The retail supply chain is becoming more complex in all directions. Materials from around the world are flowing to manufacturers and sellers, and retail organizations are operating through more channels than ever before, reaching their customers in physical stores or online. Tasked with serving demanding audiences with high standards, processes are becoming both faster and increasingly precise at all these levels. In the face of these changes, it's normal for companies to be feeling strain. One area of operations may be especially difficult to deal with: reverse logistics.
Returns are tough to master. Processing a return shipment doesn't have the direct commercial payoff of making a sale, and failure to accomplish the task in a prompt and effective manner could make customers unhappy, weakening loyalty. Overall supply chain improvements in retail shouldn't neglect reverse logistics, though this wide-ranging focus could be tricky to maintain.
The circular chain conundrum
A Supply Chain Management Review piece with input from Peerless Research Group, the Warehouse Education Council and the Reverse Logistics Association recently pointed out the issues modern organizations are having with processing returns. The research indicated that there are tangible benefits for companies that commit to making reverse logistics processes better and more effective, but that numerous organizations haven't yet made that leap. Maybe these firms are unaware of the advantage, perhaps they don't have the resources to spare. In any case, they're missing an opportunity.
Becoming great at reverse logistics means intelligently handling the items that come back through this process. The research indicated that companies often just liquidate returned merchandise. They seem to be prizing simplicity over the potential to do something more consequential with the goods, and they are "leaving money on the table," in the words of the research's authors.
Sometimes the problem with creating a high-performing return processing system is that there is no
one with the right authority. It's fairly common for no one to specifically be in charge of reverse logistics, creating a vacuum where it's difficult for companies to innovate. The Reverse Logistics Association's Tony Sciarrotta commented that in cases where no one is accountable, problems can go unfixed.
To show the enormity of the reverse logistics issues facing companies today, it pays to look at the unofficial retail holiday National Returns Day. UPS noted some facts about this annual event, which takes place as soon as consumers get back to the work week following the New Year. This year, it fell on January 3. This is the day when holiday presents are shipped back to retailers en masse, with UPS giving an estimated figure of 1.4 million return shipments.
Consumers return any and all kinds of goods, but in the e-commerce era, a few items stand out: Apparel and accessories bought online may not fit when they arrive on buyer's doorsteps. These products make their way back to companies in huge amounts. What those organizations do with the items, and whether they have the systems in place to deal with them efficiently, may make a great difference in those retailers' fortunes, both in the short and long term.