In the world of ecommerce fulfillment and supply chain management, returns management is an undervalued and little discussed topic, and one that many ecommerce businesses need to consider. A Returns management process is integral to a healthy supply chain, imperative for customer satisfaction, and can boost your bottom line.
Is Returns Management the Same as Reverse Logistics?
When most people think of logistics they picture the process of moving a product from a seller to a customer—all the steps along the way to get goods to consumers. What isn’t obvious at first is what happens when those items need to be returned. This is known as reverse logistics.
Returns management and reverse logistics can be used interchangeably. The term returns management is sometimes used more specifically to describe the process of returning ecommerce products, the broader term, reverse logistics means the same thing.
Any time products need to be returned—the reasons vary wide—reversing the logistics process is intricate as it is important. First there is figuring out how to simplify a return label and properly routing the returned goods to an appropriate place, whether that is back to a distribution center for restocking or somewhere else.
A secondary aspect of the returns management process involves how to process returns: reused, refurbished, disposed of, recycled, etc to extend their lifecycle. Because returns management can be a very time consuming and costly aspect of doing business, many companies choose to partner with a third-party logistics provider (3PL) to handle both the supply chain process and help handle the returned products as well.
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Ecommerce Returns Process
In any ecommerce business it is inevitable that you will have to deal with your products being returned to you by your customers. The item might not match the description listed on your website, it could be the wrong size, or they could simply change their mind and no longer want the product they ordered.
No matter your return policy, you need a reverse logistics process in place to manage those returns quickly and cost-effectively. There are many different phases that a product must go through once a customer has initiated a return. These can include the following:
- Initiating the customers return request via call, email, or chat.
- Shipping the returned product back to your fulfillment center.
- Validating the return, known as RMA or return management authorization.
- Processing the return, shipping a different product or issuing a refund.
- Documenting why the product was returned.
- Testing the product for issues that potentially led to the return.
- Repairing, recycling or restocking the returned item.
Handling the returns management of your product smoothly can help you avoid the same issue that led to the return in the first place. It will also allow you to reuse as much of the products that were returned, so that it is not a total sunk cost.
Returns Management Considerations
There are four key aspects of returns management that can help you understand the flow of products that are returned. If you track these categories well, they will inform your bottom line, product inventory, and impact the rest of your business.
Plus by keeping tabs on the following returns data, you’ll be able to see where you can automate, improve and optimize the process to decrease the volume of products being returned.
Volume
What’s your overall return rate (number of returned units divided by total units sold)? Are the same items being returned over and over? Is this happening in large volumes? Answer yes to either of these questions and you may need to consider a recall, or an overhaul of your production process.
If your 3PL has a comprehensive lot control system, they will be able to help you report on the number of returns, and even specify in which batch they came from.
Percent of Sales
What percentage of your sales are lost to product returns? And how many of these products can be reincorporated into your supply chain via the returns management process? What can you do to minimize these losses of revenue?
3PLs who specialize in consumer electronics will likely have the tools and systems to repackage refurbished items for new shipments.
Condition of Returned Product
Is the product failing after a specific operation? Can you determine any patterns of failure among the returned product?
Check in with reviews to gauge the customer experience of your product. This is especially simple if your product is listed on Amazon or another marketplace-style online store. If comments are about damaged goods, late or inaccurate orders, audit your fulfillment provider. Check their quality control workflows.
You want to figure out what went wrong so you can adapt and correct the problem before it happens again.
Financial Value
Without monitoring your returns management process, your company could be losing millions of dollars in potential value. It is important to be able to assess the value of a product that is returned and see what if any part can be refurbished, reused or provide value back into your company.
All 3PLs should help you report on the number of returned or lost items, which you can then use to track the total profit those returns cost you. If returns are a big aspect of your ecommerce business, ask your 3PL about their returns management software before signing a contract.
Click Here For a Glossary of Common Reverse Logistics TermsBenefits of Optimizing Your Returns Management System
Because returns management involves the same steps as traditional “forward” logistics (customer service, warehousing optimization, transportation, inventory management, etc.), it requires similar efficiencies. By streamlining the way products move back through your supply chain, you will see benefits such as cost savings, happier customers, and improved sustainability.
Better Profit Margins
There are several ways to cut costs with reverse logistics, from reducing transportation spend, to reselling items that would have been a complete loss if disposed of upon return. If value is being regained from recycled and resold items, and the rest of the system is operating efficiently, your profit margins will improve.
Increased Customer Satisfaction
The way your business handles returns could directly affect customer loyalty and retention. A defective product can lead to a poor experience. Offering hassle-free returns if the product isn’t right may lead to more customer returns, but also happier customers.
By offering options to your customers who wish to return items that make it easier for them, it can go a long way to boost customer satisfaction and brand reputation. These can include free return shipping,offering a full refund no matter the reason for the return, not requiring the original receipt if being returned to a brick and mortar store, or allowing returns outside of a warranty timeframe.
Faster Turnaround
If you have an optimized way to process returns your business will be able turn returned items around more quickly.
This can be getting returned items into “good stock” more quickly for reselling repaired, refurbished, or reused items, or simply by better understanding the product issues and pivoting quickly.
Reduced Waste
Returns management can help you identify ways to reuse, resell or recycle materials that would otherwise end up in a landfill. This not only helps profit margins, but it also helps improve your brand’s reputation for social and environmental responsibility. By remanufacturing or refurbishing your products you can extend their lifecycle.
Bottom Line
Returns management is an integral aspect of any ecommerce business. If you put the proper systems and processes in place it can improve customer service as well as help to boost your profits by repurposing products that are returned. It can be overwhelming to get an optimized returns management process in place, so you might want to partner with a 3PL to help. They are experts at managing all types of logistics and can handle the burden of implementing and managing all of the various processes.
Click here to learn about DCL’s turnkey returns management services. Send us a note to connect about how DCL Logistics can help your company. You can read DCL’s list of services to learn more, or check out the many companies we work with.
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