How to effectively manage the reverse logistics process

How to effectively manage the reverse logistics process

Managing Director Europe and Chief Technical Officer | Airclic

Customers are much more likely to make purchases online if they know that they have the flexibility to make a return if they need to; in fact, it has been estimated that customers return up to a quarter of the garments they purchase for one reason or another.  If a retailer has a complex return and refund policy, more and more consumers will be turned off from shopping on the site in the first place.

From the retailers’ perspective, however, handling returns – often referred to as reverse logistics – is an even bigger problem than making sure that the return process is efficient for customers.  One of the biggest logistical headaches they can face is the shipping and processing of returns.  Because of the rising cost and complexity of managing returns, some retailers are starting to ‘blacklist’ consumers who make too many returns (such as 10-15 items over a six month span) and either refuse to take orders from them, or charge them a different rate for delivery as a deterrent.

But how can the reverse logistics be improved?  What are the challenges and how can the process be streamlined to both enhance customer experience and efficiently, and cost-effectively aggregate packages back up the supply chain?

Logistics—an infrastructure set up to go outbound

Returning products of any kind creates difficulties in supply chains.  Supply chains are planned in advance to go outbound – flowing from a central repository to an end point.  When products are shipped, they typically flow from one or two large facilities, from where hundreds of thousands of orders are managed; a product is picked, labelled and loaded onto a truck in a controlled environment.  These shipping scenarios typically provide good density and utilisation of warehouse resources.

In the cases of returns, reverse logistics processes are used—and it is most often an ad-hoc process to manage orders (orders that are, by nature, not expected).  In these cases, there is no longer one central location from where the product is sourced – but thousands of potential starting locations, based on customer locations.  For retailers, getting returned product back into stock, without it being damaged (if it was being returned simply as an unwanted item) or going missing is the goal.

In these return situations, single items can be shipped back from each of the disparate customer sites; which means that returns cannot easily be managed through a dedicated process – different processes will need to be used, items shipped and reshipped until reaching their upstream destination, or trucks being sent to directly pick up small orders.  While some companies will try to coordinate return pick ups in trucks that have spare capacity, in general, reverse logistics doesn’t lend itself to an efficient use of resources.

Further challenges

When an order is placed, it is assigned an order/tracking number which is encoded on the product through a barcode or RFID tag.  The unique ID can be scanned, and used to track an order at all points along the route to its destination.  When a product is returned, however, it doesn’t have a natural identity.

Companies can use one of a few methodologies to get a unique ID onto the item being returned:

  1. The consumer is asked to print a return label that can be affixed to the product in the event of a return.  This label will serve as an identifier for the product as it makes its way back through the supply chain.  There is room for error with this method, however, as the consumer may not fully remove or cover the barcode used during the outbound shipping process, which could lead to confusion during the package’s next round of shipping.
  2. If a company has the inclination that a consumer may return a product based on triggers (i.e. ordering several of the same item in different sizes/colours, past behaviour), they may include a pre-addressed return bag in the delivery package.  With a return address and identifier on the item, this is a more controlled/managed way to make a return get back to the company.
  3. Items can be returned by the consumer to a ‘local’ collection point or collected from their home or business.  The problem here is consumers making a return are not likely to prioritise being available for a delivery truck to facilitate it – and it is very costly.

In addition, another challenge is to ensure that returns are classified properly.  There needs to be delineation between the return of a damaged or refused item, versus one that is simply unwanted and can be re-sold/re-stocked.

As returns are collected, they are put into a container or pallet with other returns and are wrapped up, secured and sent back up the supply chain.  These returns could be going back to a single supplier, or to multiple suppliers.  Carriers need to ensure that items are routed to the correct suppliers to expedite the return/customer reimbursement process.

Improving reverse logistics

It is clear that a lot of thought and coordination needs to be applied to managing the reverse logistics process.  With that in mind, the following are some practices companies can consider implementing to improve – and ease – the pain of the reverse logistics processes:

  1. Share electronic data between stakeholders in the supply chain to ensure that they know a return is on its way and have the necessary data to assign IDs to it.
  2. Validate the ID of the item when it is picked up and obtain the state of the item by taking images of it, showing the condition the item was picked up in and that it is in fact the same item.
  3. Leverage resources already in the area where returns need to be made – optimise your shipping and distribution routes to also include returns, so that your vehicles can pick up returns while minimising the miles spent to get there.
  4. Scan return items when they are being processed at the depot to ensure that they are put on the right pallet and correct truck.  This also helps assist with reconciliation and validation throughout the return process.  As this is done, an email to the customer can be automatically generated, letting them know that the process has started.  Providing good tracking information on returns for the consumer is all part of enhancing their quality of experience, just as tracking the delivery is.
  5. Increase the use of collection points—handle returns in batches at sites where consumers can drop them off, like convenience stores.  Setting up locations in high traffic areas near major towns or cities may actually lower your reverse logistics costs.

It is a challenge to account for and predict the unknown, but with today’s technology, reverse logistics processes can be streamlined by putting the right checks and balances in place.  One mechanism for doing so is mobile proof of delivery software that can help track and rectify returns in real-time – and ensure that consumers and businesses alike have a clear process to follow when making returns.