Returns can be a costly, time-consuming challenge. Process improvements can help companies process returns without affecting productivity.
By Harold Baro | Senior Vice President and General Manager, SIMOS Solutions
For many consumers, if a product doesn’t fit or isn’t what they wanted, they simply return it and forget about it or get a new one. That’s part of the reason why returns are a multi-billion-dollar industry. In fact, the National Retail Federation reported that 11% of retail sales were returned last year – a total of $428 billion. Those returns pile up in the warehouse, causing costly and time-consuming backlogs and a logistical nightmare in warehouses as operations struggle to store and process their returns in order to recoup profit and provide timely credit to consumers or vendors.
For the companies taking in those returns, that can mean an influx of expenses and time-consuming processes that can potentially affect your regular business. But there are ways to address your reverse logistics function to make it work for you.
Review your process
Many retailers talk about increasing warehouse size as a way to work through returns. But that’s not the only option. Finding new ways to work through the process can set you on a path to positive returns. The first step is to look at your current process. Is it organized or are your returns piling up? How many steps does it take from intake, to providing credit, to restocking? Where do the returns go? And what about the trash? Do you have a process for recycling the boxes?
Some of the best returns operations process returns and restock them within 24-36 hours. They can do this because their restocking process is organized and straight-forward. Identifying and sorting items before putting them in picking locations can reduce the time required to restock. Having enough storage and labeling it properly can help speed up restocking time, too. Taking stock of what is going right and what could improve will set you on the road to a productive and cost-effective returns function.
Re-engineer your process
Once your physical process is in place, take a look at how you’re managing returns. Are you simply increasing headcount and hoping for the best? Take a step back and look at what you could achieve if you were able to manage your workforce based on output. Instead of worrying how many people you need in your building, you could manage staff based on the amount of returns that need to be processed.
Working with engineers who can reduce the number of steps in your process and increase efficiency quickly means budget certainty, and that leads to no lost time and money on returns processing, especially during peak seasons or the recent changes in ecommerce markets.
Engineers can standardize your operational processes with proven Lean Six Sigma practices and classical engineering expertise, showing you ways you can save time and money in your returns practice without sacrificing needed headcount or productivity. They can use traditional time and motion studies to assess efficiency. They report the findings to operations experts who review them and find out where they can improve current processes, turning those into standard operating procedures that increase your accuracy and output rates.
Restart your process
Armed with the information you need to build a productive and efficient returns process, you’ll be able to find the right way to redesign so that your costs don’t fluctuate, even when headcount, production, returns or the market change. Embracing an engineering-based cost-per-unit (CPU) labor model can offer complete accountability within the operation and increase output while meeting quality standards.
At SIMOS Solutions, we use the CPU model to document all steps of the process to see how productive a customer is: what they’re doing, pace of work and whether they’re touching the product too many times. This illustrates how the process can improve so, for example, a company that is spending 10 cents a case to unload a trailer can do it for 8.5 cents.
Because ecommerce’s rise has reshaped the retail marketplace, consumer demand will continue to climb due to the convenience of online shopping and retailers will find it increasingly difficult to control labor costs as they expand their fulfillment operations. Even as online retailers increase their use of automation, the number of employees required to process orders will continue to grow as new fulfillment centers dot the landscape. So any advantage a manufacturer can gain will go a long way to building a positive and productive returns environment without letting returns cut into your profit margins.