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How to Manage the Surge of Returns

With customer expectations and brand loyalty often hinged on customer-friendly return policies and easy return shipping, a clear and concise returns management strategy can eliminate unneeded waste and boost sales. Learn how to plan for returns effectively while leveraging automation, regardless of your distribution facility or network size.

by Phil Pletcher

As retailers and online merchants brace for the surge of returns after peak season, the ability to mitigate the process of accepting, evaluating and restocking products continues to be a focus for supply chains of all sizes. With customer expectations and loyalty often hinged on customer-friendly return policies and easy and favorable return shipping, a clear and concise strategy can eliminate unneeded waste and boost sales.

The National Retail Federation (NRF) recently reported that the retail industry would have $743 billion in returned merchandise, for an overall return rate of 14.5% in 2023.1 In the report, the NRF notes that a retailer can expect $145 million in returns for every billion dollars of sales and that there will be a higher rate of returns, 17.6%, for online orders due to the practice of bracketing.

In this FORTNA blog, we will review how to plan for returns effectively and how to leverage automation, no matter the size of your distribution facility or network.

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The returns problem

Distribution centers and networks can struggle with returns for several reasons, including:

  • Manual processing
  • Inability to quickly evaluate returned merchandise
  • Prioritizing returns over other tasks
  • Deferring restocking until there is a high number of returns to place back into inventory
  • Missing seasonality or promotional windows due to restocking delays

Operations have been effective over the past decades in using automation to move, sort and fulfill customer orders. Returns, however, need a different approach; to be effective, a clear strategy communicated to the operation as a whole is needed.

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How to create a clear returns strategy

Assemble the operational stakeholders to create a clear and concise disposition strategy for returns that covers not only the distribution operations processes but also IT, accounting and inventory availability.

Below are important policies and processes to include:

  • How quickly does a return get opened and evaluated?
  • How does the organization train workers to perform evaluations?
  • What are the speedbumps to streamlining the process, and how can they be eliminated?
  • When in the process is the customer credited?
  • Is there an approval process needed before restocking? Can the approval process be streamlined?
  • How is the restock performed?

The most effective returns process is a simple one. One that empowers workers to process the return and have the confidence to make decisions on whether the return can be restocked, classified as secondhand, recycled, thrown away or sold to a third-party returns company.

How to leverage automation to help perform restocking

While the initial part of a return is a manual process (opening and evaluating the return), organizations can leverage automation to help perform restocks and control inventory. Many organizations have some level of automation that can be used to assist in the restocking process. It can be as simple as using AutoID devices to scan the products back into available inventory, using a put wall to sort products or leveraging autonomous mobile robots (AMRs) to take totes to locations for restocking. Working with a supply chain partner familiar with these technologies, like FORTNA, can help create a returns process that can optimize your automation investments.

8 Steps to Optimize Returns
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How AutoStore manages the returns process

As a premiere global AutoStore system integrator, FORTNA has worked with retailers that have seen rates of returns as high as 40%, which makes automating some of the returns process a must. By taking advantage of the AutoStore system, once a product has been deemed fit to be restocked, it can be easily added to inventory and used to fill new orders.

There are two main ways to automate restocking:

  • Top-off replenishment: The tote that holds a SKU is called to the goods-to-person (GTP) station: the worker places the item into the bin, and the tote is sent back to storage. This process can be used in conjunction with a put wall, as the picker can sort and add multiple items to the bin, cutting down on the number of trips a bin will make to the GTP.
  • Mixed SKU return bins: This process allows an organization to segment and dedicate bins for returns only. These bins contain returned products and are segmented to hold multiple items. Then, as ordered, the return bins are utilized first and either refilled with newly returned items or stored after exhausting their inventory.

Addressing returns strategically and in a process-oriented manner can lead to success and lessen capacity and financial concerns.

FORTNA Can Help

Returns management can be a challenge, no matter the size of your business. Partnering with FORTNA and their industry experts and data scientists can help create a best-fit return disposition strategy for your operation. Learn how to make returns a competitive advantage and not a write-off.

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<sup>1</sup> <a href="https://nrf.com/research/2023-consumer-returns-retail-industry#:~:text=As%20a%20percentage%20of%20sales,of%20merchandise%20purchased%20online%20returned">https://nrf.com/research/2023-consumer-returns-retail-industry#:~:text=As%20a%20percentage%20of%20sales,of%20merchandise%20purchased%20online%20returned</a>

About the author

photo-of-phil-pletcher-director-solution-design-fortna

Phil Pletcher

Director, Solution Design

Phil is the Warehouse-Ready Solutions leader for FORTNA and is a seasoned supply chain professional with over 20 years of experience in various consulting and leadership roles.