Reverse logistics, or managing returned goods, is an essential aspect of supply chain management. The returns process can be complex and costly, but businesses can take steps to manage the process efficiently. By implementing effective returns management strategies, businesses can reduce waste, achieve cost savings, and meet customers' expectations for customer service.
The costs associated with reverse logistics include:
- Transportation: the cost of transporting returned products from the customer to the warehouse or manufacturer can be significant. According to Deloitte, transportation costs can account for up to 60% of the total cost of reverse logistics.
- Processing: from inspection to testing, sorting to repackaging, a report by Statista found that processing costs of returns can range from $10 to $40 per returned item.
- Restocking: returning products to inventory can include the cost of refurbishing, repackaging, and relabeling those products.
- Disposal: disposing of returned products that are not resold can involve recycling, scrapping, or landfill fees. Additionally, retailers miss out on the revenues they could have earned from restocking them.
Here are five things businesses can do to reduce the costs associated with reverse logistics:
- Improve product descriptions and images. Many returns happen because what the customer receives doesn’t match the expectations set by the descriptions and images in the webshop. Analysis of returns data can help retailers identify product pages in need of updates
- Streamline the returns process: by making returns easy and intuitive, managed through a single returns solution, businesses can reduce the time and cost associated with processing returns.
- Optimise inventory management. Businesses can reduce the number of overstocks and stockouts that lead to returns. According to Accenture, this can reduce costs by up to 30%.
- Implement a data-driven approach: according to Gartner, using data analytics to identify trends and patterns can help reduce costs by up to 10%.
- Embrace the circular economy. Circularity involves reusing or repurposing used or unwanted items into new products. It reduces a business’s environmental footprint and can help reduce input costs. McKinsey has found that implementing a circular economy model can cut costs by up to 50%.
By automating the entire returns process and placing the customer experience front and center, effective reverse logistics management can have a significant impact on the bottom line of a business. nShift’s Returns solution helps turn as much as 30% of returns into exchanges, whilst also improving customer loyalty.
