How to manage Reverse Logistics?

Returns have been gaining ground in the logistics field. Now, the industry is preparing to face an imminent future: almost half of the products purchased online will be returned.

The rise of e-commerce has come as no surprise to logistics operators. What once started as an added value to the classic retail model and was seen as a fad, now far exceeds the growth rate shown by its traditional counterpart.

There's no denying, this meteoric rise of e-commerce has brought opportunities like never before. However, it has also come with some challenges that we can't look away from.

One of the most important items on that list is returns and reverse logistics.

e-Commerce: origin and cause of reverse logistics

Online purchases are returned three times more often than a purchase made in a physical store, according to consulting firm Deloitte.

This statistic means that reverse logistics supply chain management must be a priority for retailers. Especially if they want to maintain healthy inventory turns and operating expenses.

What's behind this wave of returns? None other than e-commerce. The boom in online shopping over the past decade has driven a 33 percent increase in the overall retail return rate.

With this data on the table, understanding the dynamics behind how, when and why customers return items is critical.

Facts and figures

It is no secret that returns in online retail can make the difference between success and failure. Even more so when we are talking about markets like Spain where, during the last year, 49% of the population has returned products purchased online.

In this regard, we see two relevant movements in the market. On the one hand, retailers see the return and exchange policy as a competitive advantage to build customer loyalty.

Meanwhile, logistics operators are forced to implement new systems that satisfy not only the outbound flow of goods, but also the management of the return, storage and redistribution of returned products.

Know to solve

When it comes to dealing with this type of operation, and reducing its weight in day-to-day operations, it is important to know what part of the ball is in the court of logistics and what part is in the hands of the companies.

According to Statista, the most common reasons for returns in online retail are defective products, items different from the web description, poor quality and, lastly, delivery problems.

This is where logistics comes in, which, according to the figures, causes 2 out of 10 returns.

Four strategies to improve reverse logistics

Although the weight of the sector in this habit is small, the truth is that the rest of the causes have the same resolution: the return of the article.

Therefore, operators must try to implement four lines of action to deal with an operation that, according to forecasts, will continue to gain weight in the coming years.

1. Transparent monitoring systems

Many companies carefully monitor their products throughout the entire sales process. However, when the product is returned, they don't always know how it is handled on the way to them or to the manufacturer.

By gaining visibility into the reverse supply chain, companies can highlight areas that need improvement and also affect overall product quality.

2. Clear return policies

Easy, one-click shopping and next-day shipping have made shopping easier than ever. As a result, customers expect the same kind of convenience when they return something.

With clear and easy-to-follow return policies, a double benefit is achieved. Customer satisfaction can be increased and, at the same time, the stress on the reverse logistics teams can be reduced by being clear about the boundaries they are working within.

3. Investment in technology

In addition to an effective inventory management system, there are pieces of technology you can incorporate into your supply chain to make your returns policy even smoother.

A transportation management system (TMS) and a warehouse management system (WMS) allow for greater efficiency in the course of a reverse logistics operation.

4. Return labels to original packaging

This is a simple change to make. Doing so can drastically reduce delays and, at the same time, improve customer satisfaction. In most cases, the retailer can incorporate the pay-per-use postage within an invoice. It can then be placed on a label that the customer can simply peel and stick on the product for a hassle-free return.

In practice, logistics can be a very complex task. However, with the right adjustments, exceptional results can be achieved. By monitoring and focusing on customer satisfaction, operators can reduce costs, minimize losses and increase customer retention.