Reverse Logistics Market Will Hit an All-Time High by 2025
According to Allied Market Research’s Reverse Logistics Market report from 2018-2025, the reverse logistics sector is expected to reach $603.90 billion by 2025.
In 2017, reverse logistics generated $415.2 billion, meaning the sector will continuously grow at a CAGR (compound annual growth rate) of 4.6% from 2017 to 2025. This rate is similar to what we’ve seen thus far up to 2020.
So, what is reverse logistics and how can you capitalize on the growth of this expansive sector of the industry? The first step would be to consider partnering with a 3PL like Redwood Logistics to help you navigate this popular strategy.
But to help you familiarize yourself before making a decision on how you plan to approach reverse logistics, we’ve gathered some information for you…
What is Reverse Logistics?
Reverse logistics is the process of returning goods from the end consumer back to the producer for repair, replacement, or disposal. For example, you’ve probably been involved in reverse logistics as a consumer if you purchased a shirt online, had it shipped to your house, and then decided to return that shirt by mailing it back because it didn’t fit right.
Reverse logistics is much more complex than traditional forward-moving logistics. You can’t just do the same process in the opposite direction. Rather than going from a centralized distribution center out to consumers, scattered goods in the customer’s hands have to be returned to specific centers, and it’s often on a time crunch. Since returns are mostly unpredictable, it’s hard to prepare for reverse logistics route optimization in advance. Learn more about what reverse logistics is here.
Because the process is more complex, a lot of logistics companies are creating independent reverse logistics processes or departments to better meet the demands of their clients.
What’s Driving the Growth of the Reverse Logistics Market?
The ecommerce industry is expanding rapidly, especially since COVID-19. In fact, the Allied Market Research report stated the ecommerce segment is likely to exhibit the fastest growth of 6.3% from 2018 to 2025. As more consumers purchase goods online, they’ll also be eager to return goods without a physical storefront. Retailers are looking to make the process of returning online goods as simple, convenient, and painless for customers as possible. Thus, the emphasis on quality reverse logistics processes has skyrocketed for LTL clientele.
About 20% of the products ordered online are returned to the producer. This is having a major impact on the growth of the reverse logistics market.
Read: Improving Ecommerce Fulfillment through Business Integration
The introduction of blockchain technology is revolutionizing the supply chain efficiency. Blockchain allows for enhanced tracking and transparency, both from the source to final destination (and in reverse as well). This creates a streamlined customer experience while reducing cost and enhancing route optimization for products moving in reverse.
Learn more about the benefits of blockchain implementation with the following resources:
- Blockchain Technology and its Impact on Logistics
- Why Blockchain Solutions Should Be in Your Plans for 2020
- Blockchain: The Future of the Supply Chain
Product Recall Rules
The government has strict rules about product recalls, especially in the automotive and pharmaceutical industries. These stringent rules mean that a lot of recalled goods that make it to the customer have to be returned to the manufacturer promptly to avoid damage to consumers, transport workers, or the environment. An increase in these rules is requiring a more efficient and safer reverse logistics process for all parties.
Increase in Pharmaceutical Reverse Logistics
If drugs aren’t handled and disposed of properly, it can be highly dangerous and even life-threatening. It can also be detrimental to the environment. The return of pharmaceuticals is thus particularly critical and complex. Thus, it requires a unique reverse logistics process, so much so that some companies are specializing in just pharmaceutical reverse logistics. For example, the DEA appointed Woodfield Distribution, LLC as one company specifically for reverse logistics of pharmaceutical drugs to ensure this process occurs lawfully and effectively. Other companies are working on creating healthy reverse logistics for pharmaceuticals, so this will continue to boost the market and revenue for the market overall.
Is Anything Stunting the Growth of the Reverse Logistics Market?
Although reverse logistics is going to hit an all-time high by 2025, there are still some factors restraining its growth. Companies have to deal with unpredictable forecasting and optimizing products from a scattering of locations, while also maintaining quality control. Returns and recalls aren’t always predictable, so more companies are utilizing artificial intelligence to best determine return rates and route optimizations.
We also have to be aware that revenue growth doesn’t rise too quickly without figuring out the most efficient processes to handle reverse logistics successfully. Moving forward, LTLs will need to focus on the optimization of returns operations to minimize the possibilities of loss and damage. It could be easy to start accepting returns from a consumer’s house, but companies need to figure out how to effectively and efficiently get those goods back to the vendor.
Redwood Logistics creates custom technology implementations for our clients to ensure their logistics processes are moving at an advanced rate, with customer satisfaction at the forefront of logistics operations.
What Were the Findings of the Reverse Logistics Market Report?
Allied Market Research looked at return type and end-user within the reverse logistics market. For return type, this included: recalls, commercial returns, repairable returns, end-of-use returns, and end-of-life returns. The end users it studied included ecommerce, automotive, pharmaceutical, consumer electronics, and others. This report forecasted the global opportunity within the reverse logistics industry from 2018 to 2025 with a detailed analysis of market dynamics, investment pockets, competition, and major segments.
Some key findings from the report:
- Commercial returns grabbed more than one-third of the market share in 2017, and it will likely maintain its revenue lead through 2025. Commercial returns typically include retailer to consumer goods, so the retailer can rectify the mistake (like the wrong product, damaged product, wrong size, etc.) and maintain their reputation for customer service.
- “End-of-life returns” (returns from products that won’t be resold by the vendor) will grow the fastest with a high CAGR of 7% from 2018 to 2025.
- The market in Asia-Pacific captured more than one-third of the market share in 2017 and will likely continue to dominate through 2025. This is because the majority of logistics companies in this region have already begun offering specialized reverse logistics services.
- Latin America, Middle East, and Africa (LAMEA) are expected to exhibit the fastest growth in reverse logistics, with a CAGR of 6% from 2018 to 2025. This is compared to North America and Europe.
Reverse Logistics Will hit an All-Time High
Reverse logistics is on the rise, especially as ecommerce continues to surge. With the complexities of reverse logistics, especially in the last mile, logistics companies like LTLs are looking for ways to streamline this process. Enabling a more efficient and convenient reverse logistics process for the consumer and retailer could radically impact the world of ecommerce and transport—and that’s what we’re all striving towards.
Redwood Logistics understands the complexities and challenges associated with reverse logistics. And we’re here to help. We create customized solutions for our clients, so your routes are optimized, your technology is working for you, and your customers are always happy.
Contact us for a free consultation about your unique reverse logistics needs. Our team of experts looks forward to your call to begin problem-solving your logistics concerns together and give you actionable advice and potential solutions.