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Reverse Logistics & Omnichannel Returns: Maximizing Opportunity

Jeff Snyder | 07 January 2020

Today’s shoppers do not hesitate to send back items that do not meet their expectations. This may be a question of fit, quality, damage during shipping or a host of other reasons.  By all estimates, the e-commerce return rate is 30 – 50% depending on the retailer.  Today’s omnichannel customers expect a seamless process and a positive returns experience as a key driver in brand loyalty.

When shoppers return merchandise in an omnichannel world, a complex, labor-intensive process is set in place.  At the very least, someone must collect, evaluate and sort the returns, credit the customer, decide which items should be put back on the retail shelf, returned to the distribution center, refurbished and/or repackaged, sold to a clearance center or recycled.  This process does not work well in reverse flow for a typical fulfillment operation and requires significant time, training and money to execute. 

Based on a 2017 survey from DC Velocity, retailers chose several options for this process:

  1. In-house                                     64%
  2. Contracted to 3PL                       40%
  3. Direct to manufacturer              14%
  4. Sent to a clearance reseller        9%

Data from a recent survey, some retailers had multiple options.           

Modernizing the return process has become a key objective for many retailers.  The key to effective reverse logistics is to recapture the most value from the item and to quickly get the item to the best location for resale. With major constraints on labor and space, solutions for optimizing multichannel returns include; warehouse management system (WMS) modules or systems capable of automating the reverse process flow, automated material handling and packaging systems and developing effective communications with the customer.

WMS Return Module or Systems Functionality

WMS systems or modules must have the ability to handle the different transaction types. This includes processing returns labels and returns receipts, providing warehouse control system (WCS)  interfaces to automated process flows, effectively communicating with the enterprise resource planner (ERP) for the returns and credits, and communicating with the customer through the website or mobile devices.   

Process flows need to be developed that are both flexible and scalable.  These processes would include timely receipt of goods, processing, verification and inspection of merchandise and providing feedback into a continuous distribution process.  Timely receipt and processing are two critical components to the return to stock process, maintaining inventory accuracy and reducing markdowns. 

Automated Material Handling Equipment and Packaging Systems

The second piece of the puzzle is having the infrastructure in place to support the process.  Automated routing and material handling solutions combined with manual workstations and automated sorting and bagging equipment is typically the most cost-effective approach.

The modern returns process includes automated MHE systems, packaging and labeling machines, manual workstations for order processing, scanning and other solutions designed to handle various product types. These product types generally include boxes, containers, textiles and poly bags.  Some automated baggers can now run at rates of up to 3,600 clothing articles per hour which greatly speeds up the repackaging and return-to-shelf process.  Combining these systems and components into an integrated design is the key to having an effective solution that supports the processes and throughput rates. 

Developing Effective Communication with the Customer

Having effective, timely communication with the customer is a key to developing trust and brand loyalty.  Customers can track an order from the time the order is placed, picked, packed, shipped, routed through various hubs and finally delivered to their door. They expect the same level of communication on the reverse flow of goods as well.  This involves communication from the carrier at various scan points, confirmation of package receipt into the return’s facility, processing of the return and finally, and probably most important, the crediting of their account.  Customers want to have visibility into the process, they want to be updated regularly and they want acknowledgement of the final credit or outcome of the return process.

To succeed in an omnichannel returns world you need a combination of speed and efficiencies that draw on a combination of WMS systems, material handling processes and flows and the interaction with the customer.  When combined correctly, it enhances the true omnichannel experience for the customer and can aide in solidifying brand loyalty.

Author: Jeff Snyder

Jeff Snyder is a Senior Consulting Engineer with Bastian Solutions. He has over 25 years of operations and engineering management experience, working with industries including retail, ecommerce, food and beverage, parts distribution and reverse logistics. He is a strong proponent of using data analysis and modeling to derive fact-based concepts and designs. He earned his B.S. in Industrial Engineering from Texas Tech University. 


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