Blubirch

[blubirch]

Effective management of decommissioned IT assets - CSR or CR

BACKGROUND

Our client is India's largest electronics retailer, with a diverse network of 400+ stores, 200+ brands and 5,000 products. With aspirations to double their store network over the next three years, our client is looking to increase their number of products. Our client prides itself on best-in-class customer experience. To further improve their customer experience and profitability, they have been focusing on automating, digitizing and transforming the reverse supply chain.

CHALLENGE

Customer returns of purchases have been growing significantly across the industry and our client is not an exception.

To enable a good customer experience, they allow four return scenarios:

Store sales returns

Online sales returns

Home delivery sales returns

Internal damaged returns

All store sales returns, home delivery returns and internal damaged returns are tested and their disposition decision is made by the testing team before being sent to the warehouse. In contrast, online sales returns reach the warehouse without any prior testing. There is no testing executive at the warehouse. So, the warehouse executive only physically checks the item.

The process has the following issues:

There is no system for generation and tracking of internal returns.

High TAT of processing returns inventory since there is no automated system to manage and track the item lifecycle.

High number of rejects in brand call log and insurance claim on account of two issues — errors in disposition decision [disposition decision is taken manually by the testing team] and the high TAT.

High proportion of items going into liquidation and several high quality items going into liquidation.

BLUBIRCH SOLUTION

https://www.blubirch.com/assets/img/blog/casestudy61.png

""Think about it...if we throw it away, we had to buy it first. So we pay twice, once to get it, once to have it taken away. What if we reverse that cycle? What if our suppliers send us less, and everything they send us has value as a recycled product? No waste, and we get paid instead.""

- Lee Scott, Chief Executive, Wal-Mart (October 2005)

Blubirch’s integrated solution has the capability to initiate, track and manage internal returns generation, helping management make better decisions on resource deployment.

The solution has helped improve tracking, faster processing, alerts and notifications to enhance customer experience.

Rule-based automated disposition decisions leave no chance of manual errors, improving cost recovery and price realization.

Even a non-technical person can operate our grading app that is easy to configure and use, enabling the business function to take full responsibility for managing the returns process.

Blubirch has the only full-stack, automated, single access and highly configurable returns solution in the market that offers clients a seamless experience. Our lifecycle solution for returns management integrates these software interventions — returns initiation, returns inventory management system featuring warehouse management services, and B2B remarketing. The solution enables the returns management process at some of the world’s largest retailers and is India’s first and only returns automation platform.

BLUBIRCH IS A MARKET LEADER IN RA-PAAS-RETURNS AUTOMATION PLATFORM AS A SERVICE-IMPROVING REVENUE, PROFIT MARGIN, AND CUSTOMER EXPERIENCE FOR RETAILERS, OEMS AND RESELLERS.

[blubirch]

Why outsource returns pickup and management to a specialized partner?

Most retailers and brands have their infrastructure, processes, systems and manpower aligned to handle new inventory in the forward supply chain. However, the uncertainty in the timing, volume and condition of returns, along with variability in their processing based on condition, return policies, brand policies, etc., makes it essential to outsource returns management to a specialized partner. The infrastructure, processes, systems and skilled manpower required to efficiently handle the complexities of reverse logistics have been illustrated ahead.

Mechanics of outsourced returns management

https://www.blubirch.com/assets/img/blog-details/blg61.jpg

*Source: Gartner Survey, KPMG [Future proof your reverse logistics]

Key challenges of in-house returns management

A client can certainly create its own return centers; however, this approach can bring the following challenges:

Higher cost of dedicated return centers compared to decentralized shared and managed return centers.

Inability to manage volume fluctuation across seasons. If the facility is built for peak volumes, then the utilization would be sub-optimal during other times; and if it is created for average inflow, it may lead to choking and delayed processing during peak seasons.

In the case of multi-category retailing, creating a refurbishment facility or having a skilled workforce will be very difficult and costly.

Lack of a purpose-built technology system to manage returns from origin through processing to final clearance will increase operational costs and create a risk of revenue leakages.

Benefits of a specialized reverse supply chain partner

A specialized reverse supply chain partner can provide a plug-and-play returns management solution with the required systems, infrastructure and skilled manpower. Such an integrated technology solution can enable seamless information exchange across functions, helping with efficient returns handling and value recovery.

