Why you Should Prioritize Reverse Logistics and Returns Management

This year, returns set an all new single-day high and certain companies are so overwhelmed that they are refunding consumers and telling them to keep the items rather than shipping them back. Returns have become a large pain point for many companies and can add a lot of extra costs when not handled correctly. A thorough understanding for reverse logistics and returns management can allow companies to minimize the added costs and recoup some value while earning increases in customer loyalty.

Returns can happen in any industry for many different reasons. Whether the reason for return is the consumer’s fault (e.g. they ordered the wrong size), a carrier’s fault (e.g. product got damaged during transit) or the distributor’s fault (e.g. shipped an expired product) every company should prepare themselves to handle reverse logistics and returns.

The What: Standardized Process with Automated Workflows

All efficient returns management strategies rely on understanding returns data so that standardized processes can be built, and workflows can be automated. This will prepare an operation to handle all the different returns and minimize the decision making happening in real-time. Defining necessary functionality and selecting appropriate support systems is good practice. A pre-screen with the consumer to allocate the return into the correct workflow allows the logistics team to predict and plan for inbound goods. Workflows can vary company to company, but a quality check is consistent. Assessing goods and distribution into pre-determined workflows leads to quick turnaround time and fastest recouping of investment.

The Why: Financial Incentive AND Customer Loyalty

Financial incentive is clear – the opportunity to resell the goods and recoup value, whether on the primary market in full or a secondary market for fractions. What is less recognized, is the influence on customer management. Customer expectations are high for returns – quick and easy response with free shipping. Managing that relationship can go a long way. Remember that returns contribute to the bigger picture: customer loyalty and repeat sales.

The How: Valuation

With every product, being able to appraise a return is absolutely necessary. Understanding why the return is being made, any repair/refurbishment costs necessary and the future-value of the product reselling (if at all) on the primary or secondary market is key. Having a system in place to do so is extremely important. It has even led to some companies leaving the product with consumer free of charge.

Goods valuation does not paint the entire picture. A considerable piece of the puzzle is customer loyalty and retention. Determining value here is specific to each company, and something not to be ignored.

Looking Ahead

A trend significant of late is that of sustainability. Government regulations have taken interest in the proper disposal of goods and incentivized reuse and recycling. Secondary markets have flourished in recent years, leading to the development of closed-loop supply chains – those with 0 waste. We predict that 2021 continues to bring a focus to ESG initiatives, and that those not invested there will be left behind.

Warehouse Automation: Where to Start?

In the days of the pandemic (and even pre-pandemic), the trends and challenges facing the warehouse industry are clear: difficulty finding labor. As such, exploring automation for warehouses has never made more sense. However, it is a daunting task to understand and explore how to start. Below, we explore basic options to explore warehouse automation.

Automated Repeated Material Movements

Automating activities that only people can do is difficult to achieve currently; however, there are repetitive movements such as walking or transporting material that can be automated, typically at a good ROI.

For carts, something like CartConnect works well. Also, conveyance is always a good option. For repeatable pallet load movements, AGV forklifts are good at moving loads from one end of an operation to another.

Automated Storage and Retrieval

The second option is arguably the most automated – automated storage and retrieval (ASRS). There are many systems under this umbrella, but the concept remains the same for all: the ASRS will take product the operation has received, automatically store them, then pick/deliver them to an operator as needed.

Systems range from a mini-load system to a full pallet ASRS to the new solutions on the market for smaller product like the AutoStore. Also included are dense/fast-pick solutions such as vertical lift modules (VLMs) and horizontal and vertical carousels.

Whichever system is selected, the benefits are the same: more efficient storage space and reduced warehouse labor in putaway and picking, 2 of the most time-consuming processes in distribution operations.

Transaction Automation

Though perhaps not the first thing to come to one’s mind when thinking of warehouse automation, transaction automation is arguably the most important. This is a very broad term but stands for eliminating manual operator interactions to log transactions. The default way for an operator to log inventory movements, receipts, etc. is to manually type it in to the ERP or WMS. The ways to automate this are varied, from RF guns/scanning to RFID to voice picking to put-to-light/push buttons. Regardless of the method, automating transactions improves

5 Supply Chain Trends for 2021

This past year has created many new challenges for everyone, causing consumers and companies to adapt. We expect some of the supply chain changes to be temporary but that many of them will have a lasting impact on the supply chain industry going forward. Below, we discuss some of the trends that we expect to see in 2021.

