The Impact of Reverse Logistics in the Supply Chain Environment
The Impact of Reverse Logistics

The Impact of Reverse Logistics in the Supply Chain Environment

As the upcoming holiday season quickly approaches, so increases the shipping of all sorts of packages across the globe to reach their destination in time.

However, this also means that many of those same packages will be shipped back to their original source soon after arrival.

In the supply chain world, this returns process is called Reverse Logistics and has always been a pain point, and especially now since e-commerce sales are at an all-time high.

What is reverse logistics?

Reverse logistics is the process that involves all operations related to the reuse of products and materials resulting from a surplus or a return. 

To provide the latest insights, experts from Hy-Tek Integrated Systems and Johnson Stephens Consulting, discuss the trending topic, “The Future of Returns” and what it means for the impact of reverse logistics in the supply chain environment. 

In this video, Caleb Thompson (Vice President of Business Development – Hy-Tek Southern Operations) interviews Josh Duane (Director of Sales – Hy-Tek Southern Operations) and Ray DiMelfi (Vice President of Consulting Service – Johnson Stephens Consulting) on the pitfalls and best practices for establishing an efficient and effective reverse logistics program.

Tips Guide to Best Practices

As a quick summary and guide to the best practices for reverse logistics, please use the image below to assess if your current operational performance measures up to being optimal it can be.

5-Best-Practices-for-Reverse-Logistics

What Makes Returns Challenging?

  1. Returns are often considered the afterthought of the supply chain network primarily because it’s a loss mitigation process. The other aspects of the business that generate revenue like the picking and outbound processes drive a lot of the attention and as a result of the attention, that drives the investment.
  2. The returns process is complex. Part of this is because you introduce customer interaction with the process, even though they’re not located within the facility, they’re driving the inbound handling characteristics of those cartons. 
  3.  Lack of visibility. You don’t know what you’re having to process within the operation until you open up that cart and see what’s contained within it. That oftentimes creates uncertainty and the variability that results from that is dramatic and creates difficulty when it comes to defining a process and setting an expectation in terms of how it should flow.
  4. There’s been a lack of advancements in the returns process as the e-commerce industry has grown. As we saw in Q2 2020, the earnings report by several industry-leading, big-box retailers had upwards of 100-200% increase in sales in the digital sales realm. That type of growth in a non-holiday season is astronomical. That alone creates complexities when it comes to how you handle returns on a consistent basis, not just how you handle them during the peak holiday season. Returns have to be thought of as a continual process throughout the year. No longer can you look at muscling through a process for two months and then forget about the operation for the remainder of the ten months.

What are Typical Shortcomings that Companies have with the Returns Process?

  1. The most common shortcomings that we see are centered around the lack of organization. This can be the lack of organization in the returns process as a whole, it can be the lack of organization in the returns area with the product, and it can even be down to a lack of organization at individual workstations.
  2. Secondly, people often lack a forward-looking capacity plan in their returns operation. They don’t have a plan for any change in volume in the building so if you don’t have a plan during peak times and your returns ramp up, you’re naturally set up for failure. I think this is a factor of people treating returns reactively instead of proactively. You need to be proactive and have a plan to handle changes in your volume
  3. Another big challenge that we see is that companies don’t have a defined exit strategy for their product, so as you receive product into returns there’s not a clear definition of what you do with it from that point. Is it going to be put back into stock? Is it going to be thrown out? Is it going to be sent somewhere else? Maybe send it to a discount retailer? This needs to be defined and pushed down onto the operation so they know what to do and they’re not wasting time as they receive the product. Often we see that there’s no defined strategy and that product just sits for a period of time… really slowing the operation. 

A survey by Harris Interactive reported that 95% of consumers said they are either very likely or somewhat likely to shop with an online merchant again if the return process is convenient.

What Can Companies Do to Prepare for Holiday Season?