Also, the decentralized return centers provided by the specialist can substantially reduce the movement of items and reduce the overall processing time.

By outsourcing returns management, clients gain access to scalable solutions tailored to their specific needs.

Below are certain key benefits that a specialized reverse supply chain partner can bring to any client:

Improve bottom line

Reduce returns

System-driven grading during returns pickup can help validate items and eliminate unwarranted returns. Also, it helps create the digital trail of returns that allows a better understanding of customer preferences and product issues, which can be leveraged to reduce future returns.

Eliminate revenue leakages

System-driven processes can help eliminate incorrect grading or disposition, which results in revenue leakage. Also, item-level tracking will ensure that time-sensitive claims, such as RTV and insurance, are not missed, thus ensuring higher recovery. Additionally, item-level granular insights across the full return lifecycle will allow clients to identify opportunities to improve processes and eliminate revenue leakage.

Reduce operational cost

Automation of returns process steps such as item inspection, item reconciliation at the warehouse, item disposition allocation, item disposition management and remarketing will help improve operational efficiencies and reduce processing costs associated with returned products. Decentralized returns centers can help manage returns closer to your customer and thus cut logistics costs along with the risk of further in-transit damage.

Improve recovery

To prevent inventory value loss, many organizations outsource returns management to partners who can process returns swiftly.

By virtue of multiple decentralized returns centers, returned items processing does not compete for resources and infrastructure with fresh orders processing. As a result, faster returns processing reduces inventory value deterioration caused by delays. Also, shared return centers from a specialist can enable refurbishment when required, to make the inventory resellable or have better recovery.

Lastly, selling or liquidating graded inventory in the secondary market will help improve the speed and realization from remarketing.

Support revenue growth

Free management bandwidth

A reverse supply chain partner/specialist can take away the burden of managing returns while ensuring complete transparency and control through an integrated reverse supply chain management system. This will allow the management team more time to focus on the core business and its growth. Furthermore, the dedicated decentralized returns centers can enable seamless processing of returns, agnostic of seasonal volume variation without choking the warehouses meant for outbound processing.

Higher customer lifetime value [CLV]

Granular insights into the returns reasons including process or product issues will allow retailers and brands to improve processes and product mixes, which helps improve customer experience and thus transform a transactional customer into a brand loyalist.

Achieve ESG goals

Reduction in logistics hops

Multiple shared returns centers can help reduce the logistical hops that a returned item must go through. This will not only reduce waste generation but also cut down the carbon footprint.

Reuse

An efficient reverse supply chain, managed by a specialist that brings the system and ability for grading, refurbishing and remarketing will ensure that returned items are put back in the hands of new users instead of going into a landfill.

Carbon footprint calculation

The ability to track every item’s movement throughout the returns lifecycle can provide visibility into the carbon footprint generated and helps identify opportunities to reduce the same.

So, it is worth considering outsourcing the reverse supply chain to a specialized partner who can take over all related complexities of returns claim management while freeing the client's management bandwidth to focus on new sales and growth.

Read to learn how a multi-store organized retailer with high ageing and revenue losses from returned inventory overcame their returns management challenges.

[blubirch]

Why should CFO care about returns management?

Ease of returns is an important criteria for shoppers as they decide where to shop. E-commerce companies have used ease of returns as a significant differentiator to attract and retain customers. At the same time, both the volume and value of returns have increased significantly over the past decade. Recent estimates state that there is a 5 to 6% of revenue impact on the profitability of retailers. For most retailers who operate on less than 10% net margins, this represents a significant erosion of value.

Over the past two decades, retailers and OEMs have focused on improving efficiencies in the forward supply chain. Technology companies have invested in developing solutions for all aspects of the forward supply chain — demand forecasting, inventory management, customer experience etc. These investments have resulted in a large number of technology choices for the retailers to choose in improving the efficacy of the forward supply chain. As enterprises optimized their individual supply chains, the adoption of common technology solutions such as SAP across an industry led to the standardization of forward supply chain processes across the industry.

THE SAME CANNOT BE SAID OF THE REVERSE SUPPLY CHAIN

Due to the lack of technology solutions, retailers and OEMs have been using spreadsheets and email to manage the complexities of the reverse supply chain. This has resulted in inefficiencies that include:

UNWARRANTED RETURNS

The optimal way to prevent value erosion is to prevent a return from happening without sacrificing customer experience. Retailers have in their arsenal various tools to prevent/reduce a return without impacting customer experience. These include offering store credit, discount on the item if the customer agrees to keep the items, or repairs. Sometimes a return may be accepted by the retailer even when it is out of the policy period because the retailer lacks the technology to check the validity of the return. In addition to the cost of the returned item, unwarranted returns results in handling and storage costs which can be up to three/four times the cost of moving the same item in the forward supply chain.

