What’s a Return Worth? Factoring Economics and Environment with Reverse Logistics Software.
Billions of dollars’ worth of products are returned each year. Whether it’s a consumer returning a shirt or a manufacturer returning a component, the item must be received, reviewed, and dispositioned in the most efficient way possible.
But what’s a return worth? When does the cost become too high or the environmental impact too much? Companies of all sizes and sectors are wrestling with these questions.
When repairs and returns aren’t economical
The cost of handling a return, processing it and dispositioning it is expensive – often costing more than the item’s value (especially if it’s less than a few dozen dollars).
The same can be true with repairs, both in a B2B or B2C environment: if an item needs to be fixed, it might be cheaper to send a new item – and have the buyer throw out the broken one – rather than deal with tracking the return, repairing it, and shipping it back out.
The location of the return also impacts the cost of handling it. It’s typically more expensive to manage an item returned in the mail than one returned to a store. A McKinsey report found the following:
“…the fragmentation of the reverse-logistics operations leads to an increasingly higher complexity in the path for a return to become available to sell, ranging from 10 percent for the most straightforward in-store path to 42 percent for returns that are returned by mail, processed centrally, and restocked in the store or online.”
When repairs and returns aren’t sustainable
Cost isn’t the only factor of a return. Many returns end up in a landfill because the economics of recycling it or returning it to the vendor for reuse just don’t make sense. But that has a huge environmental impact, and consumers are watching. Retail Dive noted…
“…consumers are increasingly interested in how their shopping habits are contributing to sustainability. In a study by Kearney in April 2020, nearly half of consumers said the pandemic made them more concerned about the environment, and 11% said they shifted their purchases based on environmental claims. Additionally, around 78% of consumers said companies could be doing more to help them make decisions that improve environmental outcomes.”How a return management system addresses economics and the environment
Whether you prioritize economics, sustainability or a mix of both, a flexible returns management system (RMS) will support your strategy and give you comprehensive insight to make decisions that align appropriately.
With the ability to integrate with other supply chain software, an RMS reports on the costs of receiving, handling, repairing, replacing and shipping an item. Built-in automation tools direct employees on how to manage returns based on your business objectives.
Because an RMS manages the entire returns process from end to end on a single platform, it opens up more capabilities and possibilities for efficiently managing the cost and environmental impact of returns.
An RMS has a robust policy and rules engine that reinforce your policies, claims rules, vendor entitlements and approval hierarchies. An RMS’ disposition capabilities can perform everything from re-packaging, recycling, scrapping to liquidating immediately upon receipt. Based on your sustainability needs and cost parameters, it gets the item back to stock for resale, back to the vendor, recycled, or disposed of more quickly.
For example, an RMS can instruct a customer service rep to tell a consumer to keep an item while a replacement is processed. Or perhaps sustainability is paramount, and instead you configure the RMS to send a replacement product while giving the consumer a label to send the product to an authorized recycling center.
As noted above, the location of a return impacts the cost of managing it and the carbon footprint of it. A centralized RMS offers uniform access for receiving and processing returns across store locations, owned facilities and third-party partner locations. You can set rules and policies that standardize the returns process and maximize the value of the returned item by utilizing the open box market, sourcing other end users, leveraging liquidation sales options, or choosing refurbishment or recycling.
Business intelligence for smarter decisions
Setting your return strategy takes a lot of business intelligence and data, which are notoriously hard to come by in the opaque world of reverse logistics.
A centralized RMS changes all of that. By integrating with supply chain software and acting as the hub of all returns data, you can finally isolate your returns’ true financial impact. View analytics within every module, queue, and order. Get the data and BI you need on every screen for easy reporting and actionable decisions. No more siloes. No more guesswork.
Managing complexity with ease
The rate of product returns is increasing, along with the complexity of managing them. As you determine – and refine – your cost and sustainability priorities, an RMS will help you execute on those priorities and ensure efficient and standardized work throughout your locations and teams.