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The new reverse logistics challenges

COVID-19 is increasing the reverse logistics challenge. In this article, Logistyx Technologies discusses potential solutions.

During the COVID-19 pandemic, the growth in online shopping has been exponential, with more people than ever before buying online, and consequently generating more returns.This is especially true in sectors such as fashion, where consumers order multiple styles and colours to try, before sending back what they don’t want. Anecdotally, we are seeing many retailers extending returns periods and offering free returns, where previously they may have charged.

A TWO-PRONGED STRATEGY

Increasingly companies are building the cost of returns into the sale or initial shipping cost so managing returns efficiently and reducing reverse logistics costs as much as possible is essential.

With the volume of returns on the rise, there are two important steps that companies should consider when developing a returns strategy. First, reduce the cost of unavoidable returns and second, use analytics to reduce avoidable returns.

In the first case, shippers should start by calculating the true cost of returns, noting that sometimes they must be expedited (in the case of products with an expiry date for instance). Using a multi-carrier service will allow them to select the most appropriate carrier option for each return shipment.

In the second case, it may be possible to use analytics to reduce avoidable returns by identifying any weak links in fulfilment as well as identifying the most returned products and seeing if changes can be made to reduce returns – for example by discontinuing product lines or only selling certain products in store.

THE IMPORTANCE OF TRACKING

Returns present retailers with an inventory problem, in that any products that are in the hands of the consumer, either pending return, or in the process of being returned, is inventory that is unavailable to refurbish or redistribute. However, as long as retailers are using a tracked service for sending parcels on the way out, they can use the same system to give them visibility of shipments – and available inventory for resale – being returned, from the moment they are collected until they arrive back at the warehouse.

Tracking returns in this way is key for managing goods inwards in warehouses. With an accurate picture of the expected volume of returns, companies can assign the appropriate level of workers and resources to check returned goods and ensure they can be swiftly put back in stores or warehouses for resale.

Moreover, using a tracked return protects both the customer and the retailer. Some retailers are now providing a refund to the customer as soon as the carrier first scans the returned parcel on the customer’s doorstep. There is a level of risk to the retailer with this because the product might not be in a condition to put back into stock – but customers are more likely to be loyal if they know they will be refunded quickly.

AVOIDING RETURNS

Some companies are trying to avoid returns altogether, with wrong or lost orders replaced at no cost to the consumer. For example in the US, pet supplier chewy.com asks customers to donate any incorrect orders to a local animal shelter. Why would they do this? They avoid the cost of dealing with the return, which may be higher than the cost of the new delivery. And in the case of prescription medications, seasonal products or those with a short expiry date, the retailer may be unable to process and resell the products within a suitable timeframe.

ROLE OF AUTOMATION

Emile Naus - partner at logistics consultancy BearingPoint - comments on the returns challenge.

Fundamentally, there are two options – either reduce the costs of returns or reduce the number of returns. The first option requires a step-change in the operational process, typically supported by automation. Reducing the number of returns requires an end-to-end view on the customer process, including supporting the customer sales process, ensuring the customer understands the impact of returns (both cost and environmental) and having the right analytics to understand which products and customers have higher return rates. For example, it is typically for on-line clothing purchases to include multiple sizes of the same product. If the size-matrix of the business is inconsistent, it is not a surprise that customers will buy two or three sizes, ‘just in case’.

The costs handling returns is typically several times larger than the original despatch costs. Part of this is driven by the small quantities that are being handled. Automated systems can be more suitable to this type of automation, especially with Goods-to-Person technology. It is unlikely to be a solution just for e-commerce returns, but would need to be part of an overall operational solution.

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