For the most part, your warehouse is sending goods out the door, never to be seen by your staff again. But on occasion, some of those items will make their way back to your warehouse. This is what we call reverse logistics — where customers return damaged or unwanted items.
The e-commerce return rate ranges from 20-30%, which is much higher than the in-store return rate. Online shoppers don’t have the advantage of seeing a product in person before they buy. Sizing issues, wrong items, or failing to meet customer expectations all contribute to the high level of returns.
Receiving these items and figuring out what to do next falls squarely on the shoulders of the warehouse team. When you receive a returned item, what should happen? Does the item go back on the shelf? Do you need to repackage the item? If the item is broken or otherwise can’t be resold, do you throw it away?
This is why having a practiced and documented reverse logistics process is so important. There are many ways to handle a returned item. A process can help you know what to do in every scenario.
Here’s how to create a reverse logistics process for warehouse returns, step by step.
Created a Dedicated Space for Reverse Logistics
You first need a designated space to collect, sort, and process returned items. This keeps returned items separate from the rest of your inventory.
Many warehouses use a three-bin system: return to inventory, discard, and return to supplier. Having a sorting system can be a huge time saver. You’re processing items in bulk rather than running each item to its destination.
CBRE recommends expanding your reverse logistics space by 15-20% during the holidays to accommodate a temporary influx of returns.
Require an RMA
Having a Return Merchandise Authorization (RMA) for each item allows your warehouse to know what returns are inbound and better plan for them. You’ll know what to expect and can decide the next best action without the guesswork. It also allows warehouse receivers to compare the RMA data with the item(s) returned to make sure they match.
If you’re 3PL handling inventory for other companies, the return policy will often be set by your client rather than by you. Each retailer you serve might have different requirements and expectations when it comes to returns. However, for those who allow customers to send back items, you can require them to submit an RMA so there are no surprises.
Thoroughly Inspect Each Item
As items are received, carefully inspect the packaging and the item for damage. If an item has damage to the original box, you may need to repackage it. Customers who buy new items have high expectations for complete, pristine packaging. They may return an item if the packaging is damaged (even if the item is intact).
Also, check items for damage so they don’t end up going back on the shelf in an unsellable condition. Sometimes, the damage is obvious, such as a break or cosmetic marking. Sometimes, damage lies in the item’s functionality. You may need to test items to determine whether or not they can be resold.
For items you can’t resell, you will need to notify your customers. They will need to take the appropriate course of action on their end.
For items that you can return into inventory, you may need to repackage the item to make it look presentable for the next customer.
Decide How to Charge Customers for Handling Returns
Handling returns can be a time-consuming process . It’s one that requires a lot of attention to detail. You’ll need to inspect each item carefully, which takes longer than simply pulling an item off the shelf and packing it for shipping.
There’s also the paperwork that comes with returns processing. You’ll have to log items into inventory properly. You’ll need to notify your customers. Additional action steps need to be taken.
All of this requires time and human resources. You’ll need to decide how to charge your customers to process their returns. Make sure these costs are spelled out in your client contracts so they aren’t overwhelmed with surprise charges.
Create a New SKU for Sellable Returned Items
Sometimes, returned items might be in good condition but do not have their original packaging. Or, the packaging might have slight cosmetic damage. To salvage the item, your customer may want to sell it at a discount.
In this case, you can create a new SKU for that item and return it to inventory. The new SKU ensures you pull the right item for the right order so that it doesn’t get mixed up with brand-new items of the same kind.
Measure Your Reverse Logistic KPIs
Reverse logistics impact your warehouse’s productivity, profits, and reputation. To get a better sense of this impact, you should track key performance indicators (KPIs) related to your returns.
KPIs to consider monitoring include:
- Number of items returned by category
- Return rate compared to the total number of items sold
- Cost per return
- No fault found rate (returns that are not related to the actions of the fulfillment warehouse)
- Scrap rate (number of damaged items you can’t sell)
You may have other reverse logistics KPIs you want to measure. Using a comprehensive warehouse management system like Zenventory can help you track these metrics. It logs all return activity in a single system alongside your fulfillment and inventory data.
These insights can be helpful in acquiring new customers who want specific details on how you handle returns, especially your scrap rate and cost per return.
How Zenventory Supports Reverse Logistics
Zenventory’s platform builds reverse logistics into the inventory management process.
Users can create RMAs in seconds to streamline the way they return goods back into inventory. Clients can log into their portals to view returns activity and see exactly what is happening with their inventory. Generate new SKUs for discounted items, get real-time reports for returned merchandise, and leverage automation to keep track of each customer’s returns.
To learn more about reverse logistics with Zenventory, schedule a demo.