Supply Chain has always been a two-way process, it can never be one way! Management of a business must acknowledge and frame a plan to handle returns in the most amicable and cost-effective manner, so that burden of reverse logistics is neither on the management nor on the customers. Returns management strategies ensure inventories help in increasing profit margin.

Some of the common reasons for returns could be damaged items, product no more required, excess raw materials or delays. Reverse logistics is one of the essential aspects of supply chain efficiency. It streamlines management of returned items that have been distributed or sold. The process routes returned goods for reuse or recycle or dispose or repair. Reverse logistics improves customer relationship, reduces costs, works on sustainability and opens avenues. Like if a returned item is unopened and the packaging is intact, it can be sent directly to the new location of demand.

It has its own challenges, and a roadmap is necessary for reverse logistics optimization for reducing the impact of excess inventory. The article explores the challenges and solutions of reverse logistics in supply chain management.

Challenges of Reverse Logistics in Supply Chain Management

Product return can be segmented into two categories—consumer returns and business returns. Irrespective of the type, their challenges are almost the same and need to be addressed.

• 1. Lack of Space: Warehouse work at their optimal capacity in a cyclic process, with automated stock replenishment. This means usually these facilities do not have extra space for accommodating returned items. To manage returns, management must have ample space in the warehouse to restock returned items.
• 2. Consumes Time: Forward logistics is a planned process, unlike reverse logistics. If return processing techniques are not planned, then extra time has to be taken out for picking, transporting, reviewing for further processing, handling and finally redelivery of returned goods. All these consumes a lot of time which could have been invested in widening the scope of business.
• 3. Reverse Logistics Cost: It is a costly affair as it is not a bulk transportation but an uncharted work. If reverse logistics is not synced with operations, it might become a burden for the management. It is better that organizations create a framework on how to handle reverse logistics without adding any extra cost either to the consumer or to the business. It requires both manpower and technology for managing it effectively.
• 4. Complex Operation: Reverse logistics is viewed as a complex and time-consuming. Here, products have to be picked from the exact location of the consumer and transported to the right destination as manufacturer, or warehouse or third-party or for disposal or to some other location where it can be reused or recycled. There are too many dynamics which need to streamline for ironing out the creases of operations.
• 5. Customer Expectations: In the age of eCommerce, customers want quick address to return requests. In fact, during purchase of an item, they first consider return policies, which they prefer to be friendly, less complicated and seamless. They wish to have a fast response time and timely communication about pickup status as well as return of money or replacement.
• 6. Sustainability in Reverse Logistics: Packaging, transport, picking or redistributing or reallocating, each step leaves a carbon footprint. So, reverse logistics must be managed in a way that it carbon emission is reduced.

Besides these challenges, reverse logistics also face compliance issues, especially with perishable goods and need to be redirected for reuse without loss of time. Also, entire supply chain gets disrupted with a single order cancellation or return whether it is a business return or a consumer return.

Strategies for Product Return Optimization & Reducing Impact of Excess Inventory

Since, the emergence of eCommerce, supply chain operation has undergone a sea of change. The first change is businesses with end-to-end synchronized system have better chances of survival and win trust of consumers. The second is, consumers expectations have grown, they believe in instant results and faster response time to their order. Today consumers prefer to shop from those platforms that offer coherent, simple and straight return policies. Businesses need to have robust reverse logistics for recovery value maximization from the items returned. Some of the strategies for product return optimization which would reduce impact of excess inventory and open opportunities for revenue are listed below—

• 1. Technological Upgradation: In this hybrid shopping era, supply chain efficiency is a mandate for a business. An integration of operations provides real-time visibility on the status of an item. Each SKU is mapped till the end of its journey which is inclusive of reverse logistics. AI and Machine Learning allow data analytics in reverse logistics, together they compile and share information about reasons, locations and timing of returns. This prepares the management for handling returns and cancellations in the most profitable way.
• 2. Return Merchandise Authorization (RMA): An RMA system provides an authorization number to track a return order for the consumers. It documents the return requests for repair, or refund or replacement. It is useful for eCommerce businesses that have customers across the border. It gives consumers convenience of tracking and knowing the status of their return requests.
• 3. Inventory Liquidation Methods: One of the inventory management solutions is inventory liquidation methods. Inventory managers use automation for sorting inventories according to date and time of expiration. The items can be sent for online or offline auctions, discounts, sales or to wholesalers or to non-profitable organizations which also builds reputation of the company.
• 4. Demand Forecasting: This is one of the best methods to control reverse logistics. Data analytics help in predictive demand and saves from overstocking or understocking of inventories. This controls inventories roll out and stocking.
• 5. Return Prevention Strategies: It is the process of leveraging returns to generate revenue and improve customer satisfaction. Data analytics, real-time visibility and tracking of items allow retailers to have simple return policies favoring both management and consumers. A good return policy promotes sustainability in returns, cost-effective returns handling and fair policies. Comprehensive return prevention strategies like active customer service, improving description of the product, using AI for virtual look of the product as how a dress will look on the buyer, using technology to package undamaged items, and simpler check out process build customer loyalty.
• 6. Transportation Optimization: Reverse logistics are the most expensive operation for a business. When operations are synced, it is easy to economize transportation. Eco-friendly means of transportation can be used for picking orders or customers can be guided to drop the item at a designated store for pick-up.

Reverse logistics optimization ensures customer satisfaction enhancement. Order that can be tracked and traced in real-time and assurance of timely refunds build customer trust. An open communication channel increases customer satisfaction level, makes them repeat customers, and generates better revenue opportunities.