Global reverse logistics is growing rapidly.
This is mainly driven by e-commerce developments, market-rise in the Asia-Pacific region, and new trends empowered by the huge focus on sustainability. Top corporations have not only managed to revamp their reverse logistics from cost to profit center but have also managed to increase the value obtained from these returns.
The Russian reverse logistics market, however, runs a bit behind on the global growth, since there is a lack of theoretical foundations and a unified approach to reverse logistics. However, we believe there 5 important key factors you should know about reverse logistics in Russia.
1. Trade Compliance. What goes in Russia, stays in Russia, right?
Since every international shipment implicates at least two local authorities, you should stay up to date on each of their regulations. Remember: to export something out of Russia, you must show the import declaration number.
Now imagine that you have an imported laptop with a broken SSD. Many would argue that it is impossible to take out that broken SSD and export it back separately. I would say that most of you leave your money on the table - because you can! To allow it, you need to start at the import declarations and just add the specification and identification number of that SSD, so that the customs authorities can identify that broken SSD inside the laptop and allow export. Simple!
2. WEEE? – No, never heard of…
Russian waste management, unfortunately, remains on the incipient stage. Although no consolidated piece of legislation, specifically regulating WEEE management, has been adopted in Russia - there are still some rules to follow. Manufacturers and importers, as well as some other operators, have become responsible for the recycling of products and the packaging that these operators place or circulate on the Russian market. In practice, there are two most popular ways to follow: 1) choose a compliant 3rd party service provider or 2) pay the environmental charge.
3. Certification. Plan your outbounds well in advance!
Based on the provided technical description of the goods waiting for their import into Russia, your local partner will classify HS codes and only then they can tell you if a certification, or even a notification, is required. The Government is now paying a lot of attention to certifying agencies, so it may take up to 1 month to get that certificate. Sending samples for laboratory testing prior to the main shipment is also a common practice, so be prepared for lead times!
4. Costs. Why is my logistics spending so high in Russia?
Logistics costs as a percentage of the nominal GDP by country remain quite high in Russia. This is the reality that we can hardly influence. On the other hand, most of the companies work with global service providers, who include the RCIS into the EMEA region. It depends on each and everyone’s resources and internal policies, but most of the global providers do not have a presence in Russia. As a result, you get a margin on margin setup flavored with a lack of local competence from your direct point of contact. This often results in a lack of control and low transparency. In other words, there is room for optimization. Perhaps, making a few exceptions, by choosing local partners, for complex regions like Russia and CIS might help.
5. “Our distributors are handling returns.” Really?
While most of the distributors are capable of handling returns (though very grudgingly, as it is not their core) the return process is usually limited to local logistics and scrapping. There is practically no testing & screening, no cross-border returns, and no transparency in general. As soon as you lose transparency, you lose your money. A simple example would be your No-Fault Founds (NFF). The average NFF rate is above 40% and you do nothing but scrap. I would say, you are leaving your money on the table again.
The Russian market might not be a priority compared to a global one, but judging by this logic, it will always stay a cost. Critically evaluate your reverse supply chain processes, factor the costs of your return in advance, and find the right partner that will help you to revamp your reverse supply chain to not only perform, but that will add value to your business!
Written by Tim Pivavarau, Sales & Business Development Professional with International Experience, who worked at Ahlers May 2017-Dec 2019. Contact: Elena Robakidze, Business Development Manager
Please contact our logistics professionals, we will tell you all about it.