As summer turns to fall and winter, most of us are thinking about warmer clothes and pumpkin-spiced lattes. Warehouses and distribution centers, on the other hand, should be bracing for impact. While there is still a good deal of uncertainty heading into what’s left of 2020, the one thing retailers and e-commerce distributors can count on is the onslaught of returns, especially with no immediate cures for the global pandemic.
One recent survey forecasts that more than 70% of consumers expect to do at least half of their shopping online this year. So how can warehouses and fulfillment centers prepare for what’s practically guaranteed to result in a record-breaking number of returns this holiday season? Let’s start by looking at how and why this year is shaping up to be a whole different beast than the supply chain is accustomed to dealing with this time of year.
A Rising Tide of Returns
The cost of returns has been steadily rising year after year, creating ongoing challenges for distributors everywhere. According to Statista, U.S. return delivery costs were estimated to be $350 billion in 2017—a figure predicted to reach $550 billion in 2020. This increase likely tracks the growth of online shopping, as retail e-commerce sales in the U.S. have increased by roughly 300% between 2009 and 2019.
Not only has the trend of online returns accelerated in recent years, it’s been amplified each holiday season, leading to several consecutive epic years for National Returns Day, which is known as the busiest day for holiday returns in the U.S. In fact, UPS estimated handling a record 1.9 million packages on Jan. 2, 2020, a 26% increase over the 2018 post-holiday season. What’s more, announcements around price hikes for delivery and returns services continue to roll out ahead of this year’s peak holiday shipping season, putting pressure on shippers to pass those higher charges along to consumers.
But let’s forget about the spike in the volume of returns for a moment to discuss a couple of other changes in recent years. We’ll start with free return shipping. If the customer isn’t satisfied with their purchase, charging them return shipping is a guaranteed way to lose a customer, maybe for good. The second issue is quick and hassle-free returns. Expectations for streamlined returns must be met or you could end up reading about it on social media. It comes as no surprise that both factors are byproducts of “the Amazon effect.” It’s not enough that our purchases should arrive fast, accurate and free, but the same is expected should we need to return our purchase.
Distributors everywhere grapple with difficult questions like, “What is the reason for this return?” and “Is this item sellable or do we need to send it back to our supplier for credit?” and “Did the customer even buy it from us?” While some might pass off returns as primarily an e-commerce or retail issue, the fact of the matter is that returns create distinct challenges all distributors must face. Beyond the cost to ship returns, there are costs associated with processing, restocking and reselling returned goods that can’t be overlooked.
What Are You Doing With Your Returns?
One of the worst examples I’ve seen in my nearly 40-year career involves a company that distributed much of their small, blister-packaged fasteners to retailers. When the company would receive returns, they’d arrive in huge boxes without any organization at all. Instead of dealing with the cost of sorting through these new, perfectly resaleable items and returning them to the warehouse shelves, this company would simply trash the returns. Sure, some would argue that this approach was the most cost-effective. Objectively, it was certainly a terrible waste.
In order to avoid situations like this, putting a proper receiving process in place is the best place to start. Without one, returns may get mixed up with inbound products and processed similarly by mistake, creating hours and hours of work for salespeople who are then responsible for tracking down those returned items. Are they still in the returns pile? Have they been put back on the shelf? Or have they already been resold? When workers don’t have visibility into the status and whereabouts of returned items, valuable time and energy—which would be better spent filling other orders—is wasted.
So, what’s a distributor to do? Fortunately, there are solutions available to address these growing reverse logistics challenges, as well as simple steps you can take to streamline the returns process in the warehouse. Take full-featured warehouse management systems (WMS), for example. The right WMS provides complete visibility to prevent inventory from ever getting lost or ending up missing in action. WMS technology can make it faster and easier to identify and track returns, giving distributors control over the warehouse throughout the entire reverse logistics process.
Because there are so many questions surrounding a return, it’s not uncommon for these items to sit on a shelf or floor completely outside the visibility of the ERP or WMS (as seen in the aforementioned worst-case scenario). For strategies on how to combat situations like this, let’s take a closer look at some of the ways a WMS can simplify, support and improve your returns process.
Mistakes Happen (But They Don’t Have To)
Mistakes are inevitable in warehouse order fulfillment. Errors happen, but not all of them have to—as many can be decreased significantly or eliminated entirely through the use of technology. Easy-to-use WMS software reduces errors and encourages employees to do their jobs better, resulting in improved productivity and greater overall efficiency.
Not only can utilizing a WMS help automate fulfilling customer orders faster, it can also drastically reduce the occurrence of errors in this process. When there are fewer mistakes, there are fewer returned orders—which means fewer complaints from customers. While reductions in order returns have an obvious financial benefit, can you ever really put a price on happier customers?
Control Damages Now to Avoid Damage Control Later
We’re only human; people make mistakes or things just break. What if an item was damaged during inbound or outbound delivery? Or what if it was simply defective and slipped through manufacturing quality control? The next step in both of these scenarios is the same—someone needs to resolve the issue while also dealing with their usual day-to-day work activities and responsibilities.
You can identify trends like defective products or frequently returned items through the use of reason codes in a WMS. While many ERP systems are also capable of providing such information, this is only the case once the return winds its way through the slow and painstaking process. Consequently, it’s not uncommon for distributors to avoid gathering this level of detail during the returns process, limiting visibility of the factors contributing to the return of damaged goods.
Meet the Need—the Need for Speed
Like it or not, your customers now expect to receive their orders from you just as quickly as they receive their purchases from Amazon Prime. If the shipment takes too long to arrive, your customers likely won’t hesitate to look elsewhere—and leave you to deal with the lost sale and returned item.
A WMS with an integrated and easy-to-use manifest and shipping system can simplify warehouse shipping, route management and package tracking. A seamless multi-carrier shipping solution ensures you get products to customers securely, quickly and affordably, while also prioritizing expedited deliveries so they are picked, packed and shipped in the right order. Getting orders to your customers on time goes a long way toward not seeing them show up again later as a return.
On Your Marks, Get Set…
With the volume of order returns on the rise, now is the time to review your reverse logistics supply chain processes. A recent CBRE report found that a reverse logistics supply chain requires 15-20% more warehouse space than traditional outbound distribution. Are you maximizing your WMS to its full extent to handle the expected increase in returns? You should expect to see efficiencies like those outlined above in the form of visibility and control over the items in your distribution center.
Rather than a cluttered returns area that’s overrun with hundreds of untracked items, or simply tossing those returned goods into the dumpster, imagine the alternative: a competitive advantage that can come from streamlining the returns process and reducing returns in the first place, bringing more joy to your holiday season.
Eric Allais is president and CEO of PathGuide Technologies Inc., a provider of warehouse management systems for distributors. He has over 30 years of experience in marketing, product management and sector analysis in the automated data collection industry, including warehouse management practices in wholesale distribution.
