Achieving a Sustainable Returns Program
A good returns management program is a sustainability effort in itself. The right approach can improve value recovery, increase efficiency, and lower transport and labor costs, all while reducing your carbon footprint, food and landfill waste, and fossil fuel consumption.
The answer to sustainability could be right under your nose, residing in business process improvements available in your internal processes and infrastructure.
Among supply chain leaders, 70% are planning to invest in the circular economy in the next 18 months, and 66% are either currently using or planning to use digital technologies to improve reverse logistics in the next two years, finds a February 2020 Gartner report.
They’re right. Take the example of retail returns management. A good reverse logistics program can improve costs and meet measurable sustainability successes in the following areas:
- Transportation. Strategically locating returns-processing facilities can greatly reduce your transport spend. If you use an external returns processor, choose one with facilities located near your distribution centers to reduce road miles. Some national retailers have only two or three returns facilities in the entire country, which is mind-blowing considering the miles spent moving less-valuable product. There are opportunities to reduce those miles and cut your carbon footprint.
- Returns disposition software. Five basic things can happen to returns:
1. Return to stock.
2. Return to vendor.
3. Liquidate.
4. Donate.
5. Recycle/destroy.
Too many retailers throw away money by trashing products that can either be returned to stock for full retail price or returned to vendors for credit. Having a tool designed specifically to manage and optimize returns disposition is critical to both recovering value and reducing the volume of product going to landfills.
The right returns management software helps maximize value recovery, boosts net sales with more return-to-stock, and enables recycling and donation programs.
- Liquidation. While no one wants to let product go for a fraction of its retail value, it’s better than destruction, which is all cost and environmentally unfriendly. Liquidation keeps viable product in commerce and out of landfills.
While brand protection often has to be considered in liquidation, it’s an opportunity to offer a higher-value product at a lower price point, introducing a new shopper segment to a brand. If you have food products in your reverse stream, liquidation and donation reduce food waste and help feed people.
Measuring Success
A solid returns management program can easily show both business and sustainability benefits. Reverse logistics is a needed data opportunity to help find understanding and knowledge about a product’s full life cycle.
Returns data is valuable in better informing other aspects of your business, such as merchandising decisions; product quality; shopper preferences; product, store, and vendor performance; and tying more KPIs directly to the bottom line.
As for reportable sustainability measures, it’s easy to capture data showing the volume of product kept out of landfills, packaging and products recycled, items donated, component parts upcycled or sent back to parts bins, and tons of other tangible measures.
When destruction is the only option, use an energy-from-waste partner who generates electricity. You can report the kilowatt hours or fossil-fuel equivalency generated from the product destroyed.
Sustainability offers opportunities that are better for your business, especially when improving your returns program is a sustainability program in itself.