Reverse logistics planning: Three considerations for an omni-channel environment

You’re trying to do everything right to lure in online shoppers: You offer free shipping. Customers can return merchandise to a retail location. You even offer free returns through the mail. But this freedom for the customer can mean a lot of headaches and cost for you. The demands of the omni-channel marketplace are not only changing the way companies fulfill orders, but how they engineer reverse logistics processes. While you need to please the customer, you also need to be profitable.

Consider this common scenario: Since you offer free returns through the mail, customers have a tendency to over-order various styles, colors, and sizes, and then mail back the items they don’t want. Now, you have a significant increase in returns coming in via the mail and perhaps through retail stores. How do you handle this efficiently and effectively? How do you ensure that the product goes back into inventory quickly so it can be available for sale again? You don’t want to lose an order because it appears to be out of stock, but was actually returned to a store recently.

Considerations for reverse logistics in an omni-channel environment are complex. Here are three of the most important factors to consider as you plan your processes:

Tear down silos
In the old days, a retail order typically traveled from the manufacturer or supplier to the national distribution center (DC), to the regional DC, to the store, and finally to the customer. Not anymore. In an omni-channel market, the retailer may request that an order be fulfilled from any location to meet customer demand quickly.

When the goal is to fulfill external expectations, you must remove internal issues that will get in the way of that goal. In addition to fulfillment silos, examine other areas that could operate more effectively if they were integrated instead of separated. These could include systems, inventory tracking, networks, the sales and reporting processes, and more. Granted, this is no easy task. Flexible and adaptable software will be needed to meet the unique needs of your business while working across systems to help give you better visibility and track metrics.

Create a single pool of inventory
To effectively manage reverse logistics processes in an omni-channel environment, maintain accurate inventory counts at every stocking location from which fulfillment can occur. In addition, you should have an understanding of what inventory is on its way into those locations and when it will arrive.

Creating a single pool of inventory goes hand-in-hand with tearing down silos across your organization: When inventory is treated as one pool and when you have real-time data to view that inventory, you can make better decisions about order fulfillment across all channels and be confident that you have the right product on your shelves and in your customers’ shopping carts at the right time.

Again, the right supply chain management software is critical in this scenario: It can help provide real-time store inventory information to your customers, trading partners and store management. It should have the ability to integrate with order management, store replenishment, supply chain planning, POS, planogram and ERP systems for quality customer service and supply chain efficiency – no matter what fulfillment center configuration you require.

Labor productivity
If you are handling more returns, your labor costs can potentially increase. Tracking productivity to ensure efficiency and cost-effectiveness is important in this situation. A performance management system gives you the ability to track industry-specific key performance indicators (KPIs) over time, build and incorporate your own company-specific KPIs, and perform analysis on the data. But more than just providing metrics, a performance management system can help communicate goals to your workforce and improve their understanding of the results needed in order to meet the demands of this ever-changing marketplace.

Managing inventory beyond the four walls
When approaching reverse logistics, the ability to track items and have real-time control and visibility is paramount. Consumer demands are changing and the expectation of being able to buy, fulfill and return anywhere means that you have to be creative and proactive with your warehouse strategies for both delivering the items and returning them. For those omni-channel retailers that prioritize reverse logistics and employ the flexible tools needed to implement those processes, the goals of tearing down silos, creating a single pool of inventory and ensuring a productive labor force will not only optimize the order process, but help improve the entire supply chain.

 

Chuck Fuerst is the director of product strategy at HighJump Software. He has more than 15 years of experience in the technology market, working for supply chain and ERP software companies to deliver innovative solutions. Chuck is responsible for monitoring supply chain industry and technology trends and identifying ways to enhance the value of products for HighJump’s customers. He holds a bachelor’s degree in marketing management and innovation from Concordia University.