LACK OF VISIBILITY

SUB-OPTIMAL DISPOSITION DECISION

Testing and grading of the returned item is a necessary process for improving the recovery from a returned item. Retailers can get the maximum amount of recovery if they return the item back to the OEM or restock the item. To return an item back to the OEM, there are very strict policies to be followed and they vary from OEM to OEM. Due to the inability of the current solutions to keep track of the different policies, retailers find that they have missed out on a large number of items that could have been returned back to the OEM for full credit. Testing and grading is another important capability. It provides information on the next best action for the retailer to follow whether it is to claim insurance, repair, e waste the item or liquidate.

AUDIT EXPOSURE

The lack of transparency in the reverse supply chain results in leakages across the reverse supply chain, from the initiation of returns to the warehouse, to liquidation of the returned item. In an environment of extreme focus on governance by regulators and the stock market, this is not a risk that the CFO should take lightly.

SO, HOW SHOULD A CFO GO ABOUT TRANSFORMING THE REVERSE SUPPLY CHAIN?

Reverse Supply Chain processes remains one of the few remaining areas of rich opportunities for enterprise transformation and high ROI. Transformation of the reverse supply chain will lead to significant increases in customer experience, the bottom line and shareholder value. With Returns Automation — Platform as a Service, solutions are now available and transformation of the reverse supply chain has now become an imperative.

One of the critical issues in Reverse Supply Chain is the lack of a process owner across the enterprise. The Reverse Supply Chain process impacts several departments across the enterprise — customer support, logistics, warehousing, finance, customer experience, front end operations, returns management etc., As such the first step in transforming the Reverse Supply Chain is the appointment of an Owner for managing the end to end returns management process.

As mentioned earlier, Returns Management process impacts customer experience and profitability. While they impact each other, enterprises should focus on improving customer experience as the first step in the Returns Supply Chain transformation. These include increasing the choices available to the customer in lieu of returns such as store credits, spot discounts, repair services, extending warranty periods etc. This will not only improve customer experience but also impact profitability positively by reducing/eliminating, costly returns.

Transformed processes should be supported by enabling technology. The chosen technology platform should be versatile to be implemented in a modular manner based on the chosen priorities and integrate with the existing ERP systems through API’s. In addition, the technology enabler should have the following features:

AI/ML embedded enablers and protocols that will automate and improve the accuracy of testing and grading

Flexibility to configure returns management processes that may differ from product to product

Insightful reports that recommend the next best action

Actionable analytics that provide valuable insights into the returns data

Strong regulatory compliance in line with industry standards

Integrated Remarketing platform with category specific buyers to ensure secondary sales and prevent leakages

The role of the CFO, given its enterprise-wide focus, is suited to take ownership of the returns management process. As noted earlier, the rewards are high.

[blubirch]

How technology brings transparency to the reverse inventory supply chain

When dealing with high-value goods like electronics in the Indian secondary market there is a significant trust deficit. Consumer protection is almost non-existent and any redressal is a matter of chance, left largely to the whim of the seller or manufacturer.

By its very nature this market is unorganized, which makes it difficult to assess the right procurement or liquidation price. Reliable sales data by region, date, seller and buyer is next to impossible to source, as bulk of the transactions are cash-based and conducted between parties that may not declare or possess formal documentation to do business.

Any platform that bridges this trust deficit by providing a transparent, end-to-end process from procurement to liquidation has great potential. This must be achieved using technology to provide diagnostics, pricing guidance, warranty servicing, curating channel partners, matching buyers/sellers and enable seamless transaction capability from order to cash.

“As companies strive to wring every cent out of their logistics costs, they’re increasingly taking a hard look at their reverse logistics practices. And no wonder — they may find a motherlode waiting to be mined.”

- Leslie Hansen Harps, Author and ex-CIO, in Inbound Logistics Magazine, December 2015

Productivity gains by increasing throughput of devices tested and graded are key to improving the bottom line. This will need consistency in test results and use of that information in deriving a grading assessment. Usage of this grading assessment will become critical input for repair versus refurbish versus recycle decisions.

