Managing reverse logistics can be challenging. It includes tapping carriers and non-traditional returns options to give customers a positive experience. Unfortunately, the rate of returns and demand for reverse logistics are increasing. As reported by Supply Chain Dive, the Reverse Logistics Association estimated “more than $550 billion worth of returns move through the economy per year, with half being sent back to suppliers and manufacturers. Many companies are making it easier for the customer to return and they’re using it as a competitive advantage. The e-ecommerce side is increasing returns dramatically.” And here’s the surprising truth. That statistic is two years old, so the real rate of returns and impact on managing reverse logistics is even greater. Shippers in need of more effective returns supply chain management need to understand how integrated processes are key to success.
Collaboration is a go-to goal for all supply chains. More collaboration is associated with stronger profitability, less work, and more enjoyable business-to-customer experiences. However, that collaboration is not free. It often comes with hidden costs, especially when a party chooses to forgo managing reverse logistics in the first place.
Consider this; the pressure for more effective returns processes has taken a dramatic toll with some companies now not requiring customers to return old products or components due to costs. It’s simply cheaper to send out a replacement. But that forgoes asking the question, “why are product returns skyrocketing?”
To understand how managing reverse logistics came to such a pass, it is important to consider the problem with collaboration.
While collaboration is all the rage, companies may fail to use newer systems and processes that make managing reverse logistics cost effective. If the systems require too much time, the total expense per return increases. As a result, it’s often easier and more affordable to eat the original item cost. Of course, that’s not a realistic strategy for high-cost products.
High-cost products include electronics, medications, and specialty equipment. These items have a reasonable life-span, and their use may be necessary to literally save lives. In addition, failure of managing reverse logistics of such items may lead to increased risk of exposing personal or company data.
For example, ISO standards mandate the proper disposal of electronics to prevent risk of data theft. Failure to dispose of such items, especially when returned for repair, replacement, or recycling may lead to financial litigation with customers. Instead of hoping disposal is properly addressed, integrated recycling supply chains keep everyone informed and hold outsourced service partners accountable.
Integrated reverse logistics also eliminates the uncertainty behind returned products. When a customer returns an item, the costs of shipping, storage, diagnosis, repair, and replacement will fall to the retailer. In turn, those costs may then fall to the manufacturer. The cycle continues until the cause is addressed, and the item can then be resold, reclaimed, or otherwise repaired. By integrating the process of managing reverse logistics with supply chain systems, particularly the transportation management system (TMS), managers can see reverse logistics KPIs and metrics in real time. These values provide a measure of health of the whole reverse supply chain for the business, and as the KPIs change, organizational leadership can refine manufacturing, marketing, or other factors to reduce risk of future returns.
Imagine this scenario. A customer returns an item based on a malfunction. It’s a simple weather radio. The manufacturer reviews the data surrounding the return and sees a high trend of returned or repaired radios based on the TMS trends. As a result, the manufacturer issues a recall to fix the broken items at risk of malfunction. Now, the retailer has an influx of returns. Simply managing the flow of products back to the manufacturer could become a nightmare. However, integrated reverse logistics processes within the TMS automatically route these returns directly to the manufacturer.
The process runs continuously behind the scenes to eliminate added inbound freight at the brick-and-mortar location. Of course, customers may opt to complete a return in-person. As a result, the TMS then takes a more proactive role, showing retailers how to tender the shipment, when it will be picked up, and bills the shipping cost to the receiving manufacturer. Again, it keeps costs under control.
Integrated everything is the motto of the modern supply chain. However, integration may take much longer for companies that try to use APIs and limited IT resources to connect their systems. Instead, it’s simpler to outsource the whole process and put the expert-consultants in your corner. For example, GlobalTranz, which Cerasis is now a part of, has a team of expert in-house consultants that can help your company identify and deploy a better returns management strategy and unified TMS in one step.
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