This week we’re diving into the second of our 5 Key Considerations retailers and brands must consider when designing a reverse logistics solution. Another decision focused on the supply chain is where should returns go once received? Should companies invest in designating a dedicated returns center (RC)? Or should they simply allocate warehouse space within forward distribution centers (DCs) for returns?
Often, due to restricted resources or operational capacity, it’s not feasible for a retailer or OEM to open a dedicated returns center. Opening and operating an RC requires an additional lease or facility purchase, whereas DCs are often already up and integrated into the supply chain. Once up, retailers themselves or 3PLs can manage the facility.
The decision to co-locate in a DC versus use an RC should be rooted in a few key characteristics. Specifically, retailers and OEMs should consider the type and volume of their returned inventory, the processing capacity of their existing supply chain, and their sales channels.
Should a company have a high volume of returns and limited capacity in DCs, a dedicated returns center is a great option. If return volumes are low or seasonal and space isn’t limited, then a co-located DC could suffice.
Regardless of where returns go, the need for additional space to process them is evident. Last year, a report from CBRE, the large commercial real estate service provider, found that the growth of returns is creating an increased demand for facility space. The report’s author explained that larger players often have more flexibility to create dedicated returns space whereas smaller companies do not. When discussing the use of existing facilities he notes that “given the complexity of the reverse flow of goods, it will eventually require more dedicated space and supply chain solutions. It’s an okay Band-Aid for now, but not a long-term solution.”
Ultimately, as the rate of returns increases, it is crucial that retailers and OEMs consider what is optimal for their reverse supply chain.
Want to learn more about this consideration and four others that leaders must take into account when designing their reverse supply chain? Download our digital flipbook, Bringing Reverse Logistics Forward.