Fulfillment and Logistics as a Competitive Tool

Every year we continue to see consumer behavior change, and in no year has that change happened as rapidly as in 2020. People want to get quality goods for a reasonable price and quickly. Unorganized supply chains will become increasingly exposed as companies will have to choose between bad service levels or unsustainable costs to meet customer demand. The most obvious example of this trend is Amazon's move to achieve next-day or same-day shipping. As stated above, consumer expectations for service continue to rise. This means businesses that have systems in place to forecast well, stock optimal levels of inventory and fulfill efficiently have a significant advantage over those that do not.

Focusing on E-Commerce, Service Levels and Omnichannel Development

The shift from brick and mortar retail to e-commerce has been growing every year, and COVID-19 only expedited that growth even more. It's no surprise that consumer’s extreme shift to e-commerce seen in 2020 will have a lasting effect on the way people do business moving forward. In addition to the e-commerce shift, service levels are also becoming a higher focus as consumers are going to choose the quickest and most reliable option. To keep up with these shifts, companies are going to have to continue to focus on developing their omnichannel strategy. This means using support systems to create an interconnected network of stores, warehouses and 3PLs, providing the flexibility to fulfill both large wholesale purchases and small e-commerce orders. Companies can then leverage this interconnectivity within the network to optimize fulfillment strategy on an order level basis.

Shifting E-Commerce to a 3PL

Another industry trend we expect to see is a significant shift for e-commerce distribution towards third-party logistics companies (3PLs). The e-commerce industry, in comparison to brick and mortar stores, presents a complexity that is hard to tackle for smaller companies. 3PLs provide an option that will allow companies to set up much quicker than if they opened their own warehouse and allow them to avoid significant fixed costs, have access to an already established network and get specialized processes based on their needs.

Making Procurement a Focus

COVID-19 complications and global trade friction with China mixed with consumer’s increasing expectations for better service have signaled to the supply chain world that now may be the time to focus on procurement. By moving suppliers closer to home (near-shoring) and prioritizing the procurement process to make lead time and flexibility priorities, companies can improve their fulfillment times and overall supply chain. Developing a regional supply chain offers the better potential for mutually beneficial relationships and improves both time and proximity to market. This confidence in relationship management and product could challenge the prior approach of low-cost country sourcing.

Freight Normalization – A New Baselinne

COVID-19 has caused overwhelming increases to volume causing capacities to be tested and costs and rejection rates to skyrocket. As the freight companies profit on these higher rates, it can be expected that they will reinvest into capital expenditures, such as more trucks, increasing capacity to meet market demand and normalizing from the economic shifts of 2020.

 We wish everyone a safe and healthy 2021.

How to Modernize Your Warehouse/Distribution Center: Part 2

In Part 2 of our process to modernize warehouses, we discuss the systems and automated confirmations necessary to eliminate human error and increase efficiency.

Support Systems

Support systems are critical in transitioning a warehouse into the modern age of logistics. Some of the most common types of support systems include Enterprise Resource Planning (ERP) systems, Order Management Systems (OMS), Warehouse Management Systems (WMS) and Inventory Management Systems (IMS). Whether your distribution network consists of hundreds of warehouses around the globe or a single warehouse that ships to just a few customers, there is a support system that can help. There are numerous different options out there and each one has different capabilities, strengths, and weaknesses. Finding the right support system for your business is critical for any operation. These systems generally support warehouse operations by collecting and tracking data, standardizing processes and allowing operations to be executed more efficiently. The system should support all the current operations by decreasing manual work and helping implement future improvements. Without a WMS or other support system, warehouse processes and operations will be very manual and slow. Additionally, without a support system you will be limited in the further improvements and technology that can be added to the warehouse. Implementing a support system is a significant investment and might be difficult to see the exact ROI but it is one of the most important investments that can be made in a warehouse. It will support the entire operation by:

• Allowing processes to run quicker, meaning less time is spent on standard operations and higher throughput is achieved.

• Tracking and giving access to data which can be analyzed to see where further improvements can be made to reduce costs and increase output.

• Making it easier to track and manage inventory and KPIs which will result in better performance, lower costs, and higher output.

