DC Velocity - November 2013

st rat e g ic i ns i g ht R EVE R S E LO GI S TI C S

through the entire returns handling process, Parris says.

A retailer’s crediting, accounting, and inventory tracking policies may even influence physical handling procedures. If those policies differ for e-commerce and brick-and-mortar sales, Vehec says, then those parameters will influence the design of the process flow, including at which 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 “detrashing” 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 associates 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 considerations. 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 pricy, 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. ;