The Gardner Group predicts returns from online purchases will total $11 billion by 2002. Learn how software solutions can prevent draining your business’ profits.

With more and more e-commerce transactions taking place in the web, manufacturers ought to pay particular attention to the issue of returned goods. The Gardner Group Inc. of Stamford, Conn. predicts that by 2002, products returned from online purchases will total $11 billion with losses between $1.8 to $2.5 billion. Fortunately, the handling of returns – or reverse logistics, as it is sometimes known – can be greatly improved by software designed to manage the processing, transportation and storage of returned goods. By taking control of their reverse logistics process, companies can realize considerable value from products returned to them.

In many companies, the responsibility of managing returns is spread over a number of departments, a situation that discourages accountability, and obscures the actual cost of returns. This lack of focus can have negative consequences. On the one hand, consider the eyewear manufacturer that refused to accept returned products from a major retailer and witnessed an immediate slide in its stock value. On the other hand, those companies that diligently address their reverse logistics have been known to increase their annual profits. According to Dale Rogers, professor of supply chain management, University of North Florida, “When it comes to returned product, there’s a fair amount of money often left on the table. Manufacturers need to be aggressive in managing what happens. They need to have a plan and make good decisions to get value out of returns.”

There are software packages aimed at managing both Business-to-Consumer (B2C) and Business-to-Business (B2B) return processes. Among the B2B variety is software that facilitates the handling of high volume shipments, navigates complex sales agreements, and takes into full account the intricacies of supply chain relationships. By providing an avenue for reporting the reason(s) why goods are returned, the software can then assess the condition of a goods from the onset. Anyone wanting to return a product can simply log onto the purchasing site and enter the product identification and reason for return. All without having to call customer service. In addition to acquiring helpful data and disseminating it quickly, managing reverse logistics electronically can reduce the time factor that traditionally plagued the return process. The manufacturer in possession of the data can process the returned goods at a quicker pace, and at a lower cost. Further, by having data on the causes for returns, companies can better focus on product quality in the hope of reducing the quantity of good returned in the future.

The redistribution of returned goods is another area where companies can compensate for profits that otherwise would have been loss in the return process. Some manufacturers negotiate with the buyer to accept some of the cost of returns. Other ‘brand sensitive companies” arrange for the returned goods to be redirected to their outlet stores for a tidy profit. Still others rely on online auctions to resell their products, using their own site or others set up for that purpose.

From all appearances, companies that have implemented a comprehensive plan to deal with the often-undeveloped potential of reverse logistics have reduced the possibility of having profits drained from their bottom line.

Source: Logistics in Reverse
Helen L. Richardson
Industry Week, April 16, 2001
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