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.

Blockchain in Logistics: How it Started and How It's Going

Blockchain’s origin is rooted in the release of the whitepaper written under the name Satoshi Nakamoto explaining the foundation of what we know as today, Bitcoin. Bitcoin offered an avenue to worry-free digital transactions due to transparency and decentralization of the data. This ensured that information could not be altered and prompted the crypto-currency boom. The core-principles of blockchain and success of Bitcoin started a wave of curiosity into other possible applications, thus the development of the technology began to arise.

One of these applications was supply chain. Blockchain emerged and appeared to be the solution to everyone’s problems. In 2019, The Port of Rotterdam and The Port of Busan pilot tested blockchain into their maritime logistics and found success in automation and reducing operation cost.

What is Blockchain? As Explained from Blocklab:

• A “digital ledger” or spreadsheet that is duplicated and stored in a distributed network in multiple locations which can be updated instantly at any location.

• Data is decentralized since it is in multiple places at once. Thus, becomes a secure network as data cannot be modified without all approval of all the members and makes it difficult to hack.

• Information is constantly monitored which makes it difficult to change data and ensures that the information is distributed but not copied.

• Agreements become mutual and documented which enhances security and traceability as transactions are logged into the ledgers which reduces the worry of parties keeping their end of the deal.

• This results in lower costs, improved efficiency, increased transparency and increased trust.

Blockchain enables users to record and store data more easily and in a decentralized way which allows for transparency from all parties, accurate/real-time data, and improved traceability from production to delivery. Currently most companies manage their data individually on independent software support systems. The information is not shared across platforms which can cause confusion and miscommunication when the information does not align. Now, imagine the ability to track end-to-end performance of your goods and trust in the data being viewed. Blockchain provides exactly that solution. Participants in the network will provide information that would be difficult to change. The transparency allows anyone to audit any point in the supply-chain and reduce errors. Goods come as expected and as a result, increase trust amongst parties and reduce operation costs.

So Why isn’t Blockchain Used More?

 A study published in 2020 in the Journal of International Trade and Commerce, delved into the blockchain adoption focusing on Port of Busan and Port of Incheon. Despite all the possible applications of blockchain, the finding suggest it may be more difficult to sell than people think.

1. Logisticians have difficulties getting a clear idea on the benefits and successful blockchain adoptions.

2. Consultants and academics worry about the technological maturity of blockchain.

3. Competitive edge of the industry is highly influenced by economic factors related to financial and time-related aspects.

Blockchain Takes a Huge Shift in Infrastructure to Implement

Blockchain performs its best with more participants because there is more information. Without participants, the use case of blockchain no longer becomes applicable. Therefore, a decent size number of entities must agree on implementing blockchain which is harder than it sounds. Blockchain requires a huge shift in infrastructure.  Instead of storing information on their own subscription platform, the information will instead be widely available to anyone in the network which may be intimidating. Not only that, but the technology is new, and companies are hesitant on uplifting their entire structure. The pilot program by The Port of Rotterdam and Busan has shown that blockchain does perform up to expectation, but only provides a single example of the tangible benefits of adoption. A few ports have started pilot testing since, but until we see more entities willing to integrate this technology, it will be a long time till we see any major shifts in supply chain management.

Blockchain is the Future of Logistics

As supply chains become increasingly complex to meet the needs of consumers, the benefits of blockchain are far too good to not be considered as a solution. Not only does it provide relief to cumbersome problems in logistics, but transparency is becoming an important factor to consumers. Ethical sourcing and detailed package tracking are just a few factors that consumers are starting to consider. Blockchain allows for trusted end-to-end product visibility, which will become more vital to companies and consumers alike.

Supply Chain Management Post-Covid-19 – Regional Supply Chains

Regional supply chains, near-shoring manufacturing, inventory management, warehousing as a market tool: oldies but goodies are making comebacks in the new, post Covid-19 world.

Life has changed drastically the last few months since this novel coronavirus disrupted the world as we knew it. Supply Chain Management is making a comeback on what is trending after its last visit on the charts back in the last century.

The trend from global to regional supply chains has been going on for a while. One reason is of course President Trump’s trade war with China. Interestingly, this has demonstrated more of the difficulties to relocate complicated supply chains from the dominating supplier clusters in China. There are so many components only available there that it is not only cost-prohibitive to moving technologically complicated production to North America or Europe. China is very deliberately undergoing a Japanization, in the sense that it used to be the place where all the cheap, low quality stuff was made and now it is becoming the high-tech hub. The tariffs and trade frictions have anyway started a motion towards more regional supply chains.

It has also demonstrated how developed the regional supply chains in east Asia are. China’s Silk Road project will undoubtedly exacerbate the growth of the Greater China supply chains. The main market may well be in Asia.

The tariffs and the COVID-19 crisis have brought the forgotten artform of scenario planning and risk mitigation back into the supply chain management world. Check in with the Site Selection Guru Bob Hess at Newmark for details on how to do this.

One answer to the risk mitigation is “near shoring” – regional supply chain in the own country or a safe region i.e. within EU or within the USMCA block. Establishing safe and resilient, regional supply chains for medical equipment is on top of many procurement specialists’ agenda.

We know from our clients with assembly/production in North America that a lot of companies are trying to find or develop suppliers of critical components within the USMCA. This is a process that takes time and the result will not be visible short-term but certainly over time. Most likely is that this will materialize in the form of regional clusters like you see for furniture in Western Michigan, cars in the Midwest or pharmaceuticals around Boston and Raleigh.

A third area for regional supply chains is products that can be made by robots or other forms of automated production. This is driven by the increasing salaries in China and the decreasing costs for robots combined with the ever-increasing capabilities and versatility they have. We see more and more very successful and growing companies built on automated production in both Europe and North America. It is not far-fetched that they will help form the foundation for regional supply chains.

The most important factor driving the growth of regional supply chains is psychological and materializes in attitude. Where offshoring to low-cost China was a default in the 1990s and 2000s, it is now mainstream to think sustainability, resilience and creativity. Enter regional or even local supply chains. Farm-to-Table or Made-in-your-County.

Supply Chain in COVID-19: The Option of Nearshoring

Our CEO, Håkan Andersson, was recently featured on a podcast with industry expert, Bob Hess, about the potential for #nearshoring as a result of the pandemic.

Listen here: https://nkf.re/3dhqU0