In the previous blog,‘Does the supply chain need re-inventing?’, we considered the almost-byzantine journey taken by consumer goods from the point of manufacture. However, what happens when it bounces back?
Most online retailers expend significant effort in developing their supply chain and ‘customer journey’ with all the attendant detail. However, many still struggle to get their head around returns and most certainly do not apply service levels/KPIs. It is usually viewed as a ‘necessary evil’ and cost of doing business. When developing back office systems, revenue-generating features and output speed generally take precedence and whilst processes such as returns are often overlooked. Big mistake.
It is worth considering some facts: on average, 1 item out of 10 bought online is returned (business-to-consumer) and this is usually higher for clothing and fashion companies. A thumb-in-the-air calculation suggests that for every 100 sales orders processed per day, you will require 4 staff to adequately service the consumer. Based on the above ratio in an average sized operation processing 500 orders per day, you would expect at least 50 returned items per day.
So, how much time (often hidden) does your organisation devote to returns management, and what cost can be attached to this task?
The problem is that returns processes cannot be easily regimented. In most cases, a sales order will take, say, 1 minute to pick, 2 minutes to process and 1 minute to pack – a repetitive task and easy enough to calculate your costs. However, due to the numerous permutations involved, the outcome of a return is not so easy to predict and, as a result, can absorb significant time, cost and high-value skills. Many choose not to give it the attention it deserves and live in denial!
From an IT perspective, returns management poses a unique problem – it is not ubiquitous or standard and many channel management packages have virtually no functionality to handle it efficiently. However, more sophisticated back office software solutions like 3EX.NET have been specifically designed to crack this problem.
Do you have a pile of returns in the warehouse gathering dust? If only those items were processed in as quickly as they originally left the building!
Let’s consider the ripple effect caused by a returned item; items must firstly be identified as valid (checked against sales history), the customer contact record updated, stock and cost of sales corrected, and a customer returns transaction (refund or replacement) created. From a business process viewpoint, these activities represent distinct workflows within the sales order processing, customer service, stock control and accountancy areas, and most systems do not have the flexibility or breadth of functionality to handle them. In the 3EX.NET environment, every activity associated with a returned item is handled within one ‘rolled up’ process, with each step driving subsequent actions within other parts of the organisation.
Generally the stock handling processes will lag behind the speed at which you wish to service the customer. Therefore the best-practice approach is to split a return between ‘customer’ and ‘stock’ processes. This enables each side of the transaction to be settled within an appropriate timescale, but removes the interdependencies, i.e. a stock item does not have to be inspected and processed before the customers’ request for, say, a replacement is processed. This reduces the administrative burden and focuses resource on revenue-generating activities.
Over and above the process issues posed by returns, there is a need to present users with an easy-to-use interface to help them handle the customer’s request in a professional and expedient manner. 3EX.NET has been tested and refined through user feedback. As a result, entry of a return transaction has been reduced to the minimum number of keystrokes.
Even with advanced workflow management such as that provided by 3EX.NET, handling returns does rely on a degree of manual and skilled administration. However, a new generation of ‘smart’ technologies are becoming available, that could potentially automate the entire process. Barcoding enables tasks to be de-skilled using scanning to identify returns documents and products prior to processing. Further out, RFID (Radio Frequency Identification) technology has the potential to revolutionise the way in which organisations store data and manage workflow. RFID ‘tags’ can be attached to products storing all transactional data, which means that when items are returned, the supporting process can be automated as soon as they pass through the warehouse door. That is real Buck Rogers stuff.
RFID overcomes the shortfalls of other automation technologies such as barcoding, because it operates without the requirement for ‘line-of-sight’. At this time, RFID is relatively expensive to implement, but the potential efficiencies and cost savings within a warehouse environment are significant. The industry is working hard on standardisation and economies of scale are driving down costs. Expect to see RFID become a core element of the supply chain over the next decade.
Returns are difficult. The financial impact is seldom quantified or understood and, very often, little investment is made on improving matters. However, ease and speed of returns is one of the key measurements of customer satisfaction and can be costly if handled badly. This is justification enough to analyse your processes and develop solutions to adequately handle the problem.