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One of the key successes of any business is the ability to productively manage product returns. Product returns are a fact of life for most companies and on the surface it would appear that most companies could handle product returns in a cost effective manor.
Unfortunately as time marches forward, and companies have to ramp up their focus on sales, fulfillment and shipments, the sheer volume of returns and the disposal options can overwhelm them making it impossible to handle them efficiently. The use of a quality, cost effective return processes can reduce expense and add dollars directly to a company's bottom line by recouping idle assets. The handling of product returns can be much more costly and resource draining than it would appear at first glance. Processing returns diverts resources away from any company's primary goal of selling their product. As we all realize the main focus of any company is based foremost on the marketing, sales and customer satisfaction. With this in mind, using valuable resources to process returns can be a big drain to bottom line profits.
The nature of returns is that they are generally received with damaged or non original packaging, mixed with other items, in all sizes and shapes. From a warehousing and distribution standpoint this makes the processing of returns much more labor intense than the receipt of new products which are sorted, boxed, labeled and palletized in a uniform manor. Often returned items do not have SKU or UPC information, which adds even more to the operational pain by requiring manual research for identification. All of these roadblocks are why many companies simply "find a space in the warehouse" to set it, collecting dust until they can be addressed.
Companies find themselves accumulating large quantities of un-sellable products in a variety of forms. These products can represent millions of dollars in carry costs for a company. On the other hand as more and more budgetary constraints find their way into every segment of distribution and warehousing, non-value added processes that use labor dollars, which are deemed non-sales related are placed on the shelf. Even when excess labor becomes available and can be spent on these non-sales related activities, the focus may be so strong on productivity related flex budgets, that labor dollars may not be used for processing returns.
Of course there is the fact that processing product returns can cost many companies as much as 3 times the original cost of the original outbound shipment which makes Outsourcing a financially viable option. Outsourcing providers are an ideal option for returns processing because they find it a perfect fit for their existing services. Not only are they experts in a variety of outsourcing type services, but they have a general philosophy of ultimate flexibility and flexibility is a key ingredient in being able to efficiently deal with the nature of returns. Because flexibility is the order of the day for most outsourcing companies, the process is not considered exception handling and therefore costs are well lower than if attempted internally.
Outsourcing the processing of Reverse Logistics can allow a company to focus on resolving these stagnant dollars, turning them into liquid assets for a company, while not dipping into their budgeted labor dollars. Managers find it much more plausible to budget for and use non-productivity dollars from their operating budgets to fund Returns processing by outside outsourcing companies, then to use their own labor dollars and risk missing productivity goals.
Using an outsourcing company to repackage, return, liquidate and otherwise dispose of products, will free up money to be infused back into the company allowing for cash flow to be used on purchasing more productive or new products.
One key ingredient that companies are realizing in making the decision to outsource returns is that a fair amount of returned product has in fact no defects and if detected quickly can be placed back into the normal product cycle to be sold at full value. The skills needed for quickly sorting, inspecting and detecting defects are generally incorporated into outsourcing companies’ daily processes. If your company finds a need to heighten it focus on return products, find a qualified outsourcing company and discuss the possibilities. You might be pleasantly surprised at the results.
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