Order Returns and Reverse Logistics

Order Returns and Reverse Logistics

Most distribution centers are built around the concept that items are received, put away in large quantities, and then picked in smaller quantities for order shipment. When there is a return, it’s similar to having a small fish swim upstream in a large fast moving river.

Distribution centers are not really built and constructed for bringing product back in small quantities. E-commerce distribution centers are built a little bit better for that simply because everything that they’re picking typically goes out in each, so they’re a little bit more equipped for processing returns in each quantities, but it still creates a problem in workflows within any given distribution center.

In fact, some larger operations, will have dedicated warehouses or distribution centers to process returns in a large-scale approach. There may be a dozen distribution centers around the country and all the returns go through one particular reverse logistics distribution center.

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Order Returns and Reverse Logistics Solution

One reason for difficulty with reverse logistics and returns operations, is required process capability to determine whether or not the product is going to be returned to the vendor, destroyed, refurbished, is resalable, and it may go through a number of different condition states before it can be appropriately dispositioned. For instance, a product that comes back in that may not be able to be resold but can be refurbished is not going to be sold as the same type of product as it was if it was in new condition. The other reason for that is, is that unlike when you’re receiving product into a warehouse, generally that product is ready and available to sell or pick for orders, kits, or work orders, etc. where in reverse logistics it may not be available for orders.

Typically, there is a returns process within the ERP system or WMS called an RMA process, which is return material authorization. This an identification from the customer that a return is coming inbound, so the distribution center is aware of it in advance, and there’s an identification as to why it’s being returned. There has to be an evaluation, review, and disposition of the product when it comes back in, because oftentimes what’s said or identified as a return is not in reality the condition of the product.

In an e-commerce environment, a customer return something because they said it was a piece of clothing that didn’t fit, or they didn’t order it, or it was the wrong thing. But in actuality, what they identified it as was something different than the true condition of the product when it comes back in. 

So there has to be an evaluation of the disposition of the product when it’s returned to make sure that it matches the RMA. Within the distribution center or the reverse logistics center, that is dealt with and handled in terms of whether it can be put back in stock for resale or whether it has to be disposed of, returned to vendor, refurbished, etc.

For order returns in a distribution center, oftentimes many ERPs manage the RMA process, which is the interaction back and forth with the customer to return the product, but they don’t handle the disposition of the product once it comes in the door. Some WMS are better prepared to handle the details of the RMA process.

There is a financial transaction that occurs with the RMA process. “My customer’s returning this product. I need to credit them X number of dollars for the return,” but when it actually hits the receiving dock, the functionality doesn’t exist to deal with what is the disposition of it, and can it go back into stock, does there need to be other handling such as throw it away, return it to the vendor, or refurbished the item.

The order return and reverse logistics process is a complicated one that is often best suited for a robust WMS solution. Intek and Minerva’s WMS software suites accommodate the RMA process and can automate it to make it very efficient.

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