The answer ‘Reversed Logistics’!
We have embraced shopping online in a big way. In fact, “big” might be considered an understatement.
With unmanaged or poorly managed returns processes, the more returns you receive, the more it effectively bogs down your system. Eventually, many of those returns will have to be sold at a discount, just to get them out of the system… These returns are eating into your profit.
With parcels being delivered to consumers every day, there are bound to be some returns. But just how many returns do e-commerce operations experience, and why? Here are a few statistics:
- At least 20% of all products purchased through e-commerce channels are returned and during the holiday shopping season, that number swells to 30% or even higher—50%—for the pricier items.
- Apparel is the most often returned online purchase at 43%, as 41% of shoppers buy multiple sizes or variations at one time with the intent of returning some of them.
- 23% of e-commerce returns are caused by a miss-pick, where the wrong item or quantity of item(s) is picked.
- 22% of e-commerce returns are due to the product not matching its online description.
- 22% of e-commerce returns are because the product received is damaged.
- 67% of all returned online purchases are the fault of the retailer.
- 48% of online shoppers report returning at least one online purchase in the past 12 months.
Reverse logistics is one of the most often overlooked elements of the complete operations cycle but it shouldn’t be. Unmanaged, uncontrolled returns processes can put tremendous strain on a facility’s available space and labour. Further, and perhaps most compelling, are the costs associated with returned inventory.
Reverse logistics isn’t just a cost of doing business. It’s a significant cost that can have an enormous impact on the bottom line. According to research by Aberdeen Group, “the top challenge facing manufacturers and retailers in regard to returns management is cost containment.” In fact, as online retailers expand their customer-friendly policies with easier options for returns—including free shipping and no restocking fees—return costs have jumped to as much as 8% of online retailer costs.
Why? Here are some more statistics:
- Anywhere from 50% to 90% of e-commerce returns cannot go back into inventory for resale.
- Liquidation of returned inventory that cannot be re-sold typically generates anywhere from 12% to 25% of the item’s original cost.
- 52% of distribution centre managers lack the ability or resources to process returns; 44% consider returns handling to be a pain point within their operations.
- An estimated 10% of overall supply chain costs result from managing return/repair processes. Inefficient processes can exacerbate this cost, cutting profit by 30%.
- 64% of retailers have identified returns management as an area needing improvement.
- At the conclusion of the 2017 holiday season, UPS anticipated processing 6 million returns in the first week of January 2018.
- Companies that implement an improved reverse logistics operation to enhance the speed and efficiency of returns save roughly £230,000 in costs annually.
- Companies with best-practice reverse logistics operations are 47% more likely to process returns daily.
- Implementing a managed reverse logistics process can increase a company’s revenue by up to 5% of total sales.
A top executive at one of the largest third-party logistics (3PL) providers, GENCO, says automation can cut reverse logistics costs associated with excess inventory, returns processing and asset liquidation by 10% to 15%.
That statement is supported by research from the Aberdeen Group, which evaluated 167 service and manufacturing operations regarding their reverse logistics practices. The top 20% of aggregate performance scorers (the “Best-in-Class” companies) in the study were 74% more likely to have automated their returns process. By putting “a system in place to predictably and repeatedly execute on the return and disposal of a part or product,” these companies are better able to both manage the complexity of a reverse logistics operation and resolve customer issues as quickly as possible.
Further, the report states:
As a result of automating the returns operation, service organizations have been able to achieve improved results in better first-time fix of issues [64%], greater service level agreement (SLA) compliance [58%], increased value reclaimed from returned parts [24%], and a higher level of customer satisfaction [77%] as compared to those organizations that have not leveraged the efficiency gains of an automated returns process.
The deployment of affordable, flexible automated storage and retrieval systems can simplify reverse logistics processing. Through the implementation of such a system, returns can be handled as another form of inbound shipping through efficient routing and restocking items to minimise inventory costs, labour requirements and space demands.
Once returned items have been inspected and labelled with a disposition destination, things can fall apart for many returns operations. Inundated with a potentially overwhelming number of discrete items, managing their sortation and routing can be a real challenge for fulfilment centres. Boxes and totes of returned items can quickly overwhelm both the space allotted for their temporary storage and the labour assigned to their management. Especially for facilities with hundreds of thousands of square feet of conventional inventory storage racking, sending an operator to physically return one item to its stock location can be a time-consuming and ergonomically fatiguing task.
To move returned items through the disposition process quickly, an automated storage and retrieval system (AS/RS) can speed up processing times to maximise asset value recovery in a compressed footprint while reducing cycle times and labour-associated handling costs.
While there are a variety of AS/RS technologies offered in the market—including capital-intensive, multi-million-dollar robotic installations—the most affordable and flexible solutions are Vertical Buffer modules, vertical lift systems, vertical carousels and horizontal carousels. These self-contained systems offer higher density storage in a more compact footprint than manual storage equipment can provide.
The selection of the most appropriate AS/RS for a given reverse logistics operation is dependent on a variety of factors, including the number of inbound returns received per day, the size variability of the returned items, and the desired rate of throughput for returns. When paired with fixed mounted or radio-frequency (RF) scanners for barcode reading, light-directed picking workstations and/or put walls, items routed to the automated returns processing area post-inspection can be quickly identified and operators guided to the appropriate receptacle presented by the AS/RS. Because the automated systems deliver the destined receptacle directly to the worker and highlight their position, both walk and search time are eliminated, enabling a need for fewer personnel to sort and route more returns.
In certain applications, the storage bins in the AS/RS can even be utilised as forward pick areas. This functionality is enabled by integrated inventory management software that not only keeps track of the contents held within the machine but also interfaces with a facility’s warehouse management system (WMS) and enterprise resource planning (ERP) systems. This function allows picks to be sourced from the most convenient location (in this case, the returns processing area) for even faster restocking and resale of returned inventory.
Likewise, when the AS/RS’ software recognises that a pre-determined quantity of returned inventory has been reached, it can work with the WMS to assign and interleave a task for those items.
Want to learn more about returns handling, read our white paper for statistics and customer scenarios.
Kardex Remstar is one of the world’s leading suppliers of automated storage and retrieval solutions. Their products are designed to increase productivity and improve the efficiency of your working practices. With tailor-made solutions, which can considerably reduce your company’s storage space. Kardex has successfully installed more than 140,000 systems in sectors such as retail, warehouse & distribution, defence and aerospace since 1873.