Pricing depends on a large number of input parameters, which vary depending on whether it is the procurement or liquidation price that is being computed. Sub-optimal pricing calls can lead to significant revenue and margin leaks. Use of analytics and machine learning to infer patterns of buyer/seller behaviour becomes critical in a market intrinsically difficult to model mathematically.

A partner registration system which helps curate the channel network by considering parameters related to their organization, statutory documentation, certifications and credit worthiness is a must. Internal operations must be tightly monitored using inventory management and financial control systems. Optimizing spares usage is also key to cost optimization.

Using technology to integrate channel partners with e-commerce marketplaces, payment gateways, logistics partners and notification providers will make for a rich transaction experience. The latter will enhance timely information dissemination through multiple channels like email, mobile, SMS and push notifications, critical to the secondary market.

All transactions will need sophisticated authentication and authorization. This is to ensure there is data privacy and security. There should also be a high degree of audit ability and non-repudiation built into the technology platform. Multi-level access control should allow users to perform the tasks they are allowed to and see data they are entitled to, no more no less.

“The idea that software is important is true for everyone. Even if what you do is manufacture T-shirts there is still digitization in that. The digitization happens in stitching together the supply chain, working on issues like forward and reverse logistics, or maybe customising certain distributions depending on demographics. All of it is tied together.”

- Erez Yarkoni, CIO Telstra, in Financial Review, May 2015

We have seen ways in which technology plays its part in rendering a high degree of transparency and ease to doing business in this market. A platform like the one above will bring together all these capabilities under one roof while putting control in the hands of the channel partner network. Definitely a great opportunity up for grabs.

[blubirch]

Creating sustainable value in reverse supply chain

WHAT IS REVERSE SUPPLY CHAIN?

Traditionally, companies have been spending more time and resources towards forward supply chain while ignoring their reverse supply chain. However with growing e-commerce and lenient return policies, increasing competition and tightening waste management regulations, companies are increasingly recognizing the value that can be recaptured through an efficient reverse supply chain while increasing customer satisfaction and contributing to green environment. However compared to forward supply chain reverse supply chain has to deal with ambiguity related to location, timing, quantity, condition and pricing. Most existing forward supply chains are not designed to handle ambiguity related to reverse supply chain resulting in inefficiencies, value erosion and waste generation.

MANAGING DECOMMISSIONED IT ASSETS EFFECTIVELY TO ENSURE REUSE IS NO LONGER A “NICE TO DO” AND A “SOCIAL” RESPONSIBILITY BUT A CORPORATE RESPONSIBILITY.

“Reverse inventory supply chain has ambiguities at every stage and it can be overcome only through smart use of technology. Value erosion because of inefficient reverse inventory management can not be overlooked as cost of doing business but should be attended to with urgency to uncover hidden profits for the companies.”

- Mr. Sanjeev Jain, Group CFO GATI

PREVAILING HURDLES IN THE REVERSE SUPPLY CHAIN LANDSCAPE

LACK OF MANAGEMENT FOCUS

Most companies view reverse supply chain as cost of doing business and an unavoidable problem of back end process. This results in lack of commitment and focus from senior management. Companies accumulate reverse inventory in the back of warehouse or stores with suboptimal packaging resulting in value erosion from damage and pilferage.

LACK OF PROCESSES AND SYSTEMS

Most companies do not understand and appreciate the benefits and profits an efficient reverse supply chain can bring and hence do not have clearly defined policies and processes to achieve desired outcomes. Additionally, companies either do not have systems to handle reverse supply chain or have disconnected applications with limited functionalities resulting in inherent inefficiencies and potential customer dissatisfaction.

SLOW DECISION MAKING

For the lack of information on product quality, configuration and other variables companies are not able to take timely decisions on reverse inventory disposition resulting in lose in inventory value. Decline in value depends on type product however for consumer electronics products like Mobile, value lose can be in excess of 1% per week. This can be worse for products nearing the end of its life cycle.

LACK OF PRICING GUIDANCE AND LIMITED BUYERS

Unlike new assets, assessing the value of reverse inventory with varied quality is not easy. In the absence of pricing guidance, most companies work with limited buyers and get 3 quotes over email resulting in suboptimal recovery.

