How Does Returns Effect The Supply Chain?

Returns management, often referred to as reverse logistics is the management of returned items to your company. But do you know the importance of returns management?

How you manage returns will influence the overall management of your warehousing and storage, inventory, depreciating goods and soiled items. Therefore, the bottom line will be the impact on overall profitability.

Managing returns is never quite as simple as putting items back on a shelf to be shipped off to another customer. Returns involve a quality control process. The reason for returning an item should be established as soon as possible once it has been returned, if not beforehand. Streamlining a process by which returns are then managed will prevent hindrance to outgoing logistics too.

Processing can become expensive if it isn’t efficient.

92% customers surveyed said the range of return options is an important consideration in their purchasing decision.

Returns management presents both challenges and opportunities for inbound logistics. Waste management regulations and non-compliance penalties are increasing. Rising commodity prices and a growing secondary marketplace, however, create an opportunity to recover value from used and scrapped materials.

When the returned product is re-entered into the inventory ledger, it usually starts incurring inventory carrying costs, and takes up warehouse space. The returns wind up on warehouse shelves taking up valuable space, depreciating quickly, and challenging your operation’s efficiency. When an organisation does not have proper reverse logistics processes in place, due to ineffective processes, or they do not exist within the organisation at all, then it will be virtually incapable of providing the service and support its customers require. Therefore it can be noted that the most successful organisations are those that can leverage their reverse logistics capabilities to provide customers with exactly what they want, while also creating and maintaining a competitive advantage wherever possible.

Change is happening but at what pace? Zebra recently published a study2 where 87% of its 2700 respondents agreed that accepting and managing returns was a challenge. It claims that 7 out of 10 executives surveyed agreed more retailers would turn their stores into fulfilment centres to accommodate returns. While 60% did not currently offer free shipping, free returns or same-day delivery, they planned to do so. And given the growing trend for returns I wasn’t unduly surprised by Zebra’s findings that 44% expected to outsource the management of returns to a third party.

Whether your company manages the distribution of its own products or outsources logistical services to a 3PL, the ability to provide return services is fully dependent upon the capabilities of your WMS. WMS cloud software provides the ability to process all types of returns with high speed modules—some even with specialised functions for goods such as clothing, publishing, spirits, and more.

Top Key Benefits of WMS:

  • Damaged goods can be quarantined and dealt with promptly for repackaging or disposal.
  • Essential for e-commerce businesses who need to manage high returns volumes.
  • Quickly identify re-usable stock so that it can be relocated for order picking.
  • Complete traceability – allows you to track and monitor the levels and types of returns.
  • Integrates with ERP systems to ensure credits, replacements are done promptly to maintain customer satisfaction levels.

A cost-effective reverse logistics program connects the incoming supply of returns with the product information and demand for repairable items or re-captured raw goods.

Are you spending too much time and money dealing with returns?

Three key phases support returns management processes: speed, visibility, and control.

Phase One: Speed

For fast and easy returns management, automate decisions about whether to generate return material authorisations (RMAs) and how to process returned material. Three tools to speed returns processing are:

  • Automated workflows. The disposition of the return depends on data points scattered throughout the enterprise: the item’s value and materials, repair scope and cost, return source, and customer service contracts. Automating workflows drives repeatable processes and consistent routing that is efficient and measurably faster.
  • Labels and attachments. Automated workflows validate RMAs, and generate labels and shipping documents. Accurately labelled shipments with required paperwork and pre-addressed, carrier-compliant labels experience fewer delays and create a predictable inbound return stream.
  • User profiles. Profiles simplify user maintenance and permissions. User groups share attributes such as physical locations, payment terms, service contracts, and product return eligibility.

Handling inbound return shipments quickly and efficiently increases value recovery.

Phase Two: Visibility

To improve visibility and predictability, information must be captured early in the process, ideally before the return is delivered to the receiving dock. Three of the most effective and easy-to-implement approaches to obtaining visibility are:

  • Web-based portals. These online tools allow authenticated users to perform tasks from any location and time zone. Integrating Web-based portals with product data and financial applications provides consistent and accurate information across a diverse network of manufacturing locations, business units, and third-party service providers.
  • Carrier integration. Linking RMAs to carrier tracking numbers provides shipment visibility, both within Web-based portals and through automated notifications.
  • Bar-coded identifiers. Accurate inbound shipment information—including parts, condition, quantity, and dates—ensures the receiving dock and repair depot are stocked with the labour and equipment required to handle and process returns.

Phase Three: Control

Synchronising material movements is a common supply chain management challenge, especially for returns. Manufacturers must pay close attention to receipts and reconciliation, and notify stakeholders of impending quality issues. Reconciliation enables enterprise-wide visibility and control.

Three control touchpoints to build into the returns management process are:

  • Regulatory compliance. Compliance touches all aspects of the reverse logistics process. Workflows used to speed up the process also provide controls that minimise corporate liability.
  • Reconciliation and final disposition. Labelling and enterprise data integration reconcile RMA information with physical shipment, value, and accounting data. Combining financial systems and exception-based reporting enables quick shipment variance resolution and accurate credits, maintaining both external customer satisfaction and internal financial control. Integrating with product engineering determines the raw materials’ resale potential and value.
  • Quality assurance. Timely feedback helps teams address root causes of returns. Product engineering identifies quality control issues. Distribution centres review outbound shipment accuracy. Finance quantifies financial exposure and risks. Automated communication and metrics for each team improve quality throughout the enterprise.

Software solutions can help speed returns management by providing user profiles and workflows that define supply chain partners and processes; labelling and documentation that track the material; and Web-based portals and exception-based reporting to deliver information for timely reconciliation.

In Summary

In every supply chain process today, product returns is an important area that needs to be effectively dealt with. In today’s competitive business environment, companies can no longer focus only on forward supply chain management and ignore reverse supply chains.

Organisations that implement an effective returns management solution, in conjunction with a WMS system, is more likely to be able to improve customer service and response times; reduce environmental impact by reducing waste and improve overall profitability.

About us:

Speak to one of our team to understand how Clarus’ WMS system can cost effectively support best practice warehouse management processes, better customer service and highly efficient working for a range of warehouse operations with pay per month options and no IT infrastructure needed.

Our platform can scale from a one user, small depot system to a 100’s of user distribution centre operation. The ClarusWMS platform will cost effectively scale with your business based on demand.

ClarusWMS is a UK based supplier of warehouse management solutions with a wealth of industry experience in third party logistics, wholesale / retail distribution, online fulfillment and manufacturing warehousing.