In order to address the exponential growth of eCommerce shopping, retailers have mastered their forward logistics strategies with innovations such as fast fulfillment and free shipping. But along with the rise of eCommerce and buying goods sight unseen comes higher return rates, reaching nearly 30 percent for online sales.
As retailers have long-focused on forward logistics, the reverse supply chain has largely been neglected, leaving significant value on the table as retailers use piecemeal solutions such as local liquidation vendors to handle returns. We’ve found through numerous client implementations that taking a holistic approach to reverse logistics can help recover more financial value by streamlining operations, providing greater data visibility, and cutting down on physical waste and emissions. We’ve guided our clients in designing their reverse supply chains, and have determined the following five areas to be key considerations in building out a functional reverse supply chain that ultimately adds to a company’s bottom line.
In-Store vs Consolidation
If your organization is a pure-play eCommerce retailer, this consideration will of course not affect your reverse supply chain design. But for omnichannel retailers, choosing in-store versus consolidated returns operations is a common question. The benefit is stores can disposition and potentially resell returns immediately; the downside is this takes focus away from forward sales. The good news? There is an optimal hybrid design to maximize inventory value.
While pure eCommerce retailers or brands have to choose consolidation, most omnichannel companies will find that handling some dispositions in-store is most efficient. This may include returning qualified stock back to shelves and liquidating low retail price inventory on-site, while consolidating and sending the remaining inventory to centralized facilities for further processing.
Co-Located vs Dedicated Returns Center
As returns volume grows, many retailers and brands are questioning whether it’s time to open dedicated facilities to process the highly variable inventory (e.g., condition, packaging, etc.). Ultimately, the decision to open a returns center or co-locate returns processing in existing distribution centers depends on your company’s needs. Retailers and brands must evaluate their inventory profiles, existing supply chain resources and capacity, and sales channels in order to accurately determine whether or not a dedicated returns center is the right call.
Insource vs Outsource
Can reverse logistics be your organization’s competitive advantage? It certainly can be, but insourcing is not the only way to differentiate your company in the competitive reverse logistics landscape. Third-party logistics (3PL) providers can design unique RL strategies to help their clients stay ahead of competition. Insourcing or outsourcing is ultimately dependent on your business. Similar to the returns center consideration above, retailers looking to design their reverse supply chains must take a look at their inventory profile, their existing supply chain operations and resources, and their labor pool — is their capacity to insource? And if so, does it make financial sense?
Branded Clearance & Outlets vs Third-Party Remarketing
Maintaining your brand in the ever-growing secondary market is a critical priority. However, there are now data-first remarketing solutions in the market that provide you with visibility that traditional liquidators do not. These solutions can also give you immediate access to the growing market of discount buyers. A hybrid approach to this consideration will allow most retailers and brands to attain the highest recovery on returns and excess by leveraging both branded and third-party remarketing channels. Simply put, this hybrid approach provides the largest market reach to move inventory quickly, while also enabling the company to sell to the secondary market to maximize resale value.
Build vs Buy
The final key consideration is a question of technology: do you build, or buy? Fortunately, there are now software systems built uniquely for RL. While some retailers or brands may opt to custom build their own system to process returns and excess, buying a Reverse Logistics Platform (RLP) may provide a lower total cost of ownership and optimize long term value. For most medium-to-large retailers and brands, buying a RLP enables the company to continue focusing on its forward retail business. Cloud-based RLPs, like Optoro’s, can provide retailers and brands with the latest capabilities to maximize the value from returns and excess.
Designing the right reverse supply chain for your organization will require a miriad of important decisions, with the above five being among the most important. Like to dig deeper into each of these? Download your copy of our flipbook: Bringing Reverse Logistics Forward.