How Technology is Reversing the Burden of Product Returns
This article originally appeared in Edition #117 of Reverse Logistics Magazine.
The supply chain has been under a microscope since COVID lockdowns began in the spring of 2020, and its weaknesses are glaringly apparent: Product delays, shipping constraints and labor shortages have left no industry untouched.
But forward logistics – getting products to customers – is only half of the supply chain equation. The other side is just as important. How can sellers effectively handle products that come back? Turns out, there are a lot of weaknesses on the reverse logistics side, too.
The tsunami of product returns
COVID accelerated online shopping habits, and it’s unlikely to slow anytime soon. Americans are expected to spend 14 percent more this year on shopping and, on average, return up to a whopping 40 percent of online purchases and up to 10 percent of in-store purchases. Online B2B purchases were up nearly 12 percent in 2020 and some expect 40 percent of B2B sales to be made online by 2028.
Whether you’re selling to consumers or corporate, expect a bigger wave of product returns that will hit your labor force and bottom line…or, provide new openings for better efficiency, sustainability and, yes, profit.
By leveraging technology to manage product returns, enterprise organizations can reverse these scenarios and turn threats into opportunities.
How technology can (finally) optimize product returns
Reverse logistics are often managed the way forward logistics were handled 20 years ago: Spreadsheets, manual tasks and lots of inconsistency.
The good news is that this part of the supply chain can finally evolve in a real and meaningful way. Technology platforms like a returns management system are addressing the complex world of product returns.
A returns management system (RMS) brings returns processes into the 21st century. It coordinates and streamlines every aspect of the returns journey and after-sales care management for B2C, B2B or hybrid environments. It transforms the product returns equation for organizations, helping them achieve…
- A less costly returns lifecycle, including for repairs management
- A more sustainable supply chain that aligns with corporate goals
- Less strain on a tight labor force
- New opportunities for revenue streams
The biggest opportunities for optimizing returns
An RMS will improve the efficiency of product returns and deliver a fast ROI for nearly any industry. But those with high or growing rates of returns – such as retail and eCommerce brands, manufacturing and 3PLs – stand to gain the biggest benefits.
Retailers and eCommerce brands
An RMS provides a totally branded returns experience that facilitates fast and easy returns for B2C or B2B customers, as well as automated notifications to keep customers informed of the return status. It enables store or warehouse employees to inspect and grade items quickly, resolve customer issues faster, centralize returns data, and disposition returns as early as possible in the cycle.
Returns management technology enables manufacturers to process returns, return-to-vendor items, perform repairs and refurbishments, and complete put-aways. This automation and efficiency will become even more essential as B2B purchasing moves online: According to McKinsey, 70 percent of B2B decision-makers say they are open to making new, fully self-serve, or remote purchases in excess of $50,000, and 27 percent would spend more than $500,000.
Manufacturers have a huge opportunity to grow customer loyalty with a frictionless returns experience – rare in the world of complicated B2B returns!
Managing returns can be exceptionally complicated for 3PLs, but returns technology has changed that. 3PLs can configure workflows and requirements for diverse customers across warehouses and shipping locations – and get total visibility into all of it. Product returns can be managed efficiently and even help distinguish a 3PL’s services (at a fraction of the cost of configuring a warehouse management system).
The basics of a returns management system
An RMS is a cloud-based, SaaS solution that delivers two major functions: 1) Manages the entire, end-to-end returns lifecycle; and 2) Centralizes and analyzes returns-related data from enterprise supply chain software.
Managing the returns lifecycle
From start to finish, an RMS manages everything that goes into a product return. This includes returns processing, repairs, return-to-vendor (RTV), customer portals, returns merchandise authorization (RMA) initiation and customer notifications.
Customers – notably B2C but increasingly B2B – expect convenient tools and easy visibility into a return’s status. A fully branded online portal allows them to initiate, track, and manage the process from start to finish, such as: product registration, contacting support, returns merchandise authorization (RMA) and printing labels.
RMA management enables store, support and return center associates to work with the same data and information. Sellers can manage and clear discrepant returns, as well as create rules for different types of returns and grading at receiving – all to expedite the disposition of the returned product. Mark it for clearance; identify return-to-vendor items for a refund or credit; identify candidates for refurbishment, or send it to recycling or the landfill.
These capabilities are only maximized if a returns management system is flexible enough to fit an organization’s way of doing business. Configurable workflows of an RMS will adjust to specific processes and requirements, including the ability to set rules and policies for partners that standardize the returns process across a network.
Centralizing and analyzing returns data
Managing products return should be as much of a proactive effort as a reactive one. It’s imperative to understand what products are being returned and why, and to identify trends that could be impacting your bottom line.
By fully integrating an RMS with other enterprise supply chain software, users are able to view analytics within every module, queue and order. In a B2B selling environment, data from many different partners – and in many different formats – can be absorbed, aggregated and analyzed.
Some organizations try to use a warehouse management system (WMS) for product returns, but a WMS lacks the end-to-end capabilities and a centralized view of data that an RMS delivers. There’s little-to-no global view of returns activity, so you can’t get ahead of trending problems or ensure standardized workflows are being followed.
An RMS centralizes all the data around product returns in one location for easy viewing, reporting and decision making. No more point solutions. No more siloed information.
