Maximize Your Returns with an Efficient Reverse Logistics Strategy

  • May 25, 2022
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Product returns are an afterthought. Sure, there are companies that have come around to the Zappos model. They expect a high percentage of purchases to come back and have built this consideration into their business process. However, most retailers have yet to 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, they often lose dissatisfied customers 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. For the most part, returns are an outcrop of customer dissatisfaction, whether it be damage, size or product misrepresentation. Regardless of the reason, when a company’s reverse logistics lack as much forethought as its forward logistics, returns tend to be treated as accidents instead of a natural aspect of conducting business and can reflect on 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 the expected customer experience, or their 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:

  1. Consider a return as a “gift”

    Returns amount to friction in a customer lifecycle. As such, the data provided by a return can provide a tremendous amount of business intelligence. The key is to get to the true root cause. Was it a sales rep who didn’t properly match the customer’s needs with the product? Were the instructions so poor that the customer 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.

  2. Treat returns like rotting fish

    The speed of disposition and triage can help maximize the value of the return and ensure the highest level of recovery.

  3. Respect the return

    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 doesn’t mean there isn’t a brick inside the box. Proper inspection ensures that there aren’t any surprises if the product is restocked and sold to the “next” customer or if the repurposed product is over or undervalued.

Designing a proper reverse logistics process

The bottom line: The amount of planning that goes into forward logistics should also be applied to reverse logistics. The best designed reverse logistics systems consider customer experience, regulatory bounds, handling requirements to recover the product, triage and disposition for repurposing the product.

You shouldn’t consider reverse logistics an “accident” or a “burden.” It can be a great opportunity to harness customer data and increase customer goodwill while still achieving the 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’ll definitely handle you. Don’t want that to happen? Then seek the expertise of those with the experience and know-how to help get your reverse logistics strategy on track and start building value for your company today.

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Irv Grossman

Irv Grossman is Senior Vice President of NTT DATA’s Supply Chain Consulting Practice. Irv leads a group of passionate professionals committed to helping companies generate maximum value from their supply chains. Previously, Irv was CEO of Supply Chain Consultancy Chainalytics and Vice President of Supply Chain Operations for Cingular Wireless (now AT&T). Irv began his career with posts at Kraft Foods, American Honda and Accenture.

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