Returns management in supply chain: Check examples, process, strategies

With the changing preferences of the way consumers shop, the patterns are changing too. With the increased popularity of e-commerce, returns management is gaining importance. As convenient as it is for consumers to return, it is equally difficult for logistics partners to manage returns. This article takes a closer look at what returns management is and how one can manage returns efficiently.

What is returns management?

As the terminology suggests, returns management is managing products returned from the customers. Whether in the traditional format of the business such brick and mortar or B2B or new age businesses such as e-commerce, returns management is a crucial activity.

It is noteworthy that managing returns is a tedious task that also involves costs for reverse logistics. In other words, it impacts the profitability of the business. In such cases, why do businesses still prefer to manage returned products?

Why returns management is important?

One of the most important benefits of accepting returned products from customers is achieving customer satisfaction. When a customer does not like the product or it’s not the best fit for them, they tend to return and place a replacement order.

In other scenarios such as damaged or defective products, taking accountability of your product and replacing it with the quality expectation can lead to customer satisfaction and loyalty. Hence, managing returns is of utmost importance from the customer satisfaction and loyalty point of view.

Returns management examples

Here are some of the common examples of why products are returned.

Product expectations not matched: his usually happens in the case of e-commerce. Since customers buy products without having a look and feel of the product, the actual product does not match the colour, size or fit that the customer expected. In such cases, customers request for return.

Shipping damages: Sometimes, products are damaged when they are in transit. Mainly it happens with fragile items. Shipping damages can be minimised with the right selection of packaging and careful handling.

Product defects: In case the product is defective, for example, a torn apparel is delivered to the customer, then the customer returns the product.

Returns management process: How returns management works?

Here is how the returns management process works.

• Customer initiation: The customer initiates the returns by sending a request via email, call or the system. In the case of a bricks-and-mortar store, customers can walk into the shop to return the product.
• Reverse logistics: Once the request from the customer is initiated, pick-up is arranged. The product is then brought back to the fulfilment centre.
• Processing returns: Once the product is back in the fulfilment centre, the return is processed. In case of replacement, another product is dispatched, or a refund is initiated.
• Noting reasons for returns: It is important to document the reason behind the return. Sometimes, products are returned due to size, shape or colour mismatch, while the product is okay. On the other hand, sometimes products are returned due to quality issues or shipping damages.
• Testing: Products are then tested for any issues, damages, etc. In case of product is returned due to damage or quality issues, products are tested to understand the problem and make a decision on how it can be further processed.
• Repair, refurbish or restock: Depending on the issue, the product is either repaired or refurbished. If the product is returned the terms of mismatch of colour, size, shape, etc., it is brought back to the inventory. 

Returns management: Points to remember

• Data analysis Firstly, it is important to analyse the frequency and flow of returned products. For example, according to a market study, the rate of returns for all products bought online is about 30% as compared to brick-and-mortar’s rate of returns is about 9%. Another study suggests that apparel has the highest rate of returns of about 12%.
• Designing returns workflow: When you have a clear workflow with regards to handling returns. Create a standard operating procedure (SOP) for the team to efficiently manage returns. Additionally, automated operations such as the use of a warehouse management system or inventory management system can help you streamline the workflow and bring efficiency.
• Efficient reverse logistics management: You can collaborate with an efficient logistics partner for efficient reverse logistics management.

Returns management: strategies

As mentioned earlier managing returns is a cost for the company. However, it helps the business attain customer satisfaction. However, a business needs to be mindful while managing returns. Here are some of the strategies that can help a company to a manage returns effectively.

Returns policy: One needs to have a defined returns policy. It should mention the duration within which the product can be returned or even the reasons for which a return request can be placed. For example, Pantaloon a leading apparel brand allows product returns within 30 days of purchase. On the other hand, some Amazon sellers accept return requests only in case of defective products.

Outsourcing to a fulfilment company: Outsourcing your activities with regards to a fulfilment centre can help you to be more efficient with return management and reverse logistics. Fulfilment centres have a n expertise to handle returns. Therefore, they are able to do the job more efficiently.

Documenting reasons for returns: It is important to document the reasons for returns. It helps to analyse the data for further use.

Minimise returns: Minimising returns is the best-case scenario for any business. Therefore, it is important to understand why products are being returned from customers. For example, if there are too many cases of shipping damage, you can change the packaging material to better protect the product.

Conclusion

For small businesses, outsourcing return management and reverse logistics functions is advisable. The logistics partners have the required ability, expertise and knowledge to deal with it. Also, due to the economy of volume, logistics partners can do it at a much better cost.