Many companies find reverse logistics to be a challenging task, mostly because their supply chain solutions weren’t designed to welcome products back in but only to send them out the door. With the rise of eCommerce, customers gained access to the global market. Ordering products online has been made a simple process, while eCommerce (as a whole) has been designed as a user-first experience. It’s made possible by a combined supply chain with data networking between the supplier’s assembly lines and freight forwarders. For most brands, the order management system does much of the heavy work. The final frontier for the supply chain is making online returns as easy as buying.
In reality, product returns don’t have to affect a company’s profitability, even though they may be part of the cost of doing business. A typical customer expects to have the price refunded quickly and without question. Taking too long to refund after a product return can harm your company’s relationships with both the supplier and consumer – your return process is something that can either make or break your brand. When done correctly, product returns can inspire customer loyalty and improve your brand’s image.
The way your organization handles its customers during a product return process can prove a significant competitive differentiator. Improve your reverse logistics processing, and you’ll improve the customer experience and see a positive impact on your bottom line.
How to Improve Reverse Logistics
One of the main issues with reverse logistics is that the average cost of returns is high (adding an estimated 10% to the cost price of a product). Actually, reverse logistics costs almost 1.5 times more than forward logistics. We present you with several powerful strategies for designing and implementing an efficient reverse logistics strategy.
- Why do returns happen? Find the cause
By determining the root cause of your product returns, you can find out whether your current return policy is leading to a high volume of returns. For example, if you notice that one of your products is continually getting sent back, it might be because your buyers don’t know how to use the product because the instructions you provided are not clear enough. In that case, you can reduce the frequency of product returns by using instructional videos and product imagery.
Since the expense of frequent product returns can eat up your profit, you must put in the effort to find the root cause of the problem. One of the best ways of determining the cause is analyzing and understanding the customer journey. Put yourself in their shoes to see what makes them send products back so frequently and identify patterns that might clarify product details and help adjust returns policies.
- Warehouse reverse logistics management
The place to start improving your reverse logistics system is your warehouse. Keep all your returns contained to one area and sort them into several categories (such as restock, priority, return to supplier, and discard) as soon as they come back in. This will ensure that your warehouse stays organized and that returned items are routed correctly from the start.
The returns marked restock and priority should be monitored regularly. Get them scanned and put back onto your shelves to ensure your inventory and ordering systems are always up to date. This way, products returned will be available for resale quickly.
To mitigate your losses (which is what reverse logistics is all about) and reselling “as is” or refurbished items is another way to recoup what would otherwise be lost profit. You can list these products for lower prices, which may appeal to shoppers who either won’t or can’t pay full price for them.
- Adjust your company’s return policy
When it comes to buying and returning products, the world of eCommerce has created certain customer expectations. One-click purchases and next-day shipping are conveniences that today’s shoppers enjoy, but as a result, they want the same convenience when sending products back. To reduce the strain on your customer service team and increase customer satisfaction, you need to have easy-to-follow and clear returns policies in place. Customers are more likely to send the item back (in good condition) when they know they can get a quick return. Besides customers, your customer service team must know your company’s return policy inside and out. Equip your team with all the information they need by creating an employee handbook, and enable your customers to get in touch with your returns team with the right call-center solutions.
Having an optimized reverse supply chain system in place can often make the difference between a returning customer and a one-time customer. If we take into account that it’s more costly and more challenging to acquire new customers than to retain existing ones, keeping your customers satisfied is crucial.
- Return labels
To simultaneously improve customer satisfaction and ensure on-time delivery. Adding return labels to product packaging is an obvious change to make. To do this, you can incorporate pay-on-use labels (also known as scan-based labels) within an invoice, which can be placed on a sticker that your customers can just peel off and put onto the item for a quick and easy return. That helps everyone involved, but the most important thing is getting the item back to you more quickly.
When designing a supply chain, you must build it in a way that it can process both inward and outward products with maximum efficiency. You must adjust to the prevalence of returns and not fall short of consumer expectations. With such an optimized reverse supply chain, you will improve customer services, manage asset recovery better, and reduce the number of returns. If you are worried about added costs of return shipping, implement a pilot program for a certain period, and then conduct a cost and benefit analysis to see whether it works for your operation.
- Have monitoring systems in place
Most businesses understand the importance of monitoring their products across the entire sales process. Still, when it comes to product returns, they’re not always aware of how it is handled on the way back to them or back to the manufacturer. With increased visibility and transparency across the reverse supply chain, you can detect areas that require improvement.
Monitoring your reverse supply chain can also feed into overall omnichannel inventory management. For example, it can help identify whether or not an item needs additional parts or complex repairs. Monitoring can help you decide whether to place the product on the drop-shipping list, stop stocking the returned product, invest in cheaper replacement parts, or remove it from your offering altogether.
- Make sure that the packaging is durable and easy to open
If you want your items to be sent back to you in their original envelopes or boxes, you should make sure that those packaging materials are durable enough to handle both the trip to the customer and back. Packages that are difficult to open or cheap packaging materials get damaged easily, meaning that your products are also more likely to suffer damage on their way back. Customers might get frustrated when they have to buy their own packaging in order to return a product they’re dissatisfied with and no longer want.
- Incorporate the right technology
Besides an effective IMS (Inventory Management System), you can incorporate many different tech solutions into your supply chain to make your reverse logistics processes even smoother. For example, a warehouse management system (WMS) and a transportation management system (TMS) allow for greater efficiency. When combined, these applications can keep you up-to-date on where an item is while maintaining the right documentation. Another tech solution you can use to allow customer service teams to stay connected across the product life cycle is VoIP phones. Due to the COVID-19 pandemic, more teams are working remotely, and effective communication has never been as crucial as it is today.
If you don’t have access to the latest technology, you can consider hiring a 3PL (third-party logistics provider) who already have the technology to make your reverse logistics easier. With the right tech in place, you get benefits such as:
- A synchronized supply chain to include traditional logistics, reverse logistics, and inbound logistics.
- Improved visibility of your reverse supply chain, greater responsiveness to customers, and increased productivity.
- Automatic consolidation of data from systems and partners.
- Transparency in supply chain operations (across your entire network).
Some additional benefits include the benefits of scalable resources (e.g., the resources and staff to handle unexpected increases in product return volume), minimizing shipping costs, facilities to store returned merchandise, and a sophisticated WMS to provide supply chain visibility throughout the returns process.
Having a properly designed and well-implemented reverse logistics process is a necessity for today’s retailers and manufacturers. These are some excellent strategies you should consider implementing to improve your reverse logistics process. In practice, implementing reverse logistics is a complex understanding, but even simple and small improvements can lead to great results. By focusing on customer satisfaction in returns management and with forensic monitoring, any retailer can expect improved customer retention, minimized losses, and cutting costs.If you are looking to implement reverse logistics (but don’t know how) or cannot handle managing your reverse supply chain, Redbird Logistics Services is there to help. Feel free to contact us for more information.