The true cost of not having a returns policy

First published by Mandy, on 25 March 2020

Returns management

Historically, parcel volumes from returns were insignificant for most retailers and manufacturers. More recent numbers have proven to buck this trend, as online retailers have begun to face an unprecedented rise in the volume of products returned: consumers worldwide buy and then return a staggering 642.6 billion USD worth of goods annually1

Without a proper returns management plan in place, businesses are exposed to a rise in working capital. As inventory becomes tied up in returns stockpiles, the overall cost of running a business becomes far greater than just the direct costs arising from the aforementioned operational inefficiencies. 

Businesses in most industries face very high costs when it comes to processing returns as each item typically needs to be reviewed and assessed for fault and/or damage, before being repackaged and transported to another location where they can be reworked or resold.

Evaluating the true cost of returns

Firstly, businesses have to bear the cost of additional packaging. The handling and disposal of returned products, components and packaging materials can add up, adversely affecting the environment. 

Furthermore, there is a logistical cost to transporting returned items. Using traditional forward logistics has proven to be costly, and often results in a reduction in a company’s overall supply chain channel and service delivery performance. Prashant Dadlani, Founder and CEO of blu, estimates that returning a product into the supply chain can cost as much as double the initial delivery fees. 

Not to mention the fact that returned goods may not fit to re-enter the market: out of 300 surveyed businesses, only 48% of returned stock is deemed acceptable for sale after undergoing sorting and quality control measures2. This means a double hit to the bottom line - businesses have to fork out for the unplanned cost of reverse logistics, as well as the reduced margin for items to be resold.

The unpredictability of returns is a major challenge that impedes organisations from effectively managing their reverse logistics processes. Most businesses find it extremely difficult to forecast what products will be returned, when the return is going to take place, where the return pick-up location should be, and the underlying reason behind the return. 

A reverse logistics process that meets your specific business needs

The uncertainty involved in the returns process necessitates an agile approach to reverse logistics, so that workflows and processes can be scaled up or down as necessary. At blu, our solutions are designed to be scalable, allowing you to quickly react to fluctuations in the volume of returns parcels. Go a step beyond customer-friendly returns policies and delight your customers with our network of over 100 returns drop-off points, conveniently-located around Singapore. With rapid turnaround from bluPort to warehouse, your team can sort and assess returned goods and quickly determine the next strategic steps. 

1 KPMG, “Consumers worldwide buy and then return a staggering $642.6 billion USD of goods annually.”
2 Ibid.

Written by:

Madu Lokan

Madu is a Business Development Manager at blu. He has over two decades worth of experience in various aspects of logistics, including international freight and supply chain planning. Madu believes that strong relationships, innovative solutions, and a customer-first attitude are vital to business success.

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