Planned product returns can boost the bottom line, says supply chain consultant

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Poorly organised reverse logistics during the peak returns time in January can have a significant negative impact on the bottom line, claims leading end-to-end supply chain consultancy Crimson & Co.

According to Laurie King, principal at Crimson & Co, the influx in returns in the retail sector following the Christmas period creates a business challenge for most retailers, which must be addressed and planned for. “Getting reverse logistics wrong has a big impact on margin. There are substantial costs in logistics, inventory, and markdowns/disposals,” said King.

There has been a huge growth in online shopping, and returns in e-commerce can be anywhere in the region between 6%-35%. Retailers need to consider not only the cost of getting products to the store/customer, but also the cost of returns and how quickly they can get pristine stock back into the supply chain, Crimson & Co claims.

King said: “There is a big opportunity, especially with short season product, to get it back into stock and generate sales. Otherwise, there is a big hit on margin from the cost of markdowns if stock cannot be repositioned in time.

“It is no longer appropriate to flood stores with stock and hope that it sells. The more sophisticated companies try to minimise returns in the first place by using good sales and operations planning systems and procedures. This will plan the initial ‘push’ of stock and then react to sales with fast, rapid replenishment in smaller quantities.”

Another area which successful companies focus on is the customer experience of returns. Most major retailers now provide an online service and are expanding multi-channel options, said Crimson & Co. It is all about making the internet sales process easier and more convenient for the customers.

King said: “The returns process for many is now part of the e-shopping experience – get it wrong, and you lose sales. The process of returns needs to be as user friendly as ordering so as to not risk losing customers through poor returns experiences or from chasing credit that is long overdue.”

King advises the goal is to reduce costs while gaining greater visibility of your returns supply chain. “The key differentiator in achieving this for leading companies is their mind-set – they manage returns as if they were their biggest supplier. Efficient and planned processes are required alongside systems giving visibility and reason code analysis for returns. Joined up collaboration between various departments (e-commerce, planning, logistics, quality control, customer service, buyers) is also key. All of this working together is part of the mind-set required, as well as making the returns process a key customer experience for them to want to e-shop with you again.”

“Successful retailers see reverse logistics as a business opportunity, not a nightmare. Just as they have been planning months ahead for the sales peak and mega Monday, they have been planning for the spike in returns in January.”