These tips assume that you are handling returns from international customers, using third-party carriers, and that the returning items will first come under your control at the point of warehouse receiving. If you outsource your warehousing as well as transportation, you might still wish to take the guidance onboard for discussions with your logistics provider.
1. Treat the Receiving Process like an Assembly Line
Receiving returns is a messy business. Every day will see your warehouses receive a string of different products, some in good condition, some not, and all originating from customers expecting a swift refund or credit.
Despite the potential revenue losses involved, many companies treat reverse logistics as an afterthought, placing returns into a cordoned off space with no particular system, where they wait until somebody has spare time to go through the items and determine next steps.
An efficient receiving process is a vital step in the reverse logistics flow, and one way to achieve that is to treat it like a factory assembly line.
Backlogs are anathema in reverse logistics, and although immediate processing of returns is labor-intensive (but see Tip #2 below), it will add value in the following ways:
- By reducing waste and enabling more returned items can be resold.
- By limiting the losses associated with resale.
- By ensuring customers are satisfied with the returns process and remain loyal.
2. Automate Returns Processing Where Possible
It is possible to reduce the labor intensity of reverse logistics by automating wherever you can, and the warehouse or distribution center offers some of the best opportunities to apply automation.
While this will involve substantial capital investment, and warehouse automation payback periods can be as long as four or five years, you will immediately begin to reduce the costs of warehouse labor, while also achieving the immediacy of returns processing mentioned in Tip #1.
Returns Automation in the Warehouse
Even if it’s not realistic to implement a sorting and conveyor system to help process returns in your warehouse, the use of barcodes, and scanners linked to your ERP or warehouse management system (WMS), can improve accuracy when matching products to their return orders and the original purchases.
Automation also helps prevent items from being lost in the system. As a result, your customer service function will come under far less pressure to issue non-validated credits or refunds—a typical feature of operations with ineffective reverse logistics processes.
Automating the Reverse Logistics Workflow
You do not need to limit reverse logistics automation to the warehouse. Some e-commerce and logistics software vendors have developed applications for automating returns management, and a few 3PL companies include automated reverse-logistics solutions in their service offerings.
These systems won’t necessarily help you optimize physical processes in the warehouse, but they will eliminate time-consuming and potentially error-prone manual steps in the end-to-end returns workflow.
3. Monitor and Analyze Reverse Logistics Data
Optimization of reverse logistics is all about removing waste and adding value, so whether your enterprise manages returns manually, or with partially or fully automated systems, it is vital to monitor and analyze the flow continuously, to isolate bottlenecks and points of weakness.
If your business is running on an ERP platform, you might already have integrated functionality to analyze returns, especially if your solution includes business intelligence capabilities. Alternatively, you may be able to purchase an add-on returns-management and analytics module.
Action Must Follow Analysis
Sophisticated analytics are only useful if your management team acts upon the KPIs and data provided by the software. Reverse-logistics optimization should be an iterative cycle of monitoring, identifying improvement areas, planning and executing fixes, and checking the results.
To that end, it’s well worth investing in the development of some managers and employees to serve as returns specialists.
It’s common for large e-commerce companies to absorb returns management into outbound operations, but while it is possible to find synergies across the two workstreams, optimization of the reverse flow requires people with skills and expertise acquired specifically for the purpose.