Automated Confirmation

Automated confirmation is the piece that brings together everything that we have talked about so far. We use the term ‘automated confirmations’ to be a blanket statement for all methods of an operator verifying their warehouse activity systematically, such as RF scanning, RFID, voice picking, etc. Using automated confirmation technology can drastically reduce the opportunity for human error and the time it takes to perform operations. An operator just needs to scan/speak/move a product and/or location rather than writing information down or updating the system manually. This will also provide increased visibility. Since the system is being updated at the time of the transaction, there will be a more accurate and real-time look at data which can help with knowing where products are and how much time is spent on different operations.

Adding these improvements will modernize your warehouse and allow it to operate more effectively and efficiently compared to how it operates today. They will also set you up to continuously grow and improve by making it easier to implement new improvements and technologies down the road.

How to Modernize your Warehouse/Distribution Operation, Part 1

For companies to stay successful over a long period of time, they must constantly be improving and changing with the times. This is especially true in warehousing and distribution. One of our core competencies at Establish is helping our clients logically and cost-effectively modernize and improve their warehouses and distribution centers. Over the next few weeks, we will be walking you through many of the steps necessary to modernize warehouses, from the most basic operation to a fully automated solution and everywhere in between. We start with two of the most important: Inventory Locations and Product Labeling.

Inventory Locations

Throughout a warehouse, there are many different places that inventory is stored. Simply adding names to each of those locations can help pave the way to a modernized warehouse so that an item and quantity can be tied to for efficiency and accuracy.

The naming structure can be virtually anything and should be relatively easy to follow. Each individual location should have a unique name and be labeled, with the labels being be easy to read and including barcodes to allow for scanning capabilities or check numbers. At a minimum, inventory location labels should have the location name and barcode, but they can also include more information such as color coding and the product(s) stored there. Below is a sample location name for a warehouse with standard pallet racking aisles:

The benefits of adding inventory locations to your warehouse include:

• Better tracking and traceability of inventory.

• Improved inventory accuracy and easier cycle counting.

• The ability to implement more robust warehouse practices such as barcoding.

• Improvement to current picking and put away processes.

• More functionality out of the current support systems.

Product Labeling

In addition to labeling the inventory locations, all the products in the warehouse should be properly labeled. These labels should include the product name, associated barcode, lot/batch/expiration date (if applicable) and be clear and easy to read. Products should be labeled directly upon receipt, prior to being put into storage. Even better, it can also be coordinated with suppliers to include these labels on the products that they come in already labeled. Labeling allows products to be identified seamlessly during receiving, picking and inventory counts and will help reduce human error and manual processing.

Next time, we talk about the IT and Support Systems as well as Automated Confirmations (RF scanning, voice, RFID, etc.).

How to Select the Right Warehouse Management System (WMS)

A successful warehouse depends on employees implementing storage solutions, and the success of these employees depend on system support. A Warehouse Management System (WMS) is a key system requirement in a warehouse to collect and track data, standardize processes, and execute efficient operations. WMS vary in precise functionality but will typically manage several supply chain operations within the warehouse with the objective of boosting productivity, optimizing costs, increasing customer satisfaction and creating data visibility.

There are many different factors to evaluate when choosing the right WMS for a company’s business and processes. The right WMS should be able to:

• Support current warehouse functions

• Support desired functions the warehouse plans to implement

• Integrate with systems that will not be supported by the WMS

• Grow with the company and future improvements

Tier 1 versus Tier 2 versus Tier 3

Warehouse Management Systems are typically classified in 3 tiers; Tier 1 being the most sophisticated and Tier 3 the least, with associated costs following the same pattern. The standard costs will consist of startup and implementation in addition to monthly operational costs. The decision on what kind of WMS is needed comes down to balancing costs with required or desired capabilities. The line between a Tier 1, 2, and 3 WMS is becoming less defined – a Tier 1 WMS can turn functions on or off to provide custom applications on an individual customer level to accommodate specific needs.

Tier 3 WMS are usually an enterprise resource planning (ERP) system that has WMS capabilities, but there are also basic WMS programs. The Tier 3 functionality will cover standard receiving, putaway, inventory, picking, packing and shipping. These usually are the lowest cost and popular for clients looking to develop and implement a WMS with minimal capital costs.

A warehouse operating with a Tier 2 WMS is likely to have more complex processes that require more advanced and custom functionalities. Tier 2 systems support multi-warehouse businesses, enable greater automation and can integrate with multiple systems like ERP and Transportation Management Systems (TMS). These can range in costs and clients favor these for the expanded functionality and better integration options than a Tier 3 system.

