By Irv Grossman | VP, Supply Chain Operations
In essence, product returns are afterthoughts.
Sure, there are some companies like Zappos that expect a high percentage of purchases to come back so they build that consideration into their business models. But most retailers have not put an intentional design around reverse logistics. Understanding the holistic cost of returns can provide insight into the customer experience and create a feedback loop, helping retailers and manufacturers reach their true goal: supplying a product that customers want to keep.
Even when the product itself falls short of customer expectations for one reason or another, the reverse logistics process offers an opportunity for service recovery. When that process is a mere afterthought, dissatisfied customers are often lost for good.
Carefully Planned Accidents
Why do customers return merchandise? The reasons are many – ranging from buyer’s remorse to warranty service and treatment for products at the end of their useful lives — but for the most part, returns are an outcrop of customer dissatisfaction. When a company’s reverse logistics lack as much forethought as its forward logistics, returns tend to be treated as accidents instead of natural aspects of conducting business and can reflect the brand accordingly. Naturally, this can reinforce negative perceptions.
When products are returned because they are at the end of their useful lives, like in the case of cellular phones and other electronic devices, reverse logistics is an expected part of the business model. Its design must be aligned with expected customer experience, or goodwill is risked. Poorly designed reverse logistics can turn happy customers into dissatisfied ones or validate negative perceptions.
The notion of returns being classified as accidents stems from the truth that in most instances, every effort should be made to minimize them. Returns impact sales, revenue, and distribution, and that makes understanding their long-term impact on customer value important.
Unique Notions Regarding Reverse Logistics
Over the years, I’ve learned there are three unusual considerations one should make when designing a reverse logistics process:
Returns amount to “friction” in a customer lifecycle. As such, the data provided from a return can provide a tremendous amount of business intelligence. The key is to get to true root cause. Was it a sales rep who did not properly match the customer need with the product? Were the instructions so poor that the customer just gave up in frustration? The information provided not only helps current customers, but also helps to improve far-reaching business aspects like merchandising and marketing.
The speed of disposition and triage can help maximize the value of the return and ensure the highest level of recovery. (Check out the past blog I wrote about fish and reverse logistics.)
Proper inspection, handling, and disposition are critical to a company’s reputation. For example, just because the weight of a product being returned feels right, that does not mean there isn’t a brick inside the box. Proper inspection ensures that there aren’t any surprises if product is restocked and sold to the “next” customer or if repurposed product is over or undervalued.
Designing a Proper Reverse Logistics Process
The bottom line is the amount of planning that goes into forward logistics should also be applied to reverse logistics.
The best designed reverse logistics systems consider:
Handling requirements to recover the product
Triage and disposition for repurposing the product
Environmental sustainability of the final destination
Reverse logistics should not be considered an “accident.” It can be a great opportunity to increase customer goodwill while achieving its main goal: recovering assets and maximizing their value.
Love it or hate it, reverse logistics is an inherent part of today’s business climate. If you don’t put any thought into handling it, it will definitely handle you.
Don’t want that to happen? Chainalytics can help. Get your reverse logistics strategy on track to start building value for your company today.
Irv Grossman is Vice President of Supply Chain Operations at Chainalytics where he is responsible for the delivery of services related to service supply chains, encompassing reverse logistics, after-sales service, and service-centric networks.