Reverse Logistics, The circular economy's weakest Link : An Opportunity For Innovation

Though the global market size for reverse logistics is valued at USD 415.2 bn in 2017 and is expected to reach more than USD 608 bn by 2025, the infrastructure and building blocks for reverse logistics are still rudimentary.


26 February, 2021: Reverse Logistics - i.e. getting products back from the consumer /market for reasons like recycling, returns, repairs, etc. - have very different dynamics, and therefore very different challenges than forward logistics.

Though the global market size for reverse logistics is valued at USD 415.2 bn in 2017 and is expected to reach more than USD 608 bn by 2025, the infrastructure and building blocks for reverse logistics are still rudimentary.

Why Reverse Logistics needs a Focused Innovation Program

Goods to be collected are difficult to handle because they are usually not disassembled neither packaged. Quantity and quality of returned goods are highly variable and not predictable. Transportation cost, compared to the residual value of goods transported, is usually high. Lack of scale often hinders transport optimization. 

Below are some of the dynamics of reverse logistics, which can help innovators think of relevant solutions.

  • Design Products for Reverse Logistics

Most products are not designed for reverse logistics. They are often difficult to compact or disassemble to optimize truck loading. Packaging, assuming it is still available at time of collection, is usually not designed to be reuse.

  •  Collaborate for Scale

Because goods to be collected are usually geographically dispersed and low-value products, aggregating volumes become essential. To reach sufficient scale, some companies consolidate their return flows. Return flows are usually easier to consolidate across companies than forward flows because they are not subject to the same timing and confidentiality constraints. 

  • Work on Frictionless Collection Schemes

For customers, it should be as easy to return a used product than to buy a new one. Customers should be allowed to choose among various pick-up or drop-off options such as neighborhood collection containers, automated parcel lockers or courier pick-up.

  •  Leverage Digitalization

With CPG companies going Omni channel, new technologies can also help firms manage return flows that are less predictable and more variable than forward ones. Historically, it has been difficult and time consuming for retailers to trace these products back to their source,

often requiring a week or more to determine the origin of the products. Block chain and IoT have enabled closed loop supply chains that can track and monitor products effectively during the end of their life span with the help of devices such as RFID [2].

  • Why Reverse Logistics is a Large Opportunity for Start-ups

70% of supply chain leaders plan to invest in the circular economy and that, in the next two years, reverse logistics will garner the most attention.

Ab InBev, the world’s largest brewery, manages a robust supply chain and logistics network across the globe with thousands of distributors, suppliers, and customers. There are many opportunities for the Indian businesses in the areas of reducing demurrages, bottle breakages throughout the supply chain, improving EHS compliance at our breweries, track & trace at SKU level, and old bottles collection.

On the reverse logistics side, Ab InBev and Supply Chain Labs are collaborating on the return of old bottles to our breweries. The glass collection segment is extremely unstructured with gaps in the collection process, presenting an opportunity for Indian logistics start-ups.

To solve this complex challenge, AB InBev Innovation Brewery has partnered with Supply Chain Labs . The Innovation Brewery is one of the global innovation hubs at AB InBev and works with global business units to find novel solutions to business problems. Supply Chain Labs is India’s largest platform nurturing and funding innovation in supply chain, warehousing and logistics.

AB InBev, strives to have 100% circular packaging as part of their sustainability goals 2025, and this makes reverse logistics a key challenge that needs to be addressed.

“Our innovation agenda is to deepen the startup engagement across different business verticals with strategic partners like SCL and create disruptive business models” - Pritam Dutta, Global Director, ZTech & Innovation Brewery, AB InBev

“We see an opportunity to build a seamless supply chain by leveraging key drivers of cost, quality, efficiency and service for an optimised business model to grow and scale sustainably, our and our stakeholder’s ambitions.” - Akhil Srivastava, Director, Logistics, AB InBev India.

“Reverse logistics is a large opportunity area for startups. The solutions are unlikely to be stand-alone and would most probably require multiple innovations to be stitched together to become a practical, commercially viable option. And that is what AB InBev Innovation Brewery and Supply Chain Labs are inviting innovations from startups for”

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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