Why Returns Management is a Better Solution Than Reverse Logistics

It’s essential to look at the big picture when developing a strategy to cope with returns. Returns processes need to be simple, smart, and scalable to meet the needs of a company (reduce cost) and its customers (speed and ease of returning an unwanted item). It’s also important to be able to accommodate shifts in returns such as dramatic increases or decreases before or after peak seasons. The best way to design your returns strategy is to follow the principles of ‘Smart Returns Management’ which will ensure that returns processes are fully optimized and future-proof. 

Reverse Logistics Versus Smart Returns Management 

Reverse logistics and returns management might seem like two words for the same thing, but they are two very different ways of handling returns. Put simply, returns logistics is about moving products from A to B, whereas returns management is the complete orchestration of the process – from the initiation of a return by a consumer to the end of a returned item’s entire life cycle.

What is Reverse Logistics? 

Reverse logistics refers to what happens after a product is delivered and the buyer decides they don’t want it. It’s a multi-step procedure that requires time, money, and organization. Registering the return, transporting the item, analyzing its condition, preparing for resale, recycling, and processing the refund are all steps in which errors and misalignment can occur. Things can go wrong at any point, causing customers to be dissatisfied and merchants to lose money. A returns process that does not tightly integrate every logistic stage is considerably more likely to fail than a well-planned returns management system. 

What is Returns Management? 

Returns management entails a much more extensive post-sale procedure and a complete end-to-end returns solution. In this model, a company takes full ownership of the entire process and has a complete overview of the whole ecosystem and all the parties involved. The logistics that support the most efficient and effective approach to returns are driven by sophisticated technology. Returns management includes everything from return initiation through transport, and warehouse activities, up to the moment when a product has reached its end destination. 

The Pillars of Smart Returns Management 

Smart returns management has three core pillars that must exist for the operation to be categorized as such. These pillars are the foundation upon which the strategy is built and drive the orchestration of the operation. 

Full Return Journey Orchestration 

Smart returns management focuses on the entire returns process, from return initiation to final redeployment. When returns management is implemented, the end-to-end process is optimized at every step. The consumer experience is automated at scale and customizable for individual preferences, allowing consumers to pick their preferred method to send items back whether it be through a variety of drop-off locations close to their house or convenient pick-up options. Operational excellence is achieved through control towers that manage and monitor all parties involved in the process including carriers, postal networks, warehouses, etc. The process follows the product all the way until its end location is determined, whether it goes back to stock, to recycling, or to a charity organization. 

Data-Driven by Integrated Technology 

Smart returns management is always data-driven. Integrated technology allows businesses to collect data on a systematic, real-time basis including information about consumer behavior, transactions, information about returned items, refund lead time, back-to-stock time, and more. By setting up complex backend integrations, all of the data is available in one place and through one single source of truth. This provides full visibility into the returns lifecycle, enabling fact-based decision making, predictable returns, and can even be used to reroute the manufacturing volumes to match demand. 

Ecosystem-Oriented 

With smart returns management, there is a shift from managing linear, fragmented processes to managing ecosystems of returns. Instead of owning all aspects of the process such as warehouses, logistics fulfillment centers, and more, organizations utilizing returns management will leverage an external network of warehouses, carriers, and service providers. This results in a much larger, global ecosystem and also a denser network of local drop-off points. As this shift continues, more and more consumers will be able to return products from anywhere and in any way they want faster than ever before. This is because of network effects: the larger the network, the more value-added for consumers. And the more consumers demand this way of working, the more attractive the network becomes for brand owners and carriers to join. The value of the network increases exponentially with the number of participating parties, including brand owners, consumers, carriers, and value-adding service providers. 

Instead of focusing on customer value, ecosystem value becomes the focus. Internal optimization of labor and resources, the entire supply chain and every party affected by it become the focus. Interactions between external producers, logistics companies, IT providers, and consumers are optimized and the network becomes the chief asset. 

Are returns at your company orchestrated end-to-end, data-driven, and ecosystem-oriented? If you think there’s room for improvement, you might be interested to learn more about how you can implement Smart Returns Management within your company. Download our ebook ‘Reinventing Returns’  here to see how you can get started!