Reverse Logistics: How To Improve Efficiency And Reduce Costs
Reverse logistics refers to the management of product returns
. Just like dealing with unsatisfied customers and counting stock, it is part and parcel of the online retail business.
Online shoppers return goods for a variety of reasons. Products may be broken or damaged, not as expected, or of insufficient quality. Orders may arrive late, incorrect, or incomplete. Sometimes customers order the wrong product or just decide they do not want it.
Although returns account for a large proportion of online sales in many industries, companies fearing bad publicity are reluctant to talk about them. As a result, reverse logistics gets little discussion. However, it can have enormous implications to the smooth and efficient running of a business.
Key components of reverse logistics
There are a number of key components to effective reverse logistics. To keep customers happy, online stores (known as e-retailers) must have a good returns policy in place, and ship exchange items/issue credit notes or refunds quickly and efficiently. According to research, eighty-nine percent of online buyers say return policies influence their decision to shop with an e-retailer.
It is also important to minimise the cost of reverse logistics to a business. One way to achieve this is to manage the retention or disposal of returned products. This is known as asset recovery.
Asset recovery
E-retailers place returned products into action categories to recover costs. These usually include:
1. Restock - unopened products that can go straight back into inventory
2. Repackage for sale - opened goods in "as new" condition suitable for repackaging and resale
3. Repair/recondition for sale - faulty products suitable for repair and resale at a lower cost
4. Return to vendor - items to be returned to the original vendor or manufacturer for credit or exchange
5. Scrap - products with little or no recovery vale
The challenges of asset recovery include sorting items into these categories, updating inventories in real time, and recording customer returns. Doing these tasks manually is slow and inefficient, which bleeds money. This is unacceptable, especially in the current economic climate.
Automated parcel sortation
Automated sortation systems, which many e-retailers already use to optimise order fulfilment and delivery, help solve the problems of asset recovery. They expedite the sorting and processing of returned goods, and incorporate software that automatically updates inventories.
Benefits include improved efficiency, reduced costs, and the ability to track parcels. Automated sortation systems are ideal for any company that has a returns policy.
Sortation systems for asset recovery - an example
At sorter induction points, operators scan returned products, inspect or test them to determine their asset recovery value, and designate appropriate action categories. Items are then placed onto conveyors or sorter trays manually or using automatic feeders.
A machine vision system mounted overhead identifies product labels and instructs the sorter to send items to specific destinations for further processing. Destinations include facilities for all the action categories, such as repackaging areas and waste collection sites.
Identifying parcel labels
Automated sortation systems use one of two types of technology used to identify parcel labels: traditional laser scanners and camera based machine vision systems. Lasers rely on barcodes, and have been used to scan parcels for over thirty years.
Camera based systems use auto-focus, line-scan, high-speed cameras to capture high-resolution photographic images of parcel labels. The system uses sophisticated computer algorithms and optical character recognition (OCR) techniques to interpret these images.
Users can configure camera systems with multiple units to photograph up to six sides of a parcel. This means the label can be in any orientation on these faces.
The benefits of camera systems
Read rates are vital to the efficient running of an automated sortation system. When linked to a videocoding system, a facility that allows operators to input unreadable labels manually, camera systems achieve read rates approaching 100% at high speed.
OCR technology allows camera systems to read text, supplier numbers, and even human written address information, as well as barcodes and 2D codes. Cameras also identify dirty, marked or damaged codes, and codes behind reflective packaging.
Camera systems contain few moving parts and require little maintenance. This makes them tough and durable - ideal for warehousing or other industrial environments. Long service lives mean they are cost efficient long term.
Conclusion
In reverse logistics, automated sortation systems quickly separate items for asset recovery and send them for further processing. They reduce costs and prevent loading docks becoming jammed with thousands, sometimes even millions of pounds worth of returned merchandise.
Automated sortation systems are a highly beneficial, cost effective solution for e-retailers under pressure to cut budgets and meet efficiency, productivity, and throughput targets.
by: Malcolm Smith
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