As the 2019 holiday fulfillment surge and its frantic customer fulfillment activities meet the last 24 hours of operational execution, another increasing important phase of the online retail world is starting its peak.

This, of course, is the retail-focused reverse logistics processes involving millions of customers returning goods to U.S. and other global retailers for various reasons.

A 2019 survey conducted by parcel transportation and logistics provider United Parcel Service (UPS)  indicates that upwards of 39 percent of U.S. online shoppers will return their purchases, often, directly to a store or designated local parcel pick-up area.  The carrier anticipates multiple one million per day shipping volumes of returned goods to occur through the remainder of this week, with the peak anticipated on January 2ndOnline buying and merchandise returns

Increasingly, one of the conveniences of online ordering is the ease of returning goods without the usual hassle of past retail experiences. The Wall Street Journal recently quoted data from B-Stock Solutions that indicates that U.S. consumers are expected to return between $90 billion to $95 billion worth of merchandise during this year’s holiday buying season. That is expected to be a 20 percent jump from last-year’s levels.

More and more online retailers offering more convenient third-party drop off locations providing added convenience for online consumers. However, that adds to the overall direct and indirect costs associated with online retail, and in the case of merchandise returns, such costs may be hidden for weeks.

Just as Black Friday or Cyber Monday online sales provide spikes or disruptions to U.S. wide logistics networks, similar spike periods impact reverse logistics networks.

While consumers can garner an immediate online credit for their merchandise returns, the actual accounting for the returned inventory, either saleable or non-saleable can often take weeks and returned merchandise makes its way through various channels and supplier sources.

Huge volumes inundate reverse logistics centers and warehouses. A tedious process of having to check the condition of each returned merchandise often take far more time than the original pick and ship process. Once more, some organizations release their temporary workers shortly after the Christmas holiday to reduce labor expenses before ledgers of the holiday quarter close.

If touring a warehouse meets your fancy, do so in the first part of January. That way, one can get a true sense of the efficiencies of processes and systems, since customer returns are often stuffed in areas that are segregated awaiting evaluation. Often times, that inventory can be hidden from physical view, and the clutter can be striking. Warehouse workers then to shun merchandise returns processes because of their tedious and time-consuming nature.

For teams concerned with gathering the latest data on online purchases, this growing trend can be a bit frustrating since the true net number of actual sales will likely not be available for some time.  For supply chain product demand planners, that is especially important in planning inventory, capacity and production needs for the first three months of 2020. A high level of inventory write-downs in-turn impact product margins for product groups.

Many months go into the planning of holiday or other seasonal related merchandise, often with minimal consideration to the increasing convenience of online enabled merchandise returns.

Just as occurs in complex equipment component or repair inventories, merchandise and inventory planners may indeed have to factor the notions that certain amounts of specific inventory will increasingly have a repeating inventory turnover cycle.

From our lens, this will be a ripe area for added application of artificial intelligence enhanced planning processes where the software can identify and factor repeat inventory turns based on levels of high merchandise returns, as-well as flag merchandise for specific consumer dis-taste or quality concerns.

For retail focused supply chain management teams, consider the changing notions of merchandise returns and reverse logistics processes in your supply chain digital transformation process planning needs.

 

© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.