Reverse Logistics

Using Supply Chain Management to Tackle Reverse Logistics

As commerce has increasingly shifted online, the traditional way of returning goods – taking them back to the store – isn’t always a consumer’s preferred method. So it’s important that distributors and retailers have clear reverse logistics procedures in place for returned goods.

There are many reasons that customers return items. Perhaps they aren’t what they were expecting because they don’t fit or the colour is wrong. Or maybe it’s not the purchaser’s choice to make the return: perhaps the goods have been recalled or are deemed “end of life”, as under waste directives such as the Waste Electrical and Electronic Equipment Directive (WEEE). Or, the wrong goods could have been sent, or items may have arrived damaged.

All of this creates a reverse logistics headache for warehouse managers. There are many ways that returns can be handled. Goods can be returned to the retailer or the supplier; they could be sent for repair, if broken; or can be returned to stock and refunded. As a result, returns processes are often complicated and prone to human error. Slow returns processing causes a build-up in the warehouse and takes up valuable space, as well as tying up cash in non-utilised stock.

The ease of returning goods is becoming increasingly important among consumers. In the fashion industry, return rates can be as high as 30%, forcing warehousing and operations managers to consider new ways of streamlining their reverse logistics.

When you plan your reverse logistics processes – and especially if you operate in an omni-channel environment – there are a number of factors to consider:

Fulfilment locations

Not all orders are delivered from a main warehouse. Sometimes a distributor will use drop-shipping methods or will fulfil orders from satellite warehouses or regional stores in order to meet demand. In these cases, when those items are returned, they need to get back into stock quickly so that they are available for resale.

This can prove difficult where a customer may return to a different store or to the central warehouse. Consider supply chain management systems that will allow stock tracking processes and which will give real-time reports of stock availability.

View stock as a total

Ensure you have accurate stock counts from all your fulfilment locations, so that you have a total inventory count of your stock. This allows you to always know what stock levels are and where you can deliver from.

With accurate data, you work as if you have a single inventory pool, rather than siloed distribution locations. In this way, you can be certain that you have all the information you need to make the optimal decision about where to fulfil stock from.

Integrating your supply chain management system with your ERP, order management and point of sale systems is crucial to maximising efficiency.

Staff productivity

Handling larger numbers of returns inevitably means higher staff costs. To keep wage costs in check, distributors should set and track productivity KPIs.

Many warehouse management systems (WMS) include reporting and KPI tracking dashboards, which can be used to ensure efficient use of labour, allowing them to run a cost-effective operation. For an open culture and a motivated workforce, KPI targets and the resulting metrics should be regularly communicated to operatives.

Utilise your WMS for reverse logistics

Clear returns processes should be defined within your WMS. Returns processed within the WMS give distributors a real-time view of their inventory. They let them allocate stock instantly or permit picking straight from the returns zone. Damaged goods can be quarantined and dealt with promptly for repackaging or disposal, whilst reusable stock can quickly be identified and relocated for order picking. In this way, stock is not left under-utilised for long periods.

Additionally, by processing the returns within a WMS that is integrated to an ERP solution, it allows for automatic adjustments of stock and issuing of credits, all based on your defined processes, for example, maybe you want to run some quality checks first. Best practice dictates that the returned goods are linked to the original order and customer. Equally, the seller should know in advance that the return is coming and should check and inspect it on arrival. As a result, when returns are processed into a fully integrated ERP / WMS solution, it vastly reduces human error and speeds up the credit process – all of which increases customer satisfaction.

They are many ways of approaching and defining your reverse logistics processes. But it is paramount to have a strategy that allows for clear visibility and tracking of stock. Consumer demand has meant that retailers and distributors now offer multiple channels for purchase, alongside many different types and methods of delivery and collection. And it follows, therefore, that consumers also expect to be able to return goods anywhere too. This means distributors have to optimise the order and returns processes in order to profit in today’s modern commercial world.

If you would like help in defining your reverse logistics strategy, or want to better understand how it can be integrated within an ERP and WMS solution, call us on 020 8819 9071 or get in touch.