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OM in the News: Reverse Logistics Takes Over Now that the Shopping is Done

January 12, 2019

The holiday season brings a series of challenges to the supply chain industry — especially as e-commerce continues to grow. Companies have to efficiently ensure that customers’ packages will arrive in a timely matter, putting added stress on the warehouse and transportation sector. But the peak season doesn’t end once the holidays are over. In fact, reverse logistics makes the busy season last even longer as more people return unwanted holiday gifts. Here are 3 observations from Supply & Demand Chain Executive (Jan, 11, 2019):

1. Delivering hassle-free returns is critical to retaining customers, and consumers are looking to shop with brands that quickly provide refunds. Retailers must leverage tracking for returns and offer progress reports on the transaction, which requires an efficient supply chain.

2. Overly consumer friendly return policies encourage a costly rate of returns.  L.L. Bean ended its lifetime return policy this year because it led to “abusive” returns, costing the company $250 million in losses over the last 5 years. When particular items are consistently being sent back, inaccurate product descriptions or sizing can overburden reverse networks. While the push to use less packaging materials can reduce a company’s carbon footprint and costs, a delicate balance must also be achieved. If packaging fails to adequately protect merchandise during transit, it is more likely to arrive damaged, prompting items to be returned more frequently.

3. Some retailers are leveraging dedicated reverse networks to handle returns, grading out products to be entered back either into regular sales or second channel distribution. Designing facilities specifically for reverse logistics allows companies to process returns more efficiently and effectively.

A strategically designed reverse network allows retailers to shrink the time frame from the start of the return to when a customer receives a refund. Organizations that empower their brick-and-mortar stores to process online returns can reduce the stress of returns for customers and decrease the amount of time returned merchandise is in the reverse chain.

Classroom discussion questions:

  1. Why is reverse logistics important?
  2. Define a “closed loop supply chain.” (See Ch.11)
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