A data-driven digital-first reverse supply chain should be part of every retailer's corporate strategy. Critical components include data visibility, one source of truth and predictive analytics.

Kimberly McKinley

Kimberly McKinley, director, supply chain transformation consulting practice, NTT Data Services

The recent record growth of ecommerce sales and returns has challenged even the most innovative and efficient supply chains. Researchers forecast the value of the global reverse logistics market will be $788 billion by 2028, a 5.1% compound annual growth rate from 2021. The days of letting store and online returns pile up in the corner of a store or warehouse, unavailable for resale until months later at a deep markdown, are well behind us.

A data-driven digital-first reverse supply chain should be part of your company’s corporate strategy if it wants to please today’s customers. Customers return 30% of merchandise purchased online versus 10% of in-store purchases. Is your reverse supply chain ready to handle these returns? Here we discuss the three critical components of a modern reverse supply chain: data, a returns solution and multi-channel resale.

Data 

Critical components of a data-driven reverse supply chain include data visibility, one source of truth and predictive analytics.

To compete in today’s market, retailers need data visibility across their entire supply chain, including post-sale activities. Leaders have item-level visibility on all returned units. They achieve this by applying and scanning a unique UPC or license plate to each unit, item-level visibility allows retailers to differentiate between the same SKU with more than one unit on hand across varying conditions (i.e., new, like new, good).

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API-driven, cloud-based data analytics platforms provide retailers with one source of truth. These platforms allow retailers access to reporting and dashboards for their entire supply chain from one system. This information helps them make strategic decisions and deliver exceptional customer service. Having this level of visibility offers an understanding of critical reverse supply chain KPIs like the cost of returns, item location, and returns volume. Additionally, reverse supply chain leaders should use these data analytics platforms to track progress toward their company’s ESG objectives.

Predictive analytics is no longer an extended capability but necessary for any reverse supply chain. With predictive capabilities, you can forecast return volumes by geographic location optimize return transportation and route and disposition returns to the highest recovery resale channel. The ability to predict the cost of a return from its current location allows users to decipher between items worth returning and those whose return cost would be higher than its actual value.

Returns technology

Data-driven cloud-based returns technology should be an essential consideration for your reverse supply chain. Such software can provide reverse supply chain visibility from return initiation to lifecycle end and optimize routing and disposition to the highest revenue-generating resale channel for each item.

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Retailers can integrate returns technology with inventory management systems via APIs. Many retailers hesitate to integrate their systems fully well past the trial period. This hesitation creates an inefficient returns operation which adds extra human intervention and costs to a reverse supply chain. The objective with any return is to get it back to a sellable position as quickly as possible. This is where the critical components of your reverse supply chain come together—the underlying data informs the returns solution on where to route the return.

Multi-channel resale

Years ago, retailers had only two for resale: return to stock or liquidate for pennies on the dollar. Retailers today have many post-return D2C and B2B resale options available to them. Resale leaders leverage several channels to allow customers more ways to interact with the brand, drive customer loyalty and revenue, and keep inventory out of landfills.

Any retail operation can transition from resale practitioner to leader through a multi-channel resale strategy. Item-level data will help decide what type of resale channels to leverage. Additionally, retailers should consider trade-in programs and refurbishment operations, depending on customer willingness to buy their merchandise in varying conditions and unit cost of an item’s return and refurbishment. Several leading consumer electronics retailers and global brands have trade-in programs. Other brands add resale channels by partnering with tech startups that run multi-vendor online marketplaces and stores.

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Finally, reverse logistics leaders have recycling and donation channels to support the product’s lifecycle or create a second product lifecycle. Other reverse logistics programs include spare parts management and fulfillment and responsible disposal of products.

Now what? 

With an optimized reverse supply chain, you will lower returns costs, decrease waste (operational, financial, and environmental), and set up additional revenue streams.

Your solid data-driven returns technology and resale channels all drive your customer returns experience. In a recent survey, 84% of shoppers said a positive returns experience encourages them to shop with a retailer again. Serving up an exceptional returns experience increases customer brand loyalty—right back to your store, website, or resale channels.

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NTT Data Services is an information technology and business services provider.

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