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Returning Thoughts

by Paul Rupnow, Director, Reverse Logistics Systems, Andlor Systems

Reverse Logistics Magazine, Edition 60

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In my Part 1 article, “Preparing your Reverse Logistics for Omni Channel Retailing (Part 1)“, we introduced the Omni-Channel. Omni-Channel Retailing is “the evolution of multi-channel retailing, but is concentrated more on a seamless approach to the consumer experience through all available shopping channels, i.e. mobile internet devices, computers, bricks-and-mortar, television, radio, direct mail, catalog and so on”. (Definition from Wikipedia). For the customers, this translates to a consistent and positive experience, no matter what part of the retailer you are dealing with, since all channels should have full knowledge of your activities, experiences and history with each channel. For Returns, this should mean an easy positive experience as well. However, how will these improved experiences impact the Reverse Logistics for the Retailer?

Pressure from competition is forcing retailers to use returns as a competitive weapon. In this Part 2 article I have assembled a quick list of some tips and challenges that I have uncovered in my research that will help you prepare your Reverse Logistics operations for the Omni channel.

The Challenge of Unwanted or Unplanned Returns
With Omni Channel multi-channel selling, comes multi-channel returning. The Omni Channel offers multiple return options: in store, via carrier, via drop points. All return locations must be equipped with the tools and data to disposition the products quickly and effectively.

As an example, online purchases can now be returned to a store location. But is the store ready for these returns? For instance your store may stock 1,000 SKUs, but your online store has 10,000 SKUs. So when an online item is returned to a store, what is the best method of disposition? Can the store sell that product on their shelves? Do they even have the product and pricing information to scan the item at their checkout counters?

The store needs to know what to do with this returned e-commerce inventory. You need to watch that these returns do not increase costs, slow processing, or reduce recovery.

The store managers P&L performance evaluation often includes the impact of returns. Will these online returns now be included in the store P&L when these returns are not within the managers control? Plans need to be made to ensure you keep the store managers happy and enthusiastic about recovering value from all returned items.

Reverse Flow Visibility
With multiple return channels, as discussed above, you need to define and plan your return channels and then have a pre-determined disposition plan for each item in each channel. With these plans in place, now you must monitor and manage the returns flow. Monitoring the speed of flow and minimizing “dwell” time is critical to get the returns back quickly and enable them to be sold again.

Inventory Planning for “To Be Returned” items is especially critical before you receive the return.

You must monitor the Cost of “To Be Returned” Inventory In-Transit. The cash flow impact can be huge! Especially if your return rates are high. For example, some e-commerce clothing return rates are in the 20%+ range. That results in an incredibly high value of returning inventory in transit.

Related to this “To Be Returned” inventory will be your stock levels. You may have lots of stock, but it is in the field awaiting return. This will be especially critical for high demand items, where low stock available means a lost sale to a competitor. You need to ensure rapid returns, to avoid lost sales opportunities. The uncertain amount of “To Be Returned” inventory can also create a forward supply chain issue. How much new stock do we order from manufacturer to fill our customer needs, without purchasing excess/overstock at end of season/end of life of product because we could not properly plan the level of Returns? Reverse Flow Visibility and planning is critical.

Reducing and Avoiding Returns
Omni Channel Retailers are becoming much more proactive about an ongoing relationship with customers after the sale or after they leave the store. Some retailers are setting up help lines for customers who have just purchased an item and are facing difficulties or remorse. Some retailers have even set up collaborations with the manufactures to provide a “Warm Transfer” from their helpline to the manufacturer who can support with technical advice, spare parts, and exchanges, thereby avoiding returns.

Omni-Channel Returns Processing: an Evolving
Challenge Omni-Channel Retail is a positive evolution for customers to make purchases and develop lasting relationships with retailers. It is up to us, as Reverse Logistics Professionals, to ensure the Reverse Logistics challenges are tackled efficiently and effectively. The tips and issues above are only a starting point to expose you to some of the issues and some possible solutions. Omni-Channel will be an ongoing challenge so please send me ( your challenges, tips and solutions, so we can collaborate and share your wisdom with other Reverse Logistics Professionals.
Paul Rupnow - Director, Reverse Logistics Systems, Andlor Logistics Systems Inc.
Editor - Reverse Logistics Professional Report Business Insights and Strategies for Managing Product Returns
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