It's something no retailer wants to talk about, but it remains a fact of life: A staggeringly high percentage of merchandise sold is destined to be returned. Depending on the industry, rates of returns range from 3 percent to a whopping 50 percent, according to a 1998 study by Dale Rogers and Ronald S. Tibben - Lembke of the University of Nevada-Reno. That's a lot of stuff to be managed, sorted, stored and moved. And, of course, there's no upside in terms of revenue.
No upside, but there's unquestionably a downside. Returns—or the reverse flow of product from a customer back to the vendor—cost U.S. business up to 5 percent of sales each year. AMR Research estimates that approximately 4.5 percent of the $950 billion U.S. business spends on logistics each year is related to returns. That adds up to about $43 billion annually—a huge expense for the U.S. retail industry to absorb.
Or not. An all-out effort to streamline the returns process can improve company profitability by an estimated 10 to 15 percent. The gains come not only from increased asset recovery and reduced labor and inventory costs, but also from increased customer satisfaction—whether that customer is a consumer or another business.What follows are three areas of opportunity that returns-conscious companies often overlook.
1. (Re)cover your assets
Possibly the greatest area of opportunity when it comes to improving the returns process is increasing asset recovery—that is, getting the product back to as close to its original condition and into the original sales channel as fast as possible. In the typical case, companies have at least five recovery options, listed here in descending order of revenue return:
1) Sell as new,
2) Repair or repackage and resell as new,
3) Repair or repackage and resell as used,
4) Resell at a lower value to a discount house,
5) Sell by the pound to a salvage house.
The longer the product languishes in the reverse logistics pipeline, the more value it loses. Yet, in many companies, a product can take months to go from a customer through the disposition process before it's finally taken off the books. By then, the product could have become totally obsolete. Consider the personal computer industry where a PC might have a shelf life of only three to four months. In some companies, the returns process takes this long, which means a perfectly good unit ends up being sold in a salvage channel at a fraction of its original value.
And it happens all too easily. Some suppliers have a window in which returned product is accepted from their customers—say, 60 days for a manufacturer selling to a retail customer. Though a retailer might have all of its returns sent to a central processing facility for convenience' sake, inefficiencies in the processes of getting products to the facility and handling them within the facility often mean delays past that 60-day window. That leaves the retailer with the prospect of disposing of the product at a much lower price, which can mean hundreds of millions of dollars of losses for some of the larger retail companies. In this case, simply processing the returns in the designated time window would result in a huge jump in asset value recovered.
2. Enforce your rules
In the returns world,the race may go to the swiftest—or it may go to the strictest. Many times, companies unintentionally run up their returns costs by failing to enforce their own returns guidelines. That is, they accept returns of certain products that aren't supposed to be returned or accept product returns beyond the timeframe designated in a sales contract. Just by enforcing the policies already in place, a company can reduce total returns and bolster its earnings.
But playing the heavy and denying a return may not be enough. A company also needs backup enforcement for those situations when a return has been denied, but the customers ends it back anyway. If the supplier doesn't have a system to recognize the original denial and track individual returns, the company will issue a credit. Although some sacrifices have to be made to keep a customer happy, a company that is serious about managing reverse logistics costs should do whatever's necessary to discourage unauthorized returns.
3. Streamline the handling process
Then there's the physical process of handling the return. Sending an item back through the reverse channel often requires a series of intricate, multilayered steps: Someone has to generate a Returned Merchandise Authorization (RMA) number, someone has to print a mailing label, someone must determine product handling and disposition, and someone must arrange for transportation.
And the costs add up quickly. RMAs are often generated through a phone call to a company customer service representative via an 800 number, which means the company both pays a representative to take the call and foots the long-distance calling bill. Next, the vendor—or someone designated by the vendor—must print a return mailing label and send it to the customer via some form of expedited mail, which can cost $10 or $15. Then there's the cost of transporting the item back to the seller, which must be paid for by either the customer or supplier. (Customers don't always pick the most economical carrier to return a product, which increases the costs for those companies that pay for the returned goods' transportation.) And once the product arrives at a processing facility (either a distribution center or dedicated returns facility), an employee has to determine its disposition—which means opening up the box and inspecting or even testing the product.
Happier returns?
Boosting asset recovery and streamlining the process can bring quick wins to any organization. But what about the bigger picture? For many companies, it pays to step back and l ook at returns from a strategic perspective. That might mean asking the following: Have we defined our strategy regarding returns? Is our process right from a strategic point of view? Should we be looking at automating all or part of the process?
By starting with strategy, companies can assure themselves that the returns are a key part of a more efficient and customer-centric business. But if they hope to improve the returns process at a strategic level, they'll need senior management's support to assure that process improvements will actually be made.
Getting this support often means demonstrating the value of a returns strategy to upper management. The key to this is collecting data on returns—if you can find it. The data to look for include total returns per year broken down by product type, time to process a return, cost to process a return, and total dollars spent on returns.
As for processes,the idea is to revamp the system so that returns can be inserted back into the selling cycle as early as possible. This typically requires some analysis or flow - charting of the returns process to identify bottlenecks and areas of opportunity. If possible, track a return from the customer through the process back to the supplier.
One option is to explore using technology to streamline the returns process. For those companies willing to invest, there's software on the market designed to generate RMAs online with SKU-specific reasons for returns, generate online mailing labels, identify where the return should go (to avoid multiple handling), and handle data collection on an on going basis. In formation on the types and amount of returns as well as their expected arrival dates lets managers schedule receiving and handling labor so that the product is reinserted back into the selling cycle as quickly as possible.
Note that companies that have outsourced returns management to a third party still need information regarding the types and dollar amounts of returns. To gather that information, they might choose to install returns-processing software or link to their third party to get visibility into returns. Then, with that information in hand, they can track this process and use this information for planning.
Information on returns can be hard to find, but its value can be immense.What if you could see—in real time—just how many returns a specific customer was sending back to you? How about knowing which products were resulting in the most returns? Having information like that gives you a chance to develop better channel partnerships with customers and also gives operations more real-time information on defects that result in returns so they can fix the manufacturing process.
Can your current systems supply this information? If not, what do you need to get it? A little attention to questions like these can mean better returns on your returns.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.