiencies in the reverse logistics process, such as poor product quality or inadequate refurbishment capabilities.

How to Calculate Percentage of Products Disposed of

Percentage of Products Disposed of=Number of Products Disposed of / Total Number of Returned Products×100

By monitoring this KPI, companies can identify opportunities to reduce waste, improve product quality, and enhance their environmental sustainability efforts.

7. Inventory Turnover Rate for Returned Products

The Inventory Turnover Rate for Returned Products measures how quickly returned products are resold or otherwise processed. A high turnover rate indicates that returned products are being efficiently processed and reintegrated into the supply chain, minimizing holding costs and reducing the risk of inventory obsolescence.

How to Calculate Inventory Turnover Rate for Returned Products

Inventory Turnover Rate=Cost of Goods Sold/Average Inventory of Returned Products

Improving this KPI helps businesses reduce the costs associated with storing returned products and ensures that they can capitalize on the value of these items as quickly as possible.

8. Percentage of Returns Resold

The Percentage of Returns Resold KPI tracks the proportion of returned products that are successfully resold, either as new, refurbished, or in secondary markets. A high resale percentage indicates an effective reverse logistics process that maximizes the value of returned goods.

How to Calculate Percentage of Returns Resold

Percentage of Returns Resold =Number of Returns Resold/Total Number of Returns×100

Businesses should aim to increase this percentage by implementing effective refurbishment processes and exploring secondary markets for reselling returned goods.

Conclusion

In conclusion, these eight KPIs are essential tools for evaluating and optimizing the reverse logistics process. By regularly tracking and analyzing these KPIs, businesses can gain valuable insights into their reverse logistics operations, identify areas for improvement, and ultimately enhance their overall supply chain performance. Implementing a robust KPI monitoring system is critical for achieving success in reverse logistics and maintaining a competitive edge in the market.

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The SKUBIQ is a cloud based Warehouse management system and is designed for third-party logistics companies to manage multiple customers, processes and billing schedules. The system enables access to real-time information and provides integrations with warehouse management technologies, including EDI, barcode scanning, and e-commerce shopping carts. The software scalability helps companies to manage different stock levels in warehouses, streamline business, and satisfy customers.

SKUBIQ is designed to help logistics companies automate processes and bill items accurately. The software provides features which allow the user to easily add and remove customers and products. The software is designed to help logistics providers satisfy customers’ need for updated information and increase profits through process automation.

The SKUBIQ can be integrated with any line of business application or ERP thereby allowing users to synchronize items, inventory, purchase orders, and receipts.

Manufacturing

The manufacturing is a highly regulated industry globally where attention to detail is critical to help ensure stringent requirements for product quality and deadlines are met. Its become imperative for organizations to achieve a lean environment in which they have visibility to and control over these details is where competitive advantage often resides. SKUBIQ partners with major manufacturing companies globally to improve efficiency and reduce costs, such as:

  1. Support of lean manufacturing initiatives by including inventory management capabilities within manufacturing
  2. Initiating supplier re-orders based on demand signals
  3. Compliance with industry requirements for quality, product tracking, safety, and recall management
  4. Integrated RFID, including asset tracking
  5. Quality assurance and inspection
  6. Managing a large product catalog / SKU proliferation
  7. Addressing Customer OEM parts packaging
  8. Core stratification and remanufacturing
  9. Wave planning and small order pick optimization to reduce picker travel
  10. Serialized inventory tracking
  11. EDI / ASN integration

Distribution Center

Distributors normally lack precise and seamless traceability, lot control, and recall management capabilities jeopardizing the inventory thereby putting their businesses at risk of compliance failures and legal liabilities. In addition, they are constantly challenged by the emerging consumer demands for omni-channel commerce, specialized products, and more convenient delivery options

SKUBIQ is trusted worldwide for supply chain management and visibility. But Why? Simply because our uniquely adaptable software solutions help companies like you stay on top of this fast-changing market.

SKUBIQ helps address the complete process of fulfilling complex, multi-temperature home delivery orders. SKUBIQ has the inbuilt flexibility in helping emerging online retailers and distributors a wide range of specialty products through traditional eCommerce fulfillment models.

As one of the market leaders in warehouse management (WMS) for cold-storage, third-party-logistics companies that play a critical role distribution, we bridge inventory and distribution between some of the world’s largest producers and their customers.

Fashion and Retail

The SKUBIQ is a cloud based Warehouse management system and is designed for third-party logistics companies to manage multiple customers, processes and billing schedules. The system enables access to real-time information and provides integrations with warehouse management technologies, including EDI, barcode scanning, and e-commerce shopping carts. The software scalability helps companies to manage different stock levels in warehouses, streamline business, and satisfy customers.

SKUBIQ is designed to help logistics companies automate processes and bill items accurately. The software provides features which allow the user to easily add and remove customers and products. The software is designed to help logistics providers satisfy customers’ need for updated information and increase profits through process automation.

The SKUBIQ can be integrated with any line of business application or ERP thereby allowing users to synchronize items, inventory, purchase orders, and receipts.

Fast-moving Consumer Goods

The manufacturing is a highly regulated industry globally where attention to detail is critical to help ensure stringent requirements for product quality and deadlines are met. Its become imperative for organizations to achieve a lean environment in which they have visibility to and control over these details is where competitive advantage often resides. SKUBIQ partners with major manufacturing companies globally to improve efficiency and reduce costs, such as:

  1. Support of lean manufacturing initiatives by including inventory management capabilities within manufacturing
  2. Initiating supplier re-orders based on demand signals
  3. Compliance with industry requirements for quality, product tracking, safety, and recall management
  4. Integrated RFID, including asset tracking
  5. Quality assurance and inspection
  6. Managing a large product catalog / SKU proliferation
  7. Addressing Customer OEM parts packaging
  8. Core stratification and remanufacturing
  9. Wave planning and small order pick optimization to reduce picker travel
  10. Serialized inventory tracking
  11. EDI / ASN integration

Automobile

Distributors normally lack precise and seamless traceability, lot control, and recall management capabilities jeopardizing the inventory thereby putting their businesses at risk of compliance failures and legal liabilities. In addition, they are constantly challenged by the emerging consumer demands for omni-channel commerce, specialized products, and more convenient delivery options

SKUBIQ is trusted worldwide for supply chain management and visibility. But Why? Simply because our uniquely adaptable software solutions help companies like you stay on top of this fast-changing market.

SKUBIQ helps address the complete process of fulfilling complex, multi-temperature home delivery orders. SKUBIQ has the inbuilt flexibility in helping emerging online retailers and distributors a wide range of specialty products through traditional eCommerce fulfillment models.

As one of the market leaders in warehouse management (WMS) for cold-storage, third-party-logistics companies that play a critical role distribution, we bridge inventory and distribution between some of the world’s largest producers and their customers.

Pharma & Surgical

The SKUBIQ WMS Software is a cloud-based Warehouse management system and is designed for third-party logistics companies to manage multiple customers, processes and billing schedules. The system enables access to real-time information and provides integrations with warehouse management technologies, including EDI, barcode scanning, and e-commerce shopping carts. The software scalability helps companies to manage different stock levels in warehouses, streamline business, and satisfy customers.

SKUBIQ WMS Software is designed to help logistics companies automate processes and bill items accurately. The software provides features which allow the user to easily add and remove customers and products. The software is designed to help logistics providers satisfy customers’ need for updated information and increase profits through process automation.

The SKUBIQ can be integrated with any line of business application or ERP thereby allowing users to synchronize items, inventory, purchase orders, and receipts.