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Returns are “a ticking timebomb”

Returns are “a ticking timebomb”

Supply chain planning firm Barloworld Supply Chain Software (SCS) is urging retailers to re-examine their supply chain networks after stark warnings were voiced at the latest Gartner UK Supply Chain Conference.

Analysis from the event shows that a majority (66%) of retailers are seeing returns increasing, but one in three do not have the capability to track them.

“Multichannel retail is proving to be a major headache for many retailers, not least when it comes to returns,” said Fraser Ironside (pictured), head of strategic modelling at Barloworld SCS. “Forecasting in particular is a big challenge. Orders may be taken in one channel, fulfilled in another and then returned in yet another. This means demand is often overstated in one place or understated in another.

“Christmas, the busiest time in the retail calendar, is quickly approaching. Brands that don’t get to grips with this – and quickly – will end up with a major challenge on their hands.”

Speaking at the annual event in London, Gartner research director Tom Enright described how retailers are struggling to keep pace with changing consumer demands and the multiple channels being used to buy and collect products.

Outlining the increasingly complex situation in Europe, he said that:

  • 80% of multichannel companies now use store stock to fill click and collect orders
  • 65% use store stock to fill ship-from-store orders
  • 55% drop ship directly to the consumer’s home

With costs spiralling, Mike Burnan, senior lecturer in supply chain management at Cranfield University has said that retailers and manufacturers need to take an integrated and holistic approach to managing the problem.
“Effective management of retail returns extends well beyond supply chain operations and normally requires integration of financial, product design, marketing, commercial and purchasing functions,” he said. “In our experience, very few companies know the full cost of reverse logistics.”

Dealing with returns is not a new issue for retailers. However, the boom in online sales and the popularity of ‘click and collect’ fulfilment and free returns invariably presents new dilemmas. Increasingly, many retailers are dealing with the problem by outsourcing the returns process – viewing it as a cost, rather than an opportunity to increase sales.

Barloworld SCS managing director Kevin Boake has pointed to the fact that retailers use different supply chain systems as a major factor contributing to a lack of visibility on returns, as well as a build-up in inventory. “Frequently, planners are hit with inventory from the returns process that they did not know existed – often when they have already placed a replenishment order,” he said.

“With the festive season just around the corner, rather than seeing returns as a cost, smart businesses are working to boost sales by allowing a returns process and capability. This is why reverse logistics is fast becoming a fundamental part of good supply chain design.”

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