Reverse logistics is becoming one of the major supply chain challenges facing retailers, but with the right solutions and strategies, they can prevail.
Chain Store Age recently spoke with Abe Eshkenazi, CEO, Association for Supply Chain Management (ASCM), about how changing consumer behavior is resulting in surging rates of product returns. Eshkenazi discussed how retailers can take advantage of technology and strategic innovation to effectively manage the flow of returned goods in their supply chain – a process known as reverse logistics.
What factors have increased reverse logistics volumes?
Ordering online is easier than ever, and as a result, increased e-commerce sales and returns are having a major impact on reverse logistics volumes, a problem exacerbated by the holiday season. Then, imagine what’s required after a return; workers at sorting facilities need to go through every item and evaluate it to see if it’s salvageable.
[Read more: Holiday returns to soar — and so are retailer’s return costs]
Returns impact every link across the supply chain, and it requires transportation, processing and a sufficient number of workers. This is contributing to some of the backlogs we’re seeing in supply chains.
How are customers increasing reverse logistics pressure on retailers?
We’re witnessing a drastic shift in consumer spending behaviors, from in-store to online buying. It’s turned the entire supply chain landscape on its head, and in tandem with that change, there’s been a significant increase in the returns that follow.
There’s a new phenomenon — ‘bracketing’— which is when a customer buys multiple variations of the same item, in different sizes or colors, picks one and sends the rest back. Online shopping has empowered and enabled customers to do this, but it’s causing chaos for retailers. Retailers weren’t adequately prepared for the volume of purchases and then returns, and it’s creating tension and placing extra pressure.
What are the key elements of a successful reverse logistics strategy?
In comparison to managing forward logistics for outbound goods, returns were never as big a focus —but now, as e-commerce booms, it requires more attention. To implement a successful reverse logistics strategy, businesses should turn to digital technologies, such as automation, artificial intelligence and machine learning, to speed up and iron out planning and execution.
In addition, sustainability needs to play a part. Businesses should make sure their reverse logistics practices are environmentally friendly; for example, re-manufacturing goods or recycling end-of-life products. Mastering reverse logistics will be key for retailers who want to cultivate customer trust and loyalty. A smooth and ethical exchange, refund and return process is a key part of ensuring a positive shopping experience and getting customers to shop again.
What are the benefits of creating a circular supply chain?
A circular supply chain is important both economically and environmentally as supply chain disruptions have escalated in the last year and the world continues to face a climate crisis. Linear supply chains are not always green — they contribute to higher spending and more waste; products get used then thrown out.
[Read more: Fashion resale booming amid all generations — even boomers]
A circular supply chain promotes better use of resources, and by re-purposing products, companies can save money on production costs. Even though e-commerce has boomed, consumers are concerned about their footprint and would prefer to buy from environmentally conscious retailer.