  1. What I think you have to focus on before we get there, is making the process as painless as possible for the customer when you look at things like time to process your return through the operation, the complexity of that returns process, and visibility or clarity on what that returns process is. These are all things that the customer is considering when they’re making that purchase. 
  2. Introduce smart labels. They basically operate by dropping a returns label directly into the carton on shipment and it creates a simple process for the customer to then execute that return if they receive the product and decide they don’t want it anymore. To simplify the process don’t create a lot of obstructions for the customer if they make the decision to return their products.
  3. The third thing that companies should consider is staffing the operation according to the volume that’s flowing in. It’s easy for the customer to create essentially a process that has blinders right? You work hard and create a staffing plan and then you hold that staffing plan constant regardless of the volume. Instead, you really should be looking at ways to flex that labor as volume increases. A good way to do that is smart labels because they provide you the data on current volumes and upcoming volumes, which allows you to pre-plan your staff and grow your staff accordingly. If you don’t utilize smart labels, just look at historical data. Find your growth trend in e-commerce and apply that to the future years so  you have a metric to plan off of. 
  4. Creating better flows off the dock. This can be done with sortation by disposition type. You want to be able to create consistent flows through your operation so it will be more efficient for your associates to process the same type of return repetitively. To add to this you can equip those workstations in those specific flows to handle a specific product type. The associates will be more productive and efficient if they have everything at their hands without having to move. That consistency increases your throughput and it creates a more effective team in the returns department.
  5. Create a 5s methodology plan and apply that. What you want to do is create a plan that is enacted upon and creates a new culture for the operation and establishes that culture prior to the surge that’s about to arrive during the holiday season. The reason for this is because when you create that 5s methodology and you apply it to your operation it creates consistencies and organization. You will know exactly where everything is within the operation and there aren’t any questions. The employees can then move around efficiently and get to exactly what they need in order to process those returns. Simple examples are: Taping off staging lights so you always know where your inbound product is located, creating a workstation that has clear and outlined locations for all of your tools, and developing a sortation with clear signage in terms of where a product goes next in the process. You want to do this before holiday season starts because once it does you’re in survival mode. You’re trying to get all that volume through the operation and you forget about the organization aspect.

What is in Store for the Future of Reverse Logistics?

Reverse logistics isn’t a fad, it’s not going anywhere.

As ecommerce grows returns are going to grow.

For the long-term, people need to focus on how to become more efficient with their returns process.

Something that a lot of companies do a very poor job of is tracking what it actually costs them for return goods.

When we dive into this with some of our customers and once you get to a number it can sometimes be staggering.

What is important to consider when designing or revamping your reverse logistics center is having your ultimate disposition expectations defined and having an exit strategy for your product.

You also really need to consider your footprint and the equipment that you’re going to put in there and how you’re actually going to handle returned items.

In an ideal scenario, you have a returns area and then you have existing equipment that you can repurpose for your peak return season.

A good example of this is reusing your packing area or repurposing it for returns after you get through your initial peak and you get into your peak returns.

Another example would be to use something like AMRs.

Mobile robots are something that we often see used for picking applications.

You have the equipment you should reutilize it around the facility and have pick up and drop points for returns to help move product.

How to Replan Your Returns Strategy

  1. Set your enterprise level strategy. Define how you exit the inventory that and how do you handle product that cannot be returned to stock.
  2. Create a plan that supports the growth. Everyone has a growth plan sometimes it’s more reliable than others but you use that growth plan to help plan ahead, build your space, build your operation. Size it according to the volume that’s coming at you and plan ahead so that way it’s scalable and it can support your operation through the next five years not the next month or next peak season.
  3.  Find the right spot within the operation where you can position flex space. This way you can ebb and flow your operation as the volume surge.
  4. Locate your flex space in the most strategic area that allows efficiencies in terms of getting items back into stock. A position close to the dock will help. Don’t put it in the far corner of the building where it has no access to inbound docks because all you’re going to do is create inefficiencies.
  5. Consistently reassess. One thing that has been proven in the e-commerce world is that there’s constant chaos. Returns are going to continually evolve, it’s not going to be consistent two years or three years down the road. If you don’t reassess you’re going to be severely undersized. You want to create a plan and then constantly go back and reassess that plan just like you do for the rest of the operation. 
  6. Make sure that your plans are flexible. As you reassess this allows you the chance to make changes rather easily. 
  7. Have a plan to change as your volume changes. Returns are going to be an increasing part of everyday business and fulfillment centers. The companies that plan for and handle returns efficiently are going to be the ones that are successful long-term.

To discover more in-depth opportunities to enhance your returns processing, please contact us today to learn more about how to be prepared for the coming influx of returns, contact: 800-818-6242.

Employee-owned Hy-Tek, serves customers in the United States, Canada, and Mexico from offices in Georgia, Indiana, Kentucky, Ohio, New Jersey, Pennsylvania, and Tennessee.

Insights from

JoEllen Scofield

Marketing Specialist at Hy-Tek Material Handling, LLC.

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