Reverse logistics involves the repair, recycling, reclamation, and reuse of products. While it is a broad catchall term, it is most used to describe returns management processes for modern shippers. After all, e-commerce is associated with a significantly higher rate of returns than traditional brick-and-mortar stores. E-commerce returns are significantly higher than that of traditional brick-and-mortar sales. With the supply chain continuing to experience the effects of the supply chain coronavirus pandemic, the remainder of 2020 stands as a key time to rethink reverse logistics strategy and explore opportunities for improvement through reverse logistics digital transformation.
Take a moment to think about everything that can go wrong with an outbound shipment. Now, imagine those same problems applied to a shipping capability when the shipment may not necessarily originate from within your company. Yes, consumers take on the role of shipper in this instance. As a result, it is not always possible to know what freight is moving through reverse logistics to your company. However, reverse logistics digital transformation and more comprehensive returns policies have dramatically changed the way customers view and use reverse logistics.
Of course, it’s easy to assume that fewer returns can reduce the problem. However, customers expect the ability to return items regardless of the purchase place. According to Supply Chain Game Changer, “in the exponentially growing e-commerce marketplace customers expect, and demand, a hassle free returns policy. They will check out the returns policy before making a purchase. They will go elsewhere if there is not an easy returns policy and practice. And they will use the returns process, a lot!
It is estimated that the E-Commerce market in 2018 will be about $1.5 Trillion worldwide. And as much as 30% of those purchases will be returned. Add that to the returns rate in the brick and mortar retail industry and there are over $650 Million worth of returns annually!”
So, what are shippers left to do to manage reverse logistics without throwing in the towel and stopping customer returns altogether?
There was a time when sending a product back to a manufacturer or retailer was simple. Shipments already come with return labels, but even though that label represents a small cost to the shipper, it can be unnecessary. As a result, more companies have created returns management processes that customers can begin online.
For example, Amazon allows customers to initiate a return online and choose multiple options for sending a product back to the company. Obviously, the e-commerce behemoth is a key example of using technology to reduce the impact of returns. However, additional retailers have implemented similar policies in the wake of the COVID-19 pandemic. Walmart now requests customers begin returns online, and depending on the product, returns may not be possible for safety and health reasons.
The idea of using digital capabilities to manage reverse logistics lies in creating returns authorization processes that preempt customers. Meanwhile, retailers also have the option of using brick-and-mortar stores as returns centers for online purchases, but that may fall short of meeting demand in the post COVID world.
Reverse logistics are a competitive necessity. However, they are not absolute, unchanging aspects of logistics. Returns policies can change to reflect the real-world concerns of consumers and shippers alike. Meanwhile, costs of manufacturing have declined. Furthermore, it may simply be cost-prohibitive to manage a lengthy returns process, reports Supply Chain Dive. In fact, today’s companies are deploying several innovative capabilities in reverse logistics digital transformation to save resources, including:
Few certainties remain in the world of logistics, but digital transformation is growing in value. The application of a transportation management system to enable reverse logistics digital transformation is a defining characteristic of successful supply chains. It’s time to evolve all operations and finally get control over reverse logistics. Throughout this series, we’ll further explore reverse logistics and what shippers need to know to keep their costs under control and avoid massive spikes in returns through 2020.
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