Online sales and returns are now as much as a part of the shopping experience as buying things, and retailers must respond accordingly. With return rates varying between 5-50%, and online purchases more likely to be returned than those bought on the high street, effective return management is a key strategic issue across the retail sector. Managing these returns incurs substantial costs through logistics, inventory and disposal, yet many companies appear to employ inadequate processes for dealing with these returns. Meanwhile, the integration of high street and online retail channels (i.e. omni-channel) is now firmly embedded in many sectors, providing customers with a seamless shopping experience, but presenting new challenges for managing product returns.
Reverse logistics is a broad area and as such this tool focuses on the management of retail returns. In particular, the tool views the management of the reverse logistics process from a holistic supply chain approach rather than simply starting after the point of sale.
Given the tightness of margins in many organisations, it is worth emphasising that the improved management of these returns can have a significant impact on bottom line performance. There can also be a significant impact on environmental concerns as well, since reverse logistics operations can involve a large amount of lorry movements and consequential CO2 emissions. This tool enables companies to audit their returns management activities and identify where opportunities exist to reduce costs and waste and improve customer service.
Chartered Global Management Accountants can play an important role in this area by using their analytical skills to highlight the financial benefits to be gained from making improvements to reverse logistics processes and by recognising the importance of supply chain accounting and inter-organisational accounting. Techniques such as quality costing and transparent performance measurement systems have a significant role to play. Much of the diagnostic and performance aspects of the tool are based on activities taking place across organisational boundaries with particular emphasis on relationships with suppliers and customers.
The first version of the toolkit launched in 2008 and proved extremely successful. For example, a major high street retailer made significant cost savings after making a 40% reduction in returns. An updated version of the toolkit was launched in 2018 to reflect the changes that took place in the retail sector in recent years. The new toolkit covers cost and performance management, avoidance of product returns, process management, the physical network, inventory management, information and communication technology, material handling, containers, sustainable distribution and compliance with legislation, circular economy, omni-channel, customer service, the role of the returns manager, and social media.
The reverse logistics toolkit can be downloaded for free below.
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