LACK OF TRANSPARENCY

Most companies use email based quotes for selling reverse inventory, which is leakage prone making it difficult to ensure the fairness of the process and to eliminate resulting losses to companies. Also companies have no visibility of reverse inventory post sales to brokers resulting in potential regulatory and brand image risks.

HOW CAN WE SCALE OVER THESE CHALLENGES TO CREATE SUSTAINABLE VALUE?

“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”

- H. James Harrington

PROCESSES AND SYSTEMS ALIGNED TO OUTCOME

A seamless reverse supply chain system provides real time granular data streamlining the process and helps improve customer satisfaction. With improved understanding of reverse supply chain clients can define desired outcomes and align policies and processes to achieve the same. This will result in reductions in unused inventory, improved cash flow and lesser efforts

SPEEDY DECISION MAKING

Discretely defined return diagnostic provides accurate information on quality and configuration along with better understanding of return reasons i.e. were the returns because of defects, change of mind, damage or incorrect labeling. Having accurate data timely help companies in taking corrective actions and automate downstream actions mitigating the waste and cost generated from inventory aging and return leakages.

EFFICIENT RECONDITIONING AND REMANUFACTURING

Companies can enhance the value captured from returned products by reconditioning or remanufacturing the products for reuse or resale. An integrated gatekeeping, sorting and diagnostics can help mitigate uncertainties related to timing and quality of returned products and hence more predictable refurbishment or remanufacturing process with lesser waste and cost. This will also ensure that these assets are put back to use instead of being put as waste in landfills and hence contributing to a more sustainable environment.

“Corporates should no longer pile-up the decommissioned assets in warehouses or treat them as e-waste by default. There is infinite possibility to generate Social, Environmental and Economical value by putting these assets in the hands of users instead of landfills.”

- Anthony Thomas, CIO, GE Global Growth Organization

REAL TIME PRICING GUIDANCE AND ACCESS TO LARGE POOL OF BUYERS

Companies should come out of the practice of 3 quotes on email and instead have access to a large set of resellers or end users to optimize recovery. Specialized reverse supply chain systems can not only provide them pricing guidance but also connect them to large pool of buyers via technology platform ensuring a fair and controlled mode to recover optimally.

ENHANCED CUSTOMER SATISFACTION

With fast changing technology, fashion and customer needs, companies are increasingly under pressure to introduce new products to maintain the “Freshness” of distribution channel. A reverse supply chain that is predictable, efficient and fast will ensure that companies are able to clear the obsolete or used items from channel more frequently and smoothly enhancing customer satisfaction.

END-TO-END TRACKING

Government is increasingly tightening the laws around product recycling or disposal especially the ones that are hazardous to environment. A system driven reverse supply chain can provide tracking capability right from origination to disposal safeguarding companies against regulatory and reputational risk.

In Summary, technology can dramatically reduce inspection; grading, refurbishment and disposition cost and enable companies to extract hidden profit from unused assets optimally and in environment friendly manner while being in control of the disposition process. Forward thinking pays big dividends even with Reverse Supply Chain.

[blubirch]

Effective management of decommissioned IT assets - CSR or CR

"Think about it...if we throw it away, we had to buy it first. So we pay twice, once to get it, once to have it taken away. What if we reverse that cycle? What if our suppliers send us less, and everything they send us has value as a recycled product? No waste, and we get paid instead."

- Lee Scott, Chief Executive, Wal-Mart (October 2005)

There has been a lot of focus on corporate social responsibility, with even the government now getting into the act mandating CSR spend. This seems to imply that outside of the mandatory spending on CSR, Corporates can afford to be socially irresponsible. Such behavior has led to significant challenges with exploitation of natural resources and communities. We need to change the paradigm from Corporate Social Responsibility, to Corporate Responsibility and thus bring the significant competencies that exists within the Corporation to solve the challenges we face as communities - rain water harvesting, waste management, and the like.

One immediate area that Corporates can bring an immediate, significant and noticeable impact is in the management of IT assets. Most IT assets from servers to phones, have a depreciable life of three to four years but an economic and functional life that far extends it. Most of these assets end up in bonded warehouses, gathering dust until they are given off to an e-waste handler for final disposal. What a waste! Especially when you consider that the manufacturing of each of these assets takes up almost eight times the energy as its full functional life. In not extending the life of these assets, Corporates are negatively contributing to an existing and growing problem of efficient returns management and pollution. There is another way to handle to this!

