According to the National Retail Federation, 2024 will see a significant rise in returns. The organization said it expects consumers to send an estimated 16.9% of all retail sales back via reverse logistics. This translates to around $890 billion worth of merchandise.
Returns are becoming more common as more consumers opt to shop online rather than do their buying in physical stores. In a perfect world, all sales would be final, or all end users are satisfied and companies don’t have to worry about returns, but that’s not reality. Therefore, retailers must take the necessary steps to streamline the return process and better handle reverse logistics.
In this article, we’ll explain what reverse logistics is and the role it plays in the supply chain. We’ll also talk about the steps that retailers can take to optimize the process both for the benefit of their customers and their bottom lines.
Reverse logistics 101: What you need to know
Reverse logistics refers to the process in which an end user returns a product to the manufacturer or distributor. This can happen for various reasons: The product might be the wrong size, defective, damaged during delivery, or simply fail to meet the customer’s expectations. In some cases, customers may return items because they realize they no longer need them.
The rise of e-commerce has significantly increased the volume of returns. Unlike traditional brick-and-mortar shopping, where customers can try or inspect products before purchasing, online shopping often involves a leap of faith.
Consequently, retailers are now prioritizing the returns process. They’re investing in making it as seamless and customer-friendly as the buying experience.
One standout example is Amazon. Previously, customers had to visit the company’s distribution centers or independently ship their returns.
Today, Amazon has simplified this process by offering convenient drop-off options at locations such as Amazon stores, Kohl’s department stores, and other designated spots—all free of charge. This approach not only reduces friction for customers but also fosters loyalty. In fact, research indicates that 98% of consumers are more likely to shop with a retailer again if its returns process is hassle-free.
While creating a smooth return process for consumers is vital, it’s only part of the equation. Retailers also face the challenge of efficiently managing returned items once they reach their distribution centers.
From inspecting and restocking to recycling or refurbishing, optimizing these operations is crucial to maintaining profitability and sustainability.
Next, let’s explore how warehouses and distributors can improve their reverse-logistics processes, turning returns from a challenge into an opportunity.
How to optimize reverse logistics
So how can you optimize reverse logistics at the distribution center level? Automation is the solution. A market disruptor, robotics is changing the game — for the better — in many industries. It is no exception for returns management.
While automation in the distribution center environment largely focuses on picking, packing, and shipping items to end users following purchase, you should also make efforts to better accommodate items at the various return centers that companies and brands operate. You’ll need to deploy a combination of software tools and materials handling automation to enhance the returns process.
One way to do this is by implementing a returns management system (RMS) and integrating it with your warehouse management system (WMS) that considers reverse logistics. Building out different scenarios into the RMS or WMS can help address various types of returns.
RMS/WMS can also help with re-barcoding returned items so they can go back into stock for resale faster, improving inventory management practices.
This process can be further elevated with artificial intelligence. The big benefit of AI is the ability to learn historical data and get data-driven insights. These can help leadership make decisions smarter and faster.
AI is being integrated into just about everything these days. Incorporating it into RMS/WMS software can also serve as a payoff for retailers. The capability to utilize software and automation to manage returns will become a real competitive advantage.
You can incorporate automation into reverse-logistics operations in much the same way it has become increasingly integrated into order fulfillment. Automated storage and retrieval systems (ASRS), package and unit sorters, and autonomous mobile robots (AMRs) can be designed and integrated in much the same way.
Once a return is triaged and identified, it can be routed through materials handling automation to improve a process that was once manual, slow, and costly. A well-designed returns process incorporating the sophistication of an RMS integrated with robots and software is a recipe for improving your bottom line.
Work with a qualified logistics partner today
Figuring out where to start with optimizing reverse logistics and the many systems that might help streamline the process can be overwhelming. That’s why it can be valuable to work with a qualified partner.
A partner can assess your operations and make recommendations on how to improve the returns process and what systems your operations could benefit from implementing.
Optimizing reverse logistics can give a huge competitive advantage to the brands and retailers that get it right. And while a big part of it is making returns easy and convenient for consumers, internal optimization is also very important.
Online retailers should take the necessary steps to assess their various warehouses and distribution centers and add automation to better respond to unforeseen circumstances and turn around returned goods faster.
About the author
Cecile Dick-Calmes is a content marketing strategist and creative leader with experience in business-to-business and business-to-consumer digital marketing. She is currently the marketing manager at Daifuku Intralogistics America.
Daifuku Intralogistics America is a global leader in intralogistics and automation solutions. With decades of experience, the company specializes in designing, manufacturing, and delivering advanced material handling systems to optimize efficiency, enhance safety, and drive productivity in warehouses and distribution centers.
Editor’s note: This article was syndicated with permission from Daifuku’s blog.
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