Retail returns are messy. They don’t come with standardized naming conventions, neatly packaged, untouched, and at a preset market value. Returns arrive in various conditions, ranging from “like new” to distressed.
Regardless of the scenario, retailers must meticulously manage these items by making the best business decisions at every step of the returns lifecycle. This highly variable and complex process requires an intelligent, customizable platform. Traditional warehouse management systems (WMS) simply won’t do.
Here we review how retailers can maximize returns recoveries with the proper reverse supply chain warehouse system (RWMS).
Why Traditional Warehouse Management Systems Won’t Cut It
Traditional warehouse management systems (WMS) excel at managing new inventory. WMS can accurately document stock statuses, manage storage, move items around facilities and arrange transportation. They offer visibility into a business’ entire stock while overseeing fulfillment from distribution to store shelf.
Retail WMS's function impeccably for forward logistics because they rely on set policies and processes to manage systemized products. However, traditional WMS software can’t effectively manage returns because they don’t account for the product’s condition, real-time market value, or resale channel options.
If an enterprise wants to add reverse functionality to their current system, it must undergo a complex, lengthy, and expensive development process to integrate various software platforms. And in the end, integrations can only work properly if they contain the right data, including returns policy terms.
Why Retailers Need Reverse Warehouse Management Systems (RWMS)
Reverse warehouse management systems (RWMS) consist of all standard WMS and enterprise resource management (ERP) functionality, with the intelligence retailers need to maximize returns recovery. Optimized reverse systems make data-driven decisions every time a warehouse worker touches the product from the minute returns pallets are offloaded into the facility.
Throughout the process, the software guarantees the best possible business decisions for maximum recovery. This includes assessing the value of onhand inventory and updating disposition recommendations based on its stage, from receiving to refurbishing to palletization.
Key Benefits and Features
- Profit-Driven Disposition Decisions
Reverse warehouse management systems operate a bit like Google Maps. For example, when you type in a destination, Google evaluates millions of data points to determine the fastest route to the destination. Similarly, intelligent RWMS analyze various attributes like product type, sales channel, velocity, demand, processing costs, and shipping fees. Additionally, it determines the steps required to make a return sellable, like refurbishment and re-packaging, along with the sales channel to garner the highest resale value. Simultaneously, the system assesses the financial proposition of all possible outcomes and picks the best one. And as the value of inventory changes over time, the system updates to reflect the latest market data.
- Low-Code No-Code Customization
Traditional enterprise warehouse management systems come with impressive features. However, typically they lack one of the essential qualities for returns management–malleability. Unfortunately, retailers who want to change their current WMS often receive a $150,000 bill and a six-month waiting period. This is unacceptable in the fast-paced returns industry and why the latest reverse systems must incorporate low-code customization.
The best RWMS platforms consist of user-friendly customization tools that allow retailers to make real-time changes. These visual flow chart tools essentially mimic drawing one’s thoughts on a digital whiteboard. The difference is this scratchpad immediately translates the retailer’s ideas into programmable language–no coding required. It lets the user map out job changes and instantly push them to workers on the warehouse floor. Customizable workflows mean stakeholders can create data-driven rules to optimize every warehouse function.
For example, warehouse managers might determine that a two-person receiving function can be condensed to a single job completed on one mobile device. They can update the workflow directly from their computer and implement those changes on the same day.
- Cross Functionality and Seamless Integrations
Most retailers rely on many forward logistics tools that simply don’t cut it for returns management. For example, most organizations use traditional WMSs (like Manhattan) to manage inventory status and transportation. In addition, they utilize tools like ChannelAdvisor to resell the returns. Finally, some organizations also use a policy management system to track vendor contracts.
The problem is these systems don’t speak the same language. Operating blind, retailers can’t choose the marketplaces or price points that garner the highest resale values. Additionally, they can’t determine how best to consolidate reverse shipments or select the lowest-cost transportation provider. So, despite needing data from all three to make dynamic returns decisions, retailers must rely on disparate platforms.
That’s why it’s essential to work with reverse warehouse management systems that perform these holistic functions and integrate with a full returns software suite to make the best decisions. RWMS harness cross-functional data to ensure retailers choose the best secondary sales channels and transportation methods. They even go a step further by listing inventory directly on those marketplaces and fulfilling orders.
Top KPIs for a High Functioning RWMS
- Capacity and Flow
Returns warehouse managers must constantly look at capacity and flow, like how quickly the facility moves inventory in and out. Rapid turnarounds are critical because aging stock quickly loses value and takes up space, which adds storage costs. By implementing an RWMS or working with a returns partner with these systems in place, retailers see significantly faster flow moving inventory in as little as 2-7 days.
- Recovery and Velocity
Capacity and flow are essential. However, improving velocity and recovery is where retailers see the most profound financial benefits. Effective reverse warehouse management systems ensure that the net recovery is as high as possible, regardless of how long the products wait to leave the facility.
- Revenue Increase
At the end of the day, all retailers want to boost their bottom lines, and returns management is a key area where they can achieve their financial goals. To prove RWMS can effectively increase revenue, we implemented the latest software into one of our returns centers. Then, we conducted a case study to analyze changes. By making more intelligent disposition decisions, we projected we could recover an additional $6M annually.
- Warehouse Efficiency
Amidst the Great Resignation and rising supply chain costs, retailers need to improve operational efficiency. Using our RWMS workflow builder, we condensed a core job that previously required three people to one person. Based on this small change, reporting showed we could improve product check-ins by 40% with an estimated savings of $150,000 per month.
The Bottom Line
The world’s leading enterprise software for warehouse management is extraordinarily insufficient at managing returns. As a result, many organizations inadvertently leave millions of dollars on the table in unnecessary labor costs, storage frees, freight expenses, and lost recovery opportunities. By complementing their existing WMS with focused RWMS to manage their returns and excess inventory, retailers can optimize inefficiencies and recover lost profits.
