DC Velocity - IdeaBook 2014

point e-commerce items should be separated out and handled differently. To make those decisions, processing facilities must be able to identify whether each arriving item was purchased online or at a store.

When a returned item arrives at a warehouse, it is “checked in” by scanning. This is especially important in e-commerce because, unlike store returns, it will be the first time a returned item is physically entered into the retailer’s system, Parris says. In most processing facilities, the item will move on to a workstation where employees identify it, inspect it, and determine the best disposition.

However, because most e-commerce returns arrive in their original packaging, warehouses that handle large volumes of such items usually set up “ det-rashing” and “unpackaging” areas with appropriate equipment. In other respects, facility layouts and material handling equipment are similar to those for other types of reverse logistics activities, according to the experts consulted for this article.

Inside the warehouse or DC, flexibility and the ability to accurately identify each item that arrives are paramount. “You need to have the flexibility to process a full pallet of one product, which you might get from a retailer, and also be able to handle different products individually,” Sensing says. For that reason, the companies we spoke with for this story favor work cells where associates can identify, inspect, and make decisions about the disposition of the returned items. Ryder, for instance, organizes its cells along Lean principles that allow workers to modify their workspace to accommodate different types of products and dispositions (repair, repackaging, resale, and so forth). Applying the Lean concept of “standard work” helps operations manage the variability and unpredictability of e-commerce returns because it allows an individual who may never have seen the product being returned to follow a process that applies to every item, and thus be highly productive despite so much variability, Sensing says.

An asset-recognition program that helps asso-
ciates properly identify each item is a must. Such
systems usually are proprietary to the retailer. The
best incorporate not just the retailer’s product
database but also photos and detailed descriptions
of each SKU. The systems also include the retailer’s
business rules regarding the disposition of returned
items based on value, condition, and other consid-
erations. Some of the ones Parris has seen include
example photos of various conditions, which help
associates accurately identify the value that could
be recovered from each item. Asset-recognition
systems can be pricey, but the rapid increase in
e-commerce returns makes them well worth it,
she says. “The more volume you see, the more you
can justify an improvement in systems that let you
make a higher impact on value
recovery in returns processing.”

CONSTANT CHANGE

Online retailers are trying to master the art and science of handling e-commerce returns—most of them in partnership with third-party logistics companies that have long experience and deep expertise in reverse logistics. But the business of electronic commerce seems to change almost daily, and new challenges are likely to replace the old. Many e-tailers, for instance, are growing their international business, and so must deal with the complex, highly regulated process of managing returns across borders. Here again, 3PLs can lend their expertise.

Sensing expects that in the future, online retailers and providers of reverse logistics services will devote more attention to making it easier for consumers to return unwanted products. Some companies are experimenting with urban drop-off lockers and kiosks, while others are exploring how they might leverage their existing networks to bring returns services closer to consumers. Considering the continued robust growth of e-commerce sales and the concurrent increase in returned goods, it seems likely that helping online retailers improve service to consumers is where the reverse logistics action will be for some time to come. ;