2020 saw a huge explosion in the ecommerce space with companies having to scale up their operations to adequately meet the spike in demand. This means having the ability to get thousands of shipments out every day. One of the added consequences of this is having to manage the returns and the reverse logistics process that comes with that surge in order volume.
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 reverse logistics (also known as returns management)—any time products are sent to a final destination but need to be returned for any number of reasons—and it is a huge aspect of logistics that is as intricate as it is important. Reverse logistics is an integral part of any ecommerce fulfillment operation because they are an important part of return policies that drive customer satisfaction. Companies with generous returns policies make it easier for first-time customers to try them out by allowing them to buy their products and send them back if they are unhappy with them. This helps to eliminate some of the risk for the customer.
But even though reverse logistics is an important part of order fulfillment, it’s generally an overlooked aspect in regards to the typical focus on efficiency. Here are some key tips to help you improve your reverse logistics process.
Create a Streamlined Reverse Logistics Process
A defective product can lead to a poor experience. Dealing with errors is just as important as making sales. If a customer had a bad experience with your product, you have to make it right. 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. These can include providing a full refund no matter the reason for the return, not requiring the original receipt if being returned to a brick and mortar store, not requiring the original packaging, among others. One important step to reduce the messy part of returns up front is ensuring they can be received in batches, together, and separately from your other incoming shipments. Work with your marketing and sales departments to make the process smooth end-to-end by having them provide the labeling method and a dedicated location or address that your shipper can use to keep the returns separate from other inbound shipments.
Remember, even if you use just one shipper for your outgoing packages, you will likely get returns delivered from USPS, UPS, Fedex and other carriers. You should have relationships with all of them so you can set your preferences and work together on getting your returns delivered in a manner that benefits you the most.
Document Your Reverse Logistics Process
Like any other critical process area, reverse logistics deserves its own documented workflows, KPIs, best practices and training. You should already have some highly skilled employees who are doing this right, so they can be better equipped to handle the training and onboarding of new employees.
Some of the steps and KPIs your process may be required could include:
- Traffic Distribution: like incoming orders and outgoing shipments, Returns will develop its own patterns with a “peak” day each week which you can staff around.
- Intake: how quickly incoming packages are opened, identified and prepped for inspection.
- Product Verification: documenting the requirements and criteria for identifying the state of the returned product and classifying its next destination.
Have a Dedicated Reverse Logistics Team
Reverse logistics is a cost-center for your business (though indirectly it can be a profit center). It requires specialized skills because the identification, sorting, restocking or disposing of your returned goods can impact the financial KPIs of your business significantly. Evaluating returned products and deciding how they should be handled is often a highly skilled part of the job in returns. By being quick and effective at identifying, repackaging and restocking returned items your customers will benefit from better fulfillment rates and the reverse logistics process earns its keep.
Focus on the Customer Experience
Consumers are more loyal to brands that have a streamlined returns process, and quickly crediting customers’ accounts is essential to retaining their business. This includes looking at inventory cycle time to see how long customers are waiting to be credited for their returned merchandise as well as analyzing dock to stock data for insight into the time it takes for returned products to be made available to consumers again. To optimize returns, the supply chain must be designed with transparency and visibility in mind. Customers expect tracking for returns and progress reports, which requires an efficient supply chain. With a strategically designed reverse network, retailers can shrink the time frame from when a return is initiated to when a customer is refunded. The integration between brick-and-mortar stores and ecommerce platforms has eliminated steps for consumers and cut down on the amount of time returned merchandise is in the reverse logistics chain.
Have a Reliable Quality Control Process
One aspect of reverse logistics that is not always appreciated or recognized is the overlap in skills and processes that are possible with a quality control process. The same team can apply the same training to incoming products at the receiving dock to verify contents and identify manufacturing defects or other issues. This is usually done by using a pre-determined guide that indicates how many items from a shipment (or a % of the total) that need to be inspected. This guide is usually broken down by manufacturer – as the inspection requirements are usually set based on the contract with the manufacturer.
Implement Sustainability Practices (Go Green!)
One major area with ample opportunity for improving environmentally sustainable standards is reverse logistics. It’s becoming common practice for industry-leading companies to ensure they are reducing waste, and tracking their environmental footprint. By honing in on your reverse logistics efficiencies, you’ll reduce the burden on logistical assets and the resources to keep them running. Plus there are many new ways to reuse, resell, or recycle materials that would otherwise end up in a landfill—a great solution for the environment and your company’s reputation.
Provide Supply Chain Transparency
Many supply chains stop measuring success once the product is delivered. While this is sometimes an accurate measure of customer satisfaction and profit, it doesn’t account for all situations. Once you can see all traditional forward logistics as well as reverse logistics processes, your operations will be transparent across your network. This benefit allows you to track performance across the entire life cycle of a product, and better identify opportunities for improvement. Without this transparency, it is impossible to fully oversee and holistically manage your supply chain operations.
State Your Returns Policy Clearly
After you have implemented these reverse logistics strategies, it’s time to focus on making returns easy for your customers. This starts with stating your returns policy clearly so potential buyers know what to expect. In retail, and especially in online retail, many consumers will investigate companies’ return policies before pulling the trigger on an item. You want to assure them that their returns will be handled and credited back to their accounts quickly. Showing them how the returns process works with a step-by-step illustration or guide will also help customers understand the process, minimize delays, and improve the odds of returned items reaching you in good condition.
Partner with a 3PL for Your Reverse Logistics
Many businesses have discovered the value of third-party logistics providers (3PLs) for their regular outbound shipments, but 3PLs are experts at handling the reverse logistics process too. While it does create another step in linking systems and managing a process outside of your own facilities, the benefits are worth it if you can take advantage of their existing systems, processes and training.
While many 3PLs are focused on managing the outbound business as their core business and handle returns as an additional add-on service, there are other providers who are dedicated to reverse logistics or the entire returns management process. While the cost of using outside services is higher than doing it in-house, their expertise will factor into your business immediately, maximizing your ROI on the reverse logistics process and providing you with clarity on the relevant KPIs that will give you the best insights into how that part of your business is functioning.
Services for these businesses could include:
- Test, repair and refurbishment of products
- Valuation, appraisal and sales of product not going back into circulation
- Inventory tracking, cash flow, freight & labor
- Vendor management for returns, related fees, etc.
- Recycling options where necessary
Bottom Line
Reverse logistics are an integral aspect of ecommerce fulfillment. 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 a reverse logistics system in place, so you might want to partner with a 3PL to help. They are experts at managing all types of logistics and can take the burden of implementing and managing all of the various processes yourself.
Click here to learn about DCL’s turnkey reverse logistics 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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