"The linear 'Take - Make - Dispose' system, which depletes natural resources and generates waste, is deeply flawed and can be productively replaced by a restorative model in which waste does not exist as such but is only food for the next cycle"

- Ellen MacArthur (Round-the-world yachtswoman)

Blubirch analysis shows that 80% of the assets that have been fully depreciated can be reconditioned to extend its life and put back to reuse. These refurbished assets, can be redeployed back in the organization, distributed to education institutions, given to charitable organizations or even sold back to people who otherwise could not afford one. Imagine the productivity and the nation building energy that come out of it - a rural school where children can now access the power of the internet, a company benefiting from affordable technology, a charitable institution that can now run more efficiently and stretch its contributions to cover more people or services, increased employee loyalty through employee purchase programs, decrease IT investment and costs and most importantly a greener and sustainable earth that seems to growing warmer and warmer every year!!

MANAGING DECOMMISSIONED IT ASSETS EFFECTIVELY TO ENSURE REUSE IS NO LONGER A "NICE TO DO" AND A "SOCIAL" RESPONSIBILITY BUT A CORPORATE RESPONSIBILITY.

[blubirch]

Applications of AI in Reverse Supply Chain

$1.2 trillion!

That’s the value of returned and unsold inventory in the global retail industry. In India, it is close to $75 billion. As the volume and value of returns increase, retailers cannot afford to ignore it as a cost of doing business. Blubirch helps retailers and OEMs reduce the impact of returns and unsold inventory by offering alternatives to returning the product, and minimizing costs by efficient management of the reverse supply chain.

With AI reshaping industries worldwide, the role of AI in reverse supply chain is becoming more critical than ever, given its massive potential to transform the way returns are managed. That said, the reverse supply chain is several times more complex than the forward supply chain. The returns management ecosystem covers the processes of returns initiation, approval, logistics co-ordination, testing, grading and the final disposition decision. At every step of this process, AI is used to reduce returns and decrease the costs of managing the returns.

The following are specific ways in which Blubirch is deploying AI in its Returns Management Software:

Improved Customer Experience

AI-enabled Returns Initiation Automation process enables a smooth and delightful customer experience and reduces revenue leakage. AI-enabled chatbots guide the customer through the returns journey and it also prevents revenue leakage by offering customers alternatives to returning the product such as store credit, discounts, exchanges or free of cost repairs.

Customer-Specific Returns Policy

The best point to stop a return from happening is when the customer is purchasing the product. We can use past data to predict returns based on non-identifiable historical data based on aggregate behaviour and product-specific history. AI is used to enable customer-specific returns policy dynamically so that a good customer get a generous returns policy while a customer who returns often gets a more restrictive returns policy. Agentic models can be deployed for automatic approval or rejection of returns authorization. These agents get better over time with more data. In addition, AI-powered chatbots are already being used by large e-commerce platforms to help customers have a smooth and delightful experience in the returns process.

Identifying Fraudulent Claims

Just in the US alone, retailers lose about $103 billion due to fake returns or fraudulent claims. This is a significant problem in the reverse supply chain. AI is used to identify such claims based on many parameters based on the history of fraudulent claims. These parameters include Zip Code from which the claim is made, the dealer or service centre from which the claim originates, or date on which the claim is made and several more.

Improved Recovery Through Correct Disposition Decision

An item that is returned is tested and graded to determine the next best action. This action can range from return to the vendor, to insurance, to restocking, to e-waste to selling in the secondary market. AI is used to automate several of the tests, including identifying and annotating dents and scratches to functionality. It further grades the product based on the results of the test, maintaining consistency of grading and resulting disposition decisions. The consistency of decision and the audit trail prevents leakages in revenue that otherwise happens due to misgrading and the wrong disposition decision.

Enables Sustainability Through Circular Commerce

Accurate grading of returned products enables transparency on the condition of the product to secondary market buyers. These buyers buy these products and resell them down the value chain in lower-tiered markets, promoting sustainable recommerce and value for money to the end customer.

In conclusion, AI is transforming the reverse supply chain by making processes more efficient, cost-effective and customer-centric. As organizations continue to adopt AI technologies, AI in reverse supply chain will play a vital role in achieving operational efficiency and sustainability goals.

[blubirch]

Why outsource returns pickup and management to a specialized partner?

