We had the unique opportunity to engage with leading retail and OEM brands at the Consumer Returns event this week in Dallas. Having brands, retailers and providers in the same room to discuss a problem that costs the industry up to $100 billion in annual product returns provided an interesting perspective on some of the very challenges that exacerbate the cost of dealing with this problem.
The dialogue certainly created an awareness of the issues facing OEMs and retailers. Some progress has been made on tackling common problems such as cooperation on the prevention of fraudulent returns. What became clear, however, is that there is a lack of alignment on how to tackle the cost of dealing with the problem. While the returns culture (especially in the U.S. market) is a problem in itself, the cost of dealing with returns (at 2.7 times the cost of processing the original shipments) is at least partially self inflicted.
The retail returns “recipe” spans multiple organizations and functions with conflicting motivations. A simplistic view of the process would include:
Ultimately, the process needs to deliver the appropriate service to customers, and the objective is to maximize the recovery from returned product, while protecting the brand value of new product sales.
Every time we touch or move the product, we are adding to the cost of the returns process. This is a worthwhile investment only to the extent that these costs efficiently get products to a recovery condition or improve that condition to drive an increased recovery.
The market will fix the rate of recovery at a point in time based on the recovery channel and condition of the product. With the passage of time, that recovery will decline. Time, therefore, becomes the other enemy of this process.
Today’s recipe seems geared more towards moving the problem to the next stage of a fixed process than driving a dynamic process to improve the ROI of the returns process. It is time to step back from the daily execution process and examine the true value of returns management. In a follow-up post ‘Returns Management: Too Many Cooks – the Start of a Recipe,’ we will look at some of the elements needed to improve the current recipe.
We would love to get your inputs on ingredients for success.
Originally posted by Lorcan Sheehan at http://blog.moduslink.com/bid/45269/Returns-Management-Too-Many-Cooks-No-Clear-Recipe-for-Success