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.
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:
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:
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.
Posted on: October 30th 2014