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Returns Disposition

Reverse Logistics: How to Optimize Efficiency in Your Warehouse Management Operations for Retail Returns

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 incorporating intelligent and customizable Reverse Logistics Software Solutions. 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).

Limitations of Traditional WMS: Exploring the Gap in Reverse Logistics Software

Traditional warehouse management systems (WMS) excel at managing new inventory but lack product returns management capabilities. 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 functions impeccably for forward logistics because they rely on set policies and processes to manage systemized products. However, traditional warehouse management software can’t effectively manage reverse logistics because it doesn’t account for the product’s condition, real-time market value, or resale channel options.

If an enterprise wants to add reverse supply chain functionality to their current system, it must undergo a complex, lengthy, and expensive development process to integrate various returns software platforms. And in the end, integrations can only work properly if they can incorporate critical product and vendor data, such as returns policy terms.

From Receiving to Reselling: How Reverse Warehouse Management Systems Streamline the Returns Process

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 on hand inventory and updating disposition recommendations based on its stage, from receiving to refurbishing to palletization.

Key Benefits and Features

1. Understanding Profit-Driven Disposition in Returns Management

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 reverse logistics software 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.

2. Enhancing Decision-making in Reverse Logistics through Low-Code No-Code Solutions

Traditional enterprise reverse logistics software comes 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 six-figure bill and a six-month waiting period.  

The best RWMS platforms consist of user-friendly customization tools that allow retailers to make real-time changes to their reverse flow of products. 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.  

3. Improving Reverse Supply Chain Efficiency with Cross-Functional Solutions

Most retailers rely on many forward logistics tools that simply don’t cut it for reverse logistics management. For example, most organizations use traditional WMS (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 disparate 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 unsynchronized software platforms that do not solve their reverse logistics management problems.  

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 harnesses 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.

The Key KPIs for Effective Returns Warehouse Management Systems

1. Efficiency of Reverse Logistics Solutions and Services

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 management solution partner with these systems in place, retailers see significantly faster flow moving inventory in as little as 2-7 days.  

2. Optimizing 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.  

3. Enhancing Revenue with Reverse Logistics Strategies

At the end of the day, all retailers want to boost their bottom lines, and reverse logistics software 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.  

4. Maximizing Return Service Cost Savings  

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

In conclusion, the predominant enterprise software for warehouse management falls remarkably short in handling returns, causing many organizations to unintentionally forfeit millions of dollars due to superfluous labor costs, storage fees, freight expenses, and missed recovery opportunities. By supplementing their current WMS with a specialized RWMS to manage returns and surplus inventory, retailers can rectify inefficiencies and reclaim lost profits. As the world's leading retailers underscore the significance of Reverse Warehouse Management Systems, it is evident that adopting such strategies is crucial for gaining a competitive edge in today's dynamic reverse logistics market.

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