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Reverse logistics: How to maintain profitability

David Stevens, OPEX CEO and Khurshed Mirza, OPEX Asia Pacific (APAC) Director, share the profitability of having an efficient returns management system that is powered by automation.

It’s Christmas time across the supply chain, but it’s only July? November is annually known as the beginning of the outbound inventory rush for retailers. Following a few weeks of holiday returns, distribution centres can take time to breathe after Christmas presents have been bought and returned.

However, in recent times, the traditional set Christmas peak period is now a piece of cake compared to the volume of orders that fulfilment operations have been experiencing since consumers started panic buying in March. Everyday fulfilment centres are operating at maximum speeds and processing orders at rates never seen in the global supply chain outside the holiday rush.

For today’s retailers, dealing with returned goods is one of the toughest challenges they face. During social distancing restrictions at the peak of the recent COVID-19 pandemic, more people were online shopping than ever before. Fashion retailers reported online orders were up an astonishing 450 per cent compared to the prior year, with many retail markets including fitness, grocery, home and garden recording similar figures.

Unlike the holiday period, when companies can forecast orders and returns, the current situation is rapidly changing. Therefore, when returns volume is as high as it will be, a returns management system that is integrated in everyday warehouse operations is essential.

David Stevens, OPEX CEO and Khurshed Mirza, OPEX Asia Pacific (APAC) Director, say returns aren’t a burden on operations with the right scalable solution.

“e-commerce retailers focus more on fulfillment and often don’t have a viable solution for returns. As more brick and mortar locations move exclusively to online, returns will continue to grow,” says Khurshed.

FAVOURABLE RETURNS

Dave says not only is it optimal to have an efficient returns system, but it is makes good fiscal sense. “Online merchants will need to re-think their distribution centres to efficiently handle the surge of returns and the impact to the bottom line,” he says.

Most OPEX clients in the US have experienced a dramatic increase in e-commerce operations, even up to 300%. As more orders get fulfilled, more returns have come back to the retail sender. Companies have been forced to question automation capabilities, exploring solutions that process returns within the warehouse management system that is already in place.

For apparel in particular, there tends to be a very high percentage of clothing items that get returned and can easily be resold by the merchant. Being able to process that efficiently and get it back in the supply chain loop, makes returns management just as profitable as an original order.

Khurshed believes return management can be complex, but the quicker the returned goods can be entered back into the order fulfillment system to customers, the better off a business will be. Khurshed says the efficiency lies in the automation of the warehouse system for sorting and picking. “It’s time to eliminate the manpower of manually sorting through packages of returned goods and entering them into the fulfilment loop. You can get immediate savings with a sophisticated automated solution,” he says.

RAPID FULFILLMENT

A constant two-way flow of merchandise requires considerable and dedicated restocking labour, and the labour allocated to managing returns will only climb as the volume of direct-to-consumer sales continues its upward trajectory.

It’s imperative that merchants get returned merchandise back in stock and into a saleable position as quickly as possible during this time of unprecedented demand. That’s where automation comes in.

Khurshed says Perfect Pick® from OPEX is scalable and can perfect the put function of the returns process as it is at speeding the pick function that enables rapid fulfillment. “Perfect Pick’s iBOTs can put products back into storage racking as fast as they can pick those goods for order fulfillment, which relieves a labour-and cost-intensive reverse logistics burden in distribution centres and speeding time to resale of returned merchandise,” he says.

Keeping the cost of reverse logistics under control and getting returned goods available to sell are growing imperatives, and flexible two-way warehouse automation like Perfect Pick is a key enabler of those goals.

Developing an e-commerce channel almost always requires retailers to expand their SKU counts. Automating put away processes relieves that burden, Perfect Pick goods-to-person solution can handle the put function of the returns process as seamlessly as it picks SKUs for fast fulfillment.

OPEX’s Sure Sort™

The system can be set up to allocate and pick items for fulfillment from the front while returned goods are simultaneously put away from the back, items can be picked for fulfillment on one shift and returns put back on another, or merchandise can be picked for fulfillment while returns are put back in place simultaneously through two-way screen and light user interface.

OPEX’s Sure Sort™, a robotic item sorter that handles complex variables and delivers a wide variety of parcels and single items to their final location in a single pass, is helping clients achieve performance levels of over 2,000 order lines per hour with precision accuracy.

“Sure Sort can increase pick and pack rates by more than 7 times depending on the operation, equivalent to around 6 labourers. In a time where less human contact is welcome, this automated sortation solution is allowing retailers the flexibility for the goods-to-person system to grow with less workforce,” Khurshed says.

Khurshed adds, “the proven accuracy and small footprint of both Perfect Pick and Sure Sort is giving companies the ability to breathe and successfully manage the influx of return goods experienced across operations in both Australia and the US.”

ELEVATED EFFICIENCY

Current trends indicate that returns will only continue to increase as e-commerce booms, The challenge isn’t reverse logistics but handing both inbound and outbound fulfilment.

A recent study from a UK consultancy agency found that nearly two-thirds of customers wouldn’t make an order if they had to pay for returns. “Everyone who is part of the e-commerce industry is trying to get a share of the pie to build their customer base. Companies are competing to entice customers by offering an attractive returns policy, but it needs to be financially viable,” Khurshed says.

Dave and Khurshed say that the only way companies can be viable is to implement automation in its reverse logistics process. “Having a credible solution in place to manage returns whilst simultaneously picking and packing new orders ensures cash flow isn’t lost,” Khurshed says.

“It’s a balancing act, you can’t stop your current operations and you have to solve for increased fulfillment and returns,” Dave says. For large retailers, flexibility and scalability are achieved by integrating business applications and systems. Although it may not be feasible for a small to midsize retailer to achieve full automation immediately, OPEX knows replacing the traditional person-to-goods fulfillment model with an automated solution is a good place to start.

Khurshed says the benefit with OPEX Sure Sort is that the customer doesn’t need to have a huge initial capital investment, it is scalable and can be implemented whilst continuing operations, which is un-thinkable during this peak of increased fulfilment. OPEX Sure Sort is utilised by leading retailers across pharmaceutical, fashion and electronic brands, and 3PL’s.

“Sure Sort grows with the business, which our clients are thankful for. We’ve had plenty of well-known clients across the global supply chain who have started with Sure Sort and scaled up as their e-commerce operations have taken off, which has proven to be a really powerful investment,” he says.

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