Most retailers and brands have their infrastructure, processes, systems and manpower aligned to handle new inventory in the forward supply chain. However, the uncertainty in the timing, volume and condition of returns, along with variability in their processing based on condition, return policies, brand policies, etc., makes it essential to outsource returns management to a specialized partner. The infrastructure, processes, systems and skilled manpower required to efficiently handle the complexities of reverse logistics have been illustrated ahead.

Mechanics of outsourced returns management

Key challenges of in-house returns management

A client can certainly create its own return centers; however, this approach can bring the following challenges:

Higher cost of dedicated return centers compared to decentralized shared and managed return centers.

Inability to manage volume fluctuation across seasons. If the facility is built for peak volumes, then the utilization would be sub-optimal during other times; and if it is created for average inflow, it may lead to choking and delayed processing during peak seasons.

In the case of multi-category retailing, creating a refurbishment facility or having a skilled workforce will be very difficult and costly.

Lack of a purpose-built technology system to manage returns from origin through processing to final clearance will increase operational costs and create a risk of revenue leakages.

Benefits of a specialized reverse supply chain partner

A specialized reverse supply chain partner can provide a plug-and-play returns management solution with the required systems, infrastructure and skilled manpower. Such an integrated technology solution can enable seamless information exchange across functions, helping with efficient returns handling and value recovery.

Also, the decentralized return centers provided by the specialist can substantially reduce the movement of items and reduce the overall processing time.

By outsourcing returns management, clients gain access to scalable solutions tailored to their specific needs.

Below are certain key benefits that a specialized reverse supply chain partner can bring to any client:

Improve bottom line

Reduce returns

System-driven grading during returns pickup can help validate items and eliminate unwarranted returns. Also, it helps create the digital trail of returns that allows a better understanding of customer preferences and product issues, which can be leveraged to reduce future returns.

Eliminate revenue leakages

System-driven processes can help eliminate incorrect grading or disposition, which results in revenue leakage. Also, item-level tracking will ensure that time-sensitive claims, such as RTV and insurance, are not missed, thus ensuring higher recovery. Additionally, item-level granular insights across the full return lifecycle will allow clients to identify opportunities to improve processes and eliminate revenue leakage.

Reduce operational cost

Automation of returns process steps such as item inspection, item reconciliation at the warehouse, item disposition allocation, item disposition management and remarketing will help improve operational efficiencies and reduce processing costs associated with returned products. Decentralized returns centers can help manage returns closer to your customer and thus cut logistics costs along with the risk of further in-transit damage.

Improve recovery

To prevent inventory value loss, many organizations outsource returns management to partners who can process returns swiftly.

By virtue of multiple decentralized returns centers, returned items processing does not compete for resources and infrastructure with fresh orders processing. As a result, faster returns processing reduces inventory value deterioration caused by delays. Also, shared return centers from a specialist can enable refurbishment when required, to make the inventory resellable or have better recovery.

Lastly, selling or liquidating graded inventory in the secondary market will help improve the speed and realization from remarketing.

Support revenue growth

Free management bandwidth

A reverse supply chain partner/specialist can take away the burden of managing returns while ensuring complete transparency and control through an integrated reverse supply chain management system. This will allow the management team more time to focus on the core business and its growth. Furthermore, the dedicated decentralized returns centers can enable seamless processing of returns, agnostic of seasonal volume variation without choking the warehouses meant for outbound processing.

Higher customer lifetime value [CLV]

Granular insights into the returns reasons including process or product issues will allow retailers and brands to improve processes and product mixes, which helps improve customer experience and thus transform a transactional customer into a brand loyalist.

Achieve ESG goals

Reduction in logistics hops

Multiple shared returns centers can help reduce the logistical hops that a returned item must go through. This will not only reduce waste generation but also cut down the carbon footprint.

Reuse

An efficient reverse supply chain, managed by a specialist that brings the system and ability for grading, refurbishing and remarketing will ensure that returned items are put back in the hands of new users instead of going into a landfill.

Carbon footprint calculation

The ability to track every item’s movement throughout the returns lifecycle can provide visibility into the carbon footprint generated and helps identify opportunities to reduce the same.

So, it is worth considering outsourcing the reverse supply chain to a specialized partner who can take over all related complexities of returns claim management while freeing the client's management bandwidth to focus on new sales and growth.

Read to learn how a multi-store organized retailer with high ageing and revenue losses from returned inventory overcame their returns management challenges.