How can you simplify reverse logistics in 2020?

Have you ever returned something you bought? In the past, the answer might have varied considerably from person to person, since the return rate for items bought at brick-and-mortar locations is only 5% to 10%.

However, with the meteoric rise of e-commerce, returns have become much more commonplace. As much as 40% of all merchandise bought online is returned, according to the CEO of Happy Returns, so chances are you have probably returned at least something in recent years.

Indeed, the total number of annual returns represents hundreds of billions of dollars in possible problems for retailers. And many merchants are leaving money on the table by not optimizing how they manage the flow of goods from customers back to retailers — i.e., reverse logistics.

 

What are the biggest challenges in reverse logistics?

For example, when something gets returned, it rarely gets resold at its full price. According to IT research firm Gartner, only 10% of all returns made during the busy holiday shopping season fit into this category.

Even if a product isn’t returned by a dissatisfied customer, it might still end up back with the retailer or manufacturer due to a recall or repair issue. These types of scenarios can really test the efficiency of reverse logistics processes, since inventory can pile up and customers and partners can become frustrated if something takes a long time to be fixed or exchanged.

So why is it so hard to manage reverse logistics?

There are several fundamental issues to overcome:

  • Inadequate visibility into what’s been received and why it’s been returned (e.g., because of a technical defect or another reason). For decades, reverse logistics hasn’t received the same technological attention as other portions of the supply chain, resulting in IT systems that can’t keep up with the huge amount of items flowing in reverse. Perfectly good, reusable products might be sent to a landfill due to poor insights into their conditions.
  • Difficulties in forecasting the need for spare parts; for instance, to repair a faulty item so that it can be refurbished and resold. This is related to the point above, and it can result in broken service-level agreements (SLAs) as defects aren’t properly addressed or fixed on an acceptable timetable. Getting the right part might involve a complex and costly trip through the supply chain
  • Struggles in managing the amount of inventory accumulated from returns, some of which could be refurbished while others may have to be discarded. High inventory costs are a major impetus for upgrading how reverse logistics processes are handled — items in return channels tend to linger there longer than in forward ones, depreciating in value and often being wasted, especially if they’re high-tech items that quickly become obsolete.
  • Inadequate visibility into the status of the products being returned for repair or replacement.
  • Difficulty in managing warranty claims processes and providing the right information to the customer

Overall, reverse logistics deserves a better set of tools that it typically receives in many contexts. The good news is that there are solutions for improving these flows, thereby containing inventory costs and keeping customers and partners happier.

What’s needed for superior reverse logistics

Improving your approach to reverse logistics requires multiple tasks be executed seamlessly in tandem:

  • Generate accurate demand forecasts considering product lifecycle and item substitutions
  • Supply planning must almost be on the mark, to reduce excess inventory and obsolescence through better safety stock calculations
  • Improve utilization of returned / repaired products – thereby reducing new buy spend
  • The returns management process requires an end-to-end solution that can leverage machine learning, manage multiple demand signals, rebalance inventory and improve service levels
  • Providing complete visibility on the parts / repair to the customer through various channels

With these requirements in mind, Inspirage developed Spare & Reverse Logistics, a comprehensive solution for creating a robust reverse supply chain. Available on the Oracle Cloud Marketplace, Spare & Reverse Logistics offers capabilities for inventory planning, repair/remanufacturing, demand forecasting, and much more in one platform.

To learn more, visit this page, where you can download the full product datasheet. You can also contact our team of experts at any time.

Ankur Bhatia | Key Contributor

Ankur Bhatia is a Sr. Director within Inspirage’s ERP Cloud Delivery team. He has 18+ years of experience working across different industry verticals, including High-Tech, Life Sciences, Consumer Goods, Telecom, Manufacturing, and Oil & Gas. He has successfully led transformational programs for global Fortune 500 firms, managing large teams and has designed large-scale global supply chain planning solutions. He enjoys working closely with the customers to help them realize value and benefits from their project investments. Ankur holds a MS Degree in Industrial Engineering from NITIE, Mumbai and a Bachelors degree in Mechanical Engineering.