The role reverse logistics plays in the supply chain is changing. It is an integral component to successful business. Maria Highland explores how companies can make the most of their returns offering.
As the number of shoppers choosing to make purchases online continues to grow so does the corresponding number of returns. The two are intricately linked. Customers now expect their returns experience to be as seamless and easy as the initial purchase. Retailers can no longer afford to neglect their returns offering and must keep up with changing consumer expectations to stay ahead of competition. “It’s no secret that consumer demand is ever increasing,” says Andrew Tavener, head of marketing at Descartes Systems UK. The rise of online shopping “has encouraged an instant gratification generation that expects instantaneous access to retailers”. Consumers now expect to receive deliveries within days, or even hours, often buying various sizes with the intention of returning them. “15 to 20 per cent of goods bought online are normally refunded and despite retailers being aware of this change in consumer behaviour, many still lack efficient and effective returns policies and processes, putting a huge strain on the supply chain,” says Tavener. UPS retail segment manager Sandrine Lagrost agrees that managing “returns effectively is crucial to operating a successful e-commerce business”. Consumer habits have changed, and it is up to retailers to adapt to this change to ensure success in the market. She adds that UPS research “has shown that return rates are three times higher for online purchases, and with the increasing dominance of online shopping, companies need to consider reverse logistics a core pillar of their business”. ReBOUND Returns chief executive Graham Best agrees, noting that many retailers “are waking up to the fact that their returns services are totally out of sync with their audiences’ preferences for speed and convenience. Retailers have become used to creating a reverse process without improving it over time, despite the demand for better, more flexible services from shoppers.” Reverse logistics is often seen as the “dark side” of the supply chain, explains Best. “There’s a great deal of complexity for logistics professionals to accommodate, potentially resulting in heavy costs if the process is not optimised correctly.” Returns processes tend to be overlooked as businesses target the outbound prize and e-commerce companies will innovate their product delivery operations, but not forget to do the same to their returns processes. Having a strong reverse logistics offering can drastically improve sales and build customer loyalty. “Savvy retailers see returns as an opportunity to build consumer loyalty, rather than as a challenge,” says XPO Logistics Europe supply chain managing director Richard Cawston. “A superior returns process is an opportunity to capture repeat business and build a competitive brand.” The returns experience customers receive significantly impacts their future buying decisions, says Best: “The research speaks for itself: 59 per cent of those under 35 admit having stopped shopping with a retailer because of a difficult or unclear returns process.” Shoppers are more “likely to click “checkout” if they know they can easily return their purchase if need be — rather than dreading the hassle of a return,” adds ModusLink chief supply chain officer John Heffernan. Likewise, reverse logistics strategies can “help companies recover value that would otherwise be lost on returned items and, when effective, can even create value,” says Heffernan. He explains that “finding ways to refurbish and resell returned items ensures that companies collect revenue and achieve ROI on their inventory.” “The management of returns through the supply chain will continue to increase in importance for retailers, leading logistics providers to develop innovative supply chain solutions,” says Cawston. And sitting at the heart of supply chain operations is the consumer demand. “Customers are making it critical to get reverse logistics right. This requires a focus on both the speed at which the supply chain processes returned items, as well as the level of service offered to customers,” says Best. When looking to improve reverse logistics, brands want to be reducing costs and maximising operational efficiency for both consumers and for their supply chains. This often means looking to technology to help increase supply chain velocity, improve efficiency and visibility as technology and returns appear to come hand-in-hand. There “are two areas of innovation in the future, technology and creative delivery and return options,” says marketing vice president at SEKO Logistics, Brian Bourke. “Technology is central to many reverse solutions,” agrees Cawston. “Consumer demand and behaviour shape supply, not the other way around.” Technology can help streamline reverse logistics processes says Tavener, and retailers must look to leverage real-time visibility of the supply chain, from warehouses to fleets. “Combined with advanced, scalable route planning and home delivery optimisation software, technology can transform supply chain performance,” continues Tavener. This allows “logistics professionals to maximise the utilisation and efficiency of existing resource, to speed up returns collection and transport. A real-time view of assets also empowers customers with the ability to be able to track their returns and feel confident in the retailer’s returns processing capabilities.” Communication is also key when dealing with returns. It ensures that the returns process runs smoothly, customers remain updated on their parcel’s status and are guided through the returns process. Communication helps to retain a level of support and customer loyalty, and technology can help improve this process. For example, scanning return items at depots also ensures that it is placed on the right pallet and correct truck, minimising errors.
This feature first appeared in Logistics Manager July 2018.