Reverse logistics was born from the desire to improve customer satisfaction. As competition increased and the living standard improved after World War II, customers demanded better quality and service.  As a result, people started to return items at a greater rate.  Retailers and manufacturers, seeing an opportunity to gain or keep market share eased their return policies.  For many companies, such as Wal-Mart, this was way to differentiate themselves to the customer.

In the mid 1980′s, when I was responsible for Walmart’s reverse logistics operations, I received a call from Sam Walton’s office.  Mr. Sam wanted a returned item that was an outrageous example of an item that had been returned and money refunded to a customer.  He was going to use it at an upcoming store manager’s meeting.   I went out on the floor and found a Stanley Thermos that we had recently processed from a store. On the bottom of the thermos there was a date stamped showing the date of manufacture – 1954. The first Walmart store didn’t open until 1962.  I grabbed the thermos and the store return tag and sent it over to Mr. Sam’s office.

A few weeks later, at the Wal-Mart Store Manager’s meeting, Mr. Sam held the thermos up and asked the store manager that had given the refund to come up on stage. The nervous manager walked up on stage and stood beside  Mr. Sam.  Mr. Sam shook his hand, thanked him for doing a great job and then praised him for providing such great customer service.  This guy understood that taking back a return wasn’t about a $20 thermos, that had clearly not been bought at Walmart.  It was about customer satisfaction.

All the managers in the attendance got the message.  Over the next few months, the volume of Wal-Mart’s returns increased significantly, as did sales, earnings, and market share, all which were the result of keeping customers happy, one return at a time.  By the way, that same Stanley Thermos is now on display in the Walmart’s Visitors’ Center in Bentonville Arkansas.  The message lives on.

Reverse logistics is all about customer satisfaction.  In a study published by the Aberdeen Group in February 2010, out of the 160 enterprises examined, those companies rated in the top 20% in terms of quality of reverse logistics program had an average customer satisfaction rating of 93% compared to the other firms ranked in the lower 80%, whose average customer satisfaction rating was 81%.

In other words, companies that had well developed reverse logistics programs were ranked significantly  higher in customer satisfaction.  Interestingly, the same study found that for both, the top 20% and the lower 80%, the cost of reverse logistics, as a percent of total service operations costs, were within 1%.  The point being, it isn’t about spending more money to process returns.  The difference is in how and where you spend the money you invest in your reverse logistics program.

Every executive understands the positive impact of improving customer satisfaction.  Sales grow, customer turnover decreases, over all moral improves and earning go up.   This study proves that there is a direct relationship between customer satisfaction and reverse logistics.  Reverse logistics can help both top line and bottom line results through processes  that improve customer satisfaction.