Tier 1 WMS deliver comprehensive functionality to any business operating a warehouse. These enterprise-grade systems include the most advanced functionality and can be multi-site and global installations. They provide a complete integration of the supply chain, fully automated warehouse operations, and additions like labor management, yard management and task management. Tier 1 systems are usually the priciest, but also have the broadest support and the most flexibility of all the systems. As mentioned before, most of these systems can only offer certain aspects of the software to help align costs with customer requirements.

WMS Selection Steps

When it comes time to select a WMS, the main process steps are as follows:

1. Recruit an internal WMS selection team, potentially with the addition of an external specialist, for example a WMS consultant or supply chain consultant.

2. Create a timeline and budget for the WMS search and implementation, including a forecast ROI.

3. Gather WMS requirements.

4. Create a vendor list based on WMS requirements.

5. Compile an RFP using a vendor template or custom outline.

6. Send RFP to vendors.

7. Analyze vendor responses to produce a final shortlist.

8. Schedule demos with top vendors to evaluate system performance.

9. Negotiate contracts with vendors where desired.

10. Make final WMS vendor decision based on capabilities and cost implications.

11. Schedule training and implementation.

At the end of the process, you will be going live with what is the right WMS for your business.

Declining Business: 3 Key Ways to Save in Warehousing Costs

Here are 3 key ways to help cut warehousing costs to prolong your positive cash flow:

1: Data-Driven Forecasting

Completely accurate forecasting is hard to achieve, but frequent, data-driven forecasts with informed strategic adjustments are the key to determine how much product nee on-hand inventory is needed. Being able to plan for While this seems basic, there are other areas where accurate forecast can help save money in the future. For example, if you are using a 3PL and can say that your inventory levels will drop x amount each year, your footprint in their warehouse should drop as well allowing the 3PL to fill that space with other clients thus saving you money.

2: Inventory Analysis

In a business that’s losing demand, there’s a good chance that the are certain items that maintain the demand while most others are being phased out. It is very important to keep track of the demand for each individual SKU in the warehouse. An ideal situation would be to set up all the slow-moving SKUs as direct shipments from the manufacturer while keeping only the high moving SKUs in the warehouse. While the shipment costs directly from manufacturer to customer will likely be higher, the savings from not keeping the inventory in stock will outweigh the increased shipping costs. Another option to look into would be to separate slow-moving SKUs in one smaller and centralized warehouse. You can keep the inventory levels low allowing you to lower the footprint. Staffing needs will also be reduced since the handling of these SKUs is much less than in the faster moving warehouse.

3: Inventory and Staffing Management

Proper inventory management is important for all businesses, but it is especially important in declining ones. Start by looking into any trends that might be developing in the orders. It is important to think of outside the box methods for optimizing your warehouse strategy. Instead of looking at storing the SKUs by size or product line, look to see if there are certain items that are usually part of the same order. Group these items close together in your warehouse to save on the handling costs. Instead of storing 1 small SKU per bin, store 3 in each by adding in dividers to the bins. There is also a greater need for cross training of the staff in a slower moving warehouse. There will be much more down time and you cannot afford to have employees not being productive. There will be a slight learning curve at the beginning when the employees are learning the other job functions of the warehouse, so productivity might go down. This is fine as the returns once the cross training is complete will be much greater than the lost production early on.

An Often-Overlooked Aspect of any Operation that can be Improved

As supply chain consultants, we are fortunate to be exposed to nearly every industry and have the unique opportunity to see hundreds of different warehousing and distribution operations. We get to see the different operations for exactly one reason: our clients want us to help improve them.

The most common item we recommend improving is the cleanliness and orderliness of a warehouse. Maintaining a clean and orderly operation is much more important than just the optics (though the optics are important - imagine taking a potential client or business partner through a dark warehouse with trash on the floor and graffiti on the wall!).

A clean and orderly operation drives the culture of accountability and effort. When nothing is disorganized or out of place, it makes it that much harder for someone to purposely misplace something or work inefficiently. When cleanliness is stressed, it follows to all aspects of the operation, from receiving to stretch-wrapping the pallet going out.

As simple as it sounds, this idea is not so simple to implement. Operators are typically evaluated on their productivity. The more you pick/put away accurately, the more productive you are. However, this leads to the little things being forgotten. Will an operator want to put an empty carton away in the corrugate bin if it slows them down? Probably not. These need to be taken into account when evaluating your warehouse personnel. Productivity is key, but not when it neglects other areas of the operation.