Supply chain systems have come a long way in supplier coordination, product distribution, inventory management, and customer order fulfillment -- but the back-end product returns process (also known as “reverse supply chain management”) continues to lag and is a persistent pain point with retail/e-tail customers.
"I am currently working with a client, helping them to define and implement an integrated sales and fulfillment multichannel solution,” says
Amarpal Sanghera, an industry consultant. “The contrast during the Fulfillment process discussions and Return process discussions was stark. The Fulfillment process works like a Ferrari and was the key focus of most discussion on strategy, but Returns was the cranky old pickup parked in the backyard that no one wants to know about.”
How much longer companies can afford to have the pickup parked in the backyard is open to debate, as growing numbers of customers want the sting taken out of the returns process and are beginning to see this as a retailer/e-tailer differentiator.
Some companies, such as outfitter REI, have already gotten the message. “REI has a world-class product returns process,” says Dwight Klappich, vice president of supply chain for industry research firm Gartner Inc. “Every return is promptly authorized, so the customer does not have to go through a complex rule-set of when returns will or will not be accepted. They have recognized that the returns process can be a differentiator in the minds of customers and have installed a returns process that is best-in-class at a time when many other companies’ return processes are not so good.”
To improve the customer returns experience, companies are seeking ways to streamline returns and supply chain logistics -- and are Web-enabling both internal and customer-directed communications.
“My DSL modem recently failed, so I called to request a replacement,” says one Midwest phone company customer. “I was dreading having to talk to customer service for two hours, or waiting several days for a trouble ticket resolution -- but I was pleasantly surprised when a replacement modem arrived and a pre-printed return label from UPS was emailed to me. I simply packed the defective appliance in the box, printed out and applied the UPS prepaid label with the RMA [return material authorization] number to the package, and sent the package off. It couldn’t have been easier.”
Other major pain points for customers are exchanging merchandise or receiving credit back from retailers when items are simply returned without an exchange. “Merchandise exchanges and the receipt of credit for returns are areas where the Internet makes a difference,” says Gartner’s Klappich. “This is because Web-enabled reverse supply chain communications from retail customer service tell the warehouse how to handle items that the warehouse receives as returns. Item disposition time is dramatically reduced at the warehouse, and the consequence is that customers receive credit for their returns faster.”
As companies pursue end-to-end service excellence with their customers, Web-based strategies are becoming critical for product returns processes like preprinting physical return labels; communicating with customers via email and Web accounts on returns, exchanges, and credits; and e-communicating supply chain information between retailers and warehouses.
There’s a clear financial incentive to pursue these Web options: Supply-chain research firm AMR Research Inc.estimated in August that the cost of a product return is three times the cost of an order.
“Companies are telling us that the returns process will be a top supply chain priority for them over the next two years,” says David Landau, VP of product development at Manhattan Associates, a supply chain solution provider. “Web enablement of returns communications will play a central role.”
It's difficult to assess the social damage of blogs, tweets, etc., in getting the word around concerning a company's poor returns process--but certainly something a retailer wants to avoid!
It will be interesting to see where this whole process with try-on items like shoes and clothes goes.
Companies are beginning to experiment with virtual "fittings" that assist customers in selecting correct sizes--thereby increasing the likelihood that the fit will be right the first time around, negating the need for returns.
Several years ago, I was involved in fulfillment for a banking concern and encountered great resistance from the front lines in analyzing why people returned or cancelled product subscriptions.
I felt at the time that knowledge of what was going on in returns would improve the overall approach to the customer on the front end--but the trouble was that too many of the front line folks were getting incented for recruiting businsss-and were not being measured for returns or dissastisfaction.
It's too bad that more folks on the "reverse" side of the supply chain are not sensitive to the fact that it costs companies three times as much to find a new customer than to simply retain one with good service!
One online firm I know has lately skimped on the front end, it seems, forcing me to return my last three orders for missing items, mistakes, etc. Bottom line: I've stopped ordering from them.
A company that pays attention to its front-end processes won't have to spend as much effort on returns. Conversely, the information gleaned from monitoring reverse supply chain can contribute to more efficiency up front.
Paying attention to the returns actually ends up improving the fulfillment process in the longer run. Returns are usually the result of wrong order-fills, damages, late dispatches/receipts, over promises, under delivery. So when you incur the cost & effort of returns, you then make an effort to reduce it, resulting in the improvement of fulfillment of the processes.
This is a fact I did not know, that returns have mostly not been factored into the supply chain. But returns are an integral part of a business cycle (sometimes), so why is this overlooked?
I am wondering if this is why when I got USPS to deliver at an address and the packages was not picked up, it was returned, but its been more than two weeks but the seller is yet to receive it and their tracking system is missing the return tracking.
Agree completely. There are numerous web-based companies that understood this from the get-go, but I think Zappos still is the king. How do you overcome the problem of buying possibly ill-fitting shoes without the opportunity to try them on? Make returns free and simple. People buy two pairs, return the one that's the wrong size, and because Zappos calculated the return costs into their pricing, it's a win-win.
It's encouraging that some bricks companies now get it too.
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