Most retailers, no matter what line of product it is they offer for sale, are mainly focused on sales. Returns are really only of a secondary concern, and often viewed as an irritation more than as a serious business consideration. For many companies, the price of this goodwill gesture can be costly, requiring a strategic shift into reverse logistics. ‘Satisfaction guaranteed’ is promised by many retailers, but what happens to those returned products? How do the retailer and manufacturer handle them?

Recent research has raised a number of questions concerning the reverse logistics processes: How well do companies plan their returns processes? What systems do they use? Who pays for transporting the returned product? What credit options are companies allowing? Crucially, what disposal processes are available and applied? And the research has identified a myriad other considerations.

The growth of reverse logistics is illustrated by the emergence of third-party reverse logistics solutions, and the development of technologies to better track returns and enhance reverse logistics capabilities.

While much of the hype around RFID (radio frequency identification) technology is focused on ‘forward’ logistics, the same technology has substantial application in reverse logistics. Consistent with the growth of outsourcing in forward logistics, companies that provide basic warehousing, cross-docking, remanufacturing and other value-added logistics services could become major players in reverse logistics.

Typically, when a customer returns an item, it doesn’t just retrace its steps back home. Rather, the return is treated as a special, singular, item that can travel along numerous routes depending on a variety of factors. Some of these channels may be identical to the forward chain, but many require new paths.

The research shows the top reasons for returns are:

• customer ordered incorrect product or size
• customer decided product not needed or wanted
• customer returned with no reason given
• product did not fit description on website or in catalogue
• product did not fit customer’s expectations
• company delivered incorrect product or size.

Only the sixth reason is clearly an error made by the company and not a customer judgement or reaction. A number of other factors have been identified. For example, internet and catalogue sales have a higher percentage of returns than sales through standard distribution channels. This shows that many customers still prefer the ‘hands-on’ purchasing experience. In reaction to this perception, many companies are expanding product descriptions on their internet sites and in their printed catalogues.

 More than half of the survey respondents requested feedback from customers on their returns process.

Most did not feel good about what they learnt, most ofwhich is negative; happy customers do not respond!

Less than half of the companies require preapproval for a return, while many are now applying tighter constraints on accepting returns. Warehouse management systems are the most common systems used for returns processes, although many use more than one system.

Responses for the ‘send-to’ locations for returns differ between retailers and manufacturers. Retailers are more likely to send returns to a company-operated facility or store, and manufacturers have them returned to their distribution centres. Retail companies are likely to pay for the transportation of returns, while manufacturers most often expect the customer to pay.

Events that trigger a refund or credit and the time interval from receipt to refund or credit vary greatly by company and industry. But nearly 60 percent of all companies issue refunds or credits within 24 hours. However, poorly defined return policies between vendors and customers can create excessively lenient or overly complex returns that prolong processing time and consume valuable resources.

There is no great indication of which department or organisation owns returns, and the position level responsible for returns varies by company size. The most common disposal methods for return products are reselling through the primary channel, discounting through a secondary channel, or returning the product to the vendor. This might involve various levels of reconditioning of packaging. It was noted that a very small percentage of returns are donated to charities.

Recycling of products leads the list of environmentalconcerns with respect to returns processing. Some products lend themselves to being disassembled and sold as component parts scrap. However, the products that cannot be reused have to be disposed of or destroyed, and this is an area that raises great concern in terms of environmental protection. In South Africa, recent cases of irresponsible dumping of toxic and otherwise harmful goods and materials made headlines  in most of the media, destroying companies’ credibilityand harming business operations.

Every merchant wants to reduce returns and it is proposed that following the industry’s leading practices can help. For instance you have to understand the metrics of the returns process, and measure and continuously improve processing performance.

You should also review company return policies and customer service practices to reduce returns. And you can use information technology to track and monitor the process and provide information on returns to the rest of the organisation. A two-pronged approach to tightening the reverse logistics chain makes sense: firstly, reduce the number of returns entering the reverse supply chain, and secondly, redesign and streamline the reverse supply chain. To reduce the number of returns, companies need to address the root causes.

Research has shown that, whilst many companies are indicating that they will simply discontinue selling products with regular high return rates, others are working more closely with vendors and manufacturing plants to improve product quality, enhance packaging quality, robustness and appearance, and examining ways to improve on-time delivery, even to the extent of changing delivery service providers. Overall, in terms of reverse logistics, companies need to focus on their returns policies and customer service, information technology, markets and speed, organising for returns, physical facilities and resources as well as product quality and packaging.

The bottom line is that, to successfully manage the reverse logistics process, attention must be paid to all the aspects of the returns process just as one would do for the forward process – the process cannot simply be run in reverse.