Consumers have become engrossed in online shopping with a 15% to 30% increase across various essential and nonessential product categories. Within the past two years, retailers and suppliers across the supply chain had to make the digital transformation to appeal to this changing demographic or risk their company's survival.
One of the most critical aspects of establishing a positive customer experience is creating an accessible and convenient returns process. Recent reporting has found that more than 90% of consumers will make repeat purchases from retailers with a simple returns policy. However, instituting a simple returns process comes with its complexities, which aren’t just a headache for consumers. They are a time-consuming and costly process for companies, including B2B, B2C, e-commerce, manufacturers, and third-party logistics providers (3PLs).
After adding up the labor costs of packaging and distributing products, freight logistics, receiving and sorting returned items, packaging materials, and sorting facility’s overhead, e-retailers are losing money from every angle. In fact, an online return typically costs the company $10 to $20 for each item, and that’s before shipping costs are calculated.
When 3PLs manage returns for their customers, they take that task off their customers’ hands while also creating a new way for the logistics provider to differentiate itself in the marketplace. Doing so also offers 3PLs an entirely new revenue stream that—when supported by a modern, automated 3PL reverse logistics processing platform—can enhance their revenues by 10% to 30%.
Unfortunately, many 3PLs miss out on these opportunities due to their aging warehouse management systems (WMS) and other disparate solutions. Not only was WMS not built to manage the modern-day influx of returns, but it’s also incapable of handling the many different facets of the returns management process.
By thinking beyond “picking, packing and shipping” products, 3PLs can effectively add value for their customers by providing a high-value service that their clients can’t manage themselves effectively. Offering returns processing also helps customers improve their profit margins, conversion rates and customer satisfaction. These value-adds can help position a 3PL as a go-to provider in any business condition.
Implementing a holistic approach to enhance current processes with advanced, AI-enabled technology, 3PLs can increase net profits when companies across the supply chain are being asked to do more with fewer resources. With an automated, cloud-based returns management system (RMS) platform that’s focused specifically on managing the reverse logistics process, 3PLs can do just that.
This is achieved by the RMS platform breaking the logistics of returns into three areas: initiation, processing, and tracking/recovery, which provides a flexible, unified returns management system that helps the company meet its customers’ ever-changing needs. Additionally, it helps diminish the need for wasted packing material by reducing a product’s return lifecycle through disposition management.
After the product return has been initiated and arrives at the 3PL’s facility, an RMS’s disposition capability can help evaluate the best course of action and customize the disposition steps with pre-designed workflows. The software will assist with repackaging and restocking, recycling, scrapping, returning to the vendor, liquidating, or disposing of the product. Creating smoother returns processing streamlines operations, reduces costs, addresses fraud concerns, and ensures customer satisfaction.
The Process
As return rates reach as high as 30%, returns are costly to companies and a significant portion of their operations must be devoted to processing them. Here are ways a robust RMS can help 3PLs streamline returns processing and cut costs.
Return InitiationThis is activated once the buyer requests a return. Intending to ensure that returning a product is as simple as it was buying the item, this “post-purchase” process focuses on the customer experience. It also gives the seller insight into why a product was returned at the moment the request was initiated. This visibility is crucial for the seller as they can gain valuable insight to inform future decision-making on restocking and limit potential fraudulent return activity.
For the buyer, it is all about communication and receiving timely updates on the status of their return. With a focus on promoting a positive customer experience, returns initiation reduces the time buyers call customer service agents for updates regarding their return, while allowing the organization to focus on using their most valuable resource—people—in other critical roles.
Reduce Fraud
The all-too-common reality is that some buyers make bulk purchases of one or more items only to keep the original item and get their refund while reselling the original item to make a profit. This is one of the threats that a 3PL can help protect their clients from when they incorporate an RMS platform to track fraud.
The visibility provided by a robust RMS solution during the initial stages of a return can save online merchants astronomical costs, as once the request is in, the solution will provide the visibility and data insights into the reason(s) for the return. It can also predict the costs and time associated with future returns and monitor any unusual, potentially fraudulent activity by the customer.
Returns Processing
This next step in the returns stage focuses on leveraging data to determine if the cost of shipping the returned product back to the company’s warehouse is more expensive than the product itself. This is particularly important for e-commerce retailers operating on a global level. Depending on this determination, the retailer may instruct the customer to keep the original item while shipping them a new one. Alternatively, if the customer returns the defective product, the RMS solution will determine which warehouse location is the most suited to replace it. This determination is typically based on proximity and inventory fulfillment needs.
Tracking and Recovery
As the number of returns continues to rise, warehouses have become inundated, making it hard for the returned product to be placed back in inventory for resale quickly. The RMS platform streamlines this process by determining which warehouse to have it sent to before final disposition. Then, it deploys recovery efforts to reduce inventory waste and profit loss.
By automating and optimizing reverse logistics processes with AI and machine learning, 3PLs can significantly reduce operating costs and increase customer satisfaction. At the same time, providing advanced visibility assists 3PLs in adhering to complex service level requirements with their clients all from one centralized platform. With a cloud-based RMS in place, 3PLs can efficiently orchestrate every aspect of their customers’ returns, repairs and after-sales care.
Gaurav Saran is CEO of ReverseLogix, a provider of end-to-end, centralized, and fully integrated returns management systems built for retail, e-commerce, manufacturing, and 3PL organizations. Prior to founding ReverseLogix, Saran led enterprise sales for Fortune 500 companies at Microsoft.
