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Record returns are expected this holiday season. Is your business prepared to manage the reverse logistics?

Reverse logistics have become as important as order fulfillment in the supply chain. The best logistics providers are prepared to manage this unpredictable inbound flow of returns smoothly. With Black Friday just barely in the rearview, the National Retail Federation (NRF) forecasts holiday sales may exceed $720 billion this year and up to 40% of those items could be returned.

Since roughly 10% of all retail sales are made online, consumers have an increased need to see and feel the product before they make a final commitment. This is particularly true for the clothing industry, which has a higher rate of returns than other categories.

To encourage online purchases, many e-tailers offer easy returns. Amazon continues to set the standard with free returns on a majority of items and their process is streamlined and convenient. These new standards are great for customers, but have an unpleasant side effect for the businesses-- dealing with the increase in returns.

So, what should be done with all of those returns? When the merchandise is new and unopened, it can be returned directly to inventory, but what about the tens of thousands of opened items? Sometimes the company can send damaged items back to their suppliers for credit. And there are new businesses that buy such castoff items to re-sell in other markets, such as Ebay. Careful management of returned orders will help minimize loss, and your fulfillment partner is at the core of this process.

When damaged items are incorrectly restocked and then sent to new customers, it clearly causes complaints and increases the company's reputational damage. Your logistics service must serve as your eyes to evaluate the items and act accordingly, following these four steps:

1. Identify

2. Inspect

3. Record

4. Restock


Identify the order and customer. If your business issues RMAs (return merchandise authorizations) then each return should have a packing slip included, indicating the order number, customer name, SKU(s), and quantity expected. In the absence of a packing slip or advance notice, the fulfillment house may use the return address to track down the original order.

Inspect the merchandise completely. If the packaging is opened, this must be reported, but the evaluation must go deeper- the item may be damaged or dirty, missing tags or labels, unfolded or disheveled. The fulfillment provider should discuss standards with each client so they can conduct a proper inspection.

Record the return according to procedure. Some e-commerce packages may allow for the fulfillment house to send information electronically back to the system, but this is uncommon. Usually the business must manually log the return to process it through the customer's account and update inventory.

Restock the item if it is deemed acceptable to ship again.

Depending on the individual business policies, the role of the fulfillment house will vary. Some businesses still process their own returns, inspecting and absorbing the inventory themselves. But for a complete solution, many fulfillment providers now offer 4PL services. This new classification indicates an enhanced 3PL that provides other services, usually also including reverse logistics.

Reverse Fulfillment Considerations

Behind the scenes, returns are a complicated process with a number of logistic steps. If you do not already have a firm process in place, consider these questions:

>Who should pay return shipping charges? Customers prefer to place orders when the return is risk-free, but this doesn't work for all products or all companies. Clothing benefits from a smooth return policy. It may be unreasonable to offer free returns on large items, and it may be unnecessary for items such as books.

>Will you require RMAs? A return merchandise authorization is the most effective way to streamline the software aspects of the return. RMAs create a record in the system, which will attach to customer accounts for refunds, as well as inventory for restocking. Plus, the customer can be given specific instructions and a packing slip. This makes things easier on the fulfillment house and keeps costs down.

>How is the shipping label generated? If your website can handle creating the shipping labels through carrier api's, then you're ahead of the game. If not, find out whether the fulfillment house can generate these labels (or call-tags) and how they will transmit the labels to the customer.

>If the website does not use RMAs, or if customer service does not inform the warehouse, how will the order be identified? The more information you can share with your logistics provider, the better. If they expect a return, they do not have to decode the contents of the box.

>Will repackaging be necessary? Some items, such as clothing, may often be returned in opened plastic bags. If you have an item like this, the fulfillment house may be able to easily repackage and/or relabel the products.

No company is safe from returns. But no company need be unprepared. Customers are more likely to reorder from a company that delivered a positive returns process. Exploring your reverse logistics process with our tips in mind, you can take some of the stress out of returns and reduce waste while increasing efficiency.