Reverse logistics is the process of moving products from end-user back to the origin to recover value or for proper disposal. The value is recaptured from products recovered from customers through rework, refurbishment, reuse, scrap recycling, or government incentives for recyclable products.

A refurbished iPhone is a good example of reverse logistics. If an iPhone sold to the customer is found defective within the warranty period, the customer returns it to the carrier network and then send it back to the Apple factory for refurbishing. Apple inspects the iPhone to determine the issue and replace it with new parts or software. A new iPhone is then labeled with a new serial or model number for reselling. A refurbished iPhone is re-sold to the customer, thus, creating value to Apple.

Product returns come in different forms including the commercial return, recall, refurbishment, or product’s end-of-life. Companies must have systems and infrastructure in handling returns to minimize recovery costs, increase recaptured value, and increase visibility. In e-commerce retail industry, the rising return rates make retailers suffer from costs associated with returns because customers get refunded for returned products (especially seasonal goods) that cannot be resold at the original price due to wear and tear, obsolescence, or damage. Implementing a return policy can mitigate reverse logistics costs as it controls and limits customers from returning goods.