Financial Benefits Product Returns and Costs of Forward Logistics
Go to the internet and identify and select an electronics retail store as a real-world example in this
discussion. Compare and contrast the financial impact of a returned product versus the cost associated
with forward logistics.
Financial Benefits Product Returns and Costs of Forward Logistics
Product returns is emerging trend that increased benefits on company performance. This is
because retailers or store companies are embracing reverse logistics to improve customer
satisfaction and recapture recovery value. Companies are reaping increased benefits from
product returns through implementation of efficient reverse logistic systems. Integrating forward
logistics and reverse logistics is an impressive opportunity for business organizations in supply
chain industry. It is important to ensure that the benefits of reverse logistics out way the costs
associated with both forward and backward logistics. This paper takes Fry’s Electronics as the
electronic retail store for evaluation. This helps in providing real-world example for comparing
and contrasting the financial impacts of a returned product versus the cost associated with
forward logistics.
Fry’s Electronics is an American big-box store and retailer of consumer electronics,
software, household appliances and computer hardware. The company is an in-store computer
repair and custom computer building services. The company was founded in 1985 and has its
BENEFITS RETURNS AND COSTS OF FORWARD LOGISTICS 2
headquarters in San Jose, California. The company has 13,999 employees and provides shipping
and delivery time services as well as world class customer services.
Benefits of Product Returns
Product returns has seen as management headache and cost drains that significantly affect
the financial performance of a business organization. Electronic retail stores should use product
returns policies to enhance customer satisfaction and loyalty as well as grow profits and
company reputation. Companies spend significant amount of revenues to handle product returns
each year and related logistics. It allows customers to return products easily and invite customers
to take chances on products. The company is able to build loyalty with customers through their
interactions in regard to product returns as well as attracting more positive reputation. The
company can improve its business. It will be able to realign corporate resources towards
customer returns in order to enhance satisfaction and increase its profits over long term. A simple
and easy policy of return boosts sale revenue. Reverse logistics is beneficial to customers and
business organization because it will enhance efficiency and effectiveness of handling product
returns.
Therefore, the company will benefit from reduced administrative and transport support
costs, increase velocity, achievement of sustainability goals, increased service market share and
greater customer service and retention levels. Besides, adopting technology for the product return
will improve reverse supply chain visibility and productivity as well as customer responsiveness.
This will improve transparency in the supply chain operations and data consolidation for systems
and partners. The company will be able to reduce overall total costs and maximize return on
BENEFITS RETURNS AND COSTS OF FORWARD LOGISTICS 3
assts. There will be improved return on investment, increased public perception, encourage
industry competition and reduce risks to the company business.
Cost of Forward Logistics
The costs of forward logistics for the company include the inventory carrying costs,
logistics administration costs, transportation costs, and customer service labor costs. These
include cost for determining applicable warranty policies and service contracts. Besides, other
costs will include financial reconciliation costs for determining inventory reporting for products
and sales labor costs for revenue recognition and margin protection as well as return rate
forecasts. In addition, traffic and shipping costs will be incurred for managing carriers or
damages incurred in transit, tracking and shipments. There is also receiving and warehousing
costs as well as grey market items. The company may incur cost of lack of visibility, inaccurate
forecasting and poor response time and brand toxicity.
BENEFITS RETURNS AND COSTS OF FORWARD LOGISTICS 4
References
Agrawal, S., Singh, R. K., & Murtaza, Q. (2015). A literature review and perspectives in reverse
logistics. Resources, Conservation and Recycling, 97, 76-92.
Bergstrom, R., Najdowski, A. C., & Tarbox, J. (2012). Teaching children with autism to seek
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