How optimized returns management is changing the logistics game
As we’ve seen so far, returns management technology – specifically a returns management system – has a lot of functionality and capabilities to make returns far easier, faster and more efficient for enterprise organizations. And the overall impact is a game changer.
Minimizing return costs: Tracking, repairs and fraud
There are a lot of nuances in managing product returns, which means there are a lot of openings for costs to creep up.
Returns technology standardizes workflows across your facilities or partner locations, so you’re not losing money to guesswork. There’s crystal-clear visibility into costs and inventory tracking, so you always know where products are located. Imagine the surprise of one company that implemented a returns management system, only to realize it had $9 million in returned devices lying forgotten in a warehouse!
Items that require repairs have a special level of complexity: they have to be opened, inspected, graded, and some level of disposition has to happen. The item might require a warranty check, price quote and an invoice. There’s complexity if an after-sales care provider or remote repair center is involved. An RMS tackles all of this, allowing you to manage customer registrations, perform in-warranty and out-of-warranty repairs, track parts and their value, and perform multi-level repairs in which everyone works in the same software platform across facility locations.
As online purchases increase, so does fraud. A returns management system addresses this by verifying order information regarding where a product was sold, registered and its condition, as well as requiring rules like a refund hold until validation is obtained.
For example, a leading global appliance company replaced a spreadsheet-heavy returns process with an RMS that standardized returns initiation for distributors. The company soon learned that some returned items were counterfeit products. By implementing a standard and very detailed returns process, it was able to catch the fake returns, identify customers who abused the policy, and save a significant amount of money.
Supporting a sustainable supply chain
Contrary to what consumers assume, most returns don’t go back on the store shelf.
According to Earth911, an estimated five billion pounds of returned goods end up in U.S. landfills each year. Because returns logistics have traditionally been so costly and complicated, landfilling is often the most efficient to way to deal with an item.
Fortunately, consumers are watching. Sixty percent cite sustainability as an essential consideration when they buy. In response, companies are increasing sustainability efforts, and a recent survey revealed that two-thirds of executives say a sustainable supply chain is a competitive differentiator.
But remember: Forward logistics is only one half of the supply chain equation. A sustainable supply chain must address product returns.
Companies can do better by the environment with returns management technology. Workflows can be configured to reflect sustainability goals, such as prioritizing recycling or setting strict parameters for disposal. RTV capabilities set rules for consolidating return shipments, saving on freight costs and transportation emissions. Or, reduce shipping overall by encouraging customers to stay local and return items to a trusted partner with Return on Behalf of capabilities. Others are considering how business intelligence can help companies keep “scorecards” of consumers, and reward them for things like fewer product returns.
Relieving labor shortages
Everyone’s feeling the crunch of the labor shortage, especially retailers, 3PLs and manufacturers with large facilities. According to CNN, “…the jobs that major chains in the United States are having the most trouble filling right now aren’t inside their stores ringing up customers and stocking shelves. They’re at their warehouses selecting items, packing boxes and loading trucks.”
Addressing the labor shortage doesn’t have to require more people. Leveraging the right technology can have an immediate impact on the efficiency and effectiveness of a labor force, getting more out of what you already have.
Configurable workflows and standardized rules and policies across locations ensure every return is accepted and inspected uniformly. Employees can work faster when guided through every step. Customer communication is automatic, reducing calls and emails to the customer service teams. Visibility into returns data by location and globally helps you identify areas where bottlenecks or variations are slowing things down.
Stock rotation is another labor-intensive process that technology like an RMS can alleviate. It sets rules for stock rotations, schedule SR initiations, and rotate locations to keep workers moving efficiently.
Creating new revenue opportunities
The increase in product returns doesn’t have to be a story of headache and hardship. Returns management opens up new avenues for organizations to truly differentiate themselves.
How many times have you hesitated to buy from a retailer with a clunky returns process? You’re not alone: Survey after survey shows that customers want an easy and fast returns experience, and will avoid sellers that don’t deliver that. From return initiation to replacement or refund, organizations that use an RMS report up to a 5% increase in profits and a 15-25% increase in customer satisfaction after streamlining and optimizing returns processes.
As noted above, online B2B purchasing is expected to grow tremendously and with it comes the expectation of a “consumer-like” returns experience. B2B enterprise organizations managing in-store and online returns across partner networks will certainly become more complicated. But returns management technology can assure processes are standardized, rules and approval policies are followed consistently, and data insight can reveal gaps and opportunities. Delivering a great customer return experience won’t just protect your bottom line, but will help you grow it.
3PLs have an exceptionally big opportunity with returns management technology because they stand to gain better visibility, reporting, and processing – for themselves and for customers. 3PLs can efficiently orchestrate every aspect of their customers’ returns, repairs and after-sales care. By thinking beyond “picking, packing, and shipping,” a 3PL can deliver a high-value service that most of its customers haven’t mastered themselves…but are more than willing to pay for!
Reversing the burden of product returns
Although returns have often been the ignored side of the supply chain equation, optimizing them will have an out-sized impact, from efficient returns and repairs, to sustainability goals, labor management and even new revenue opportunities. It’s time to reimagine what returns can mean to your business and how you can unlock their potential.