In this post, we’ll take a look at some examples of reverse logistics in companies that have managed to turn returns management into a way to stand out from the competition and even into a business model of their own.
When a product rejected by a customer arrives at the warehouse, knowing how to repair or recondition it can prevent major losses in addition to reducing the business’s environmental footprint. At any rate, truly successful management lies in minimising returns, and here, warehouses play a key role when it comes to adopting appropriate measures.
Reverse logistics strategies
Reverse logistics is the process involving the return of a product to the seller or manufacturer in order to recover its value or dispose of it properly. Reverse logistics is the antithesis of the standard supply chain; that is, processes are carried out in an order opposite to that of product marketing.
Businesses are receiving more and more returns these days. According to a study by consulting firm Deloitte, by 2022, retailers are expected to receive 13 billion returns worth $573 billion every year. That accounts for four times the total ecommerce sales in 2018). As a result, businesses with a high volume of returns usually adopt different strategies to minimise losses. For example, they recondition products to resell them, recycle certain materials and reuse components, (cannibalisation). And, when there is no alternative, they destroy or discard the product while minimising the environmental impact.
In any case, the best reverse logistics is the absence of reverse logistics — when the customer is happy with a product and, thus, doesn’t return it. To this end, it’s vital to establish mechanisms in the warehouse to avoid errors and, thus, improve customer satisfaction.
Reverse logistics examples from our customers
In the reverse logistics examples below, we’ll take a look at several strategies of businesses that have implemented solutions from the Mecalux Group to effectively manage returns.
1) Refurbishment (Rent the Runway)
Refurbishment consists of reselling a product that a customer has brought back. The merchandise must not have been significantly damaged by the previous customer and must undergo a reconditioning process.
Refurbishment is a common practice in the day-to-day of Rent the Runway, as it forms part of the business model of this New York-based fashion rental company that offers pieces from 550 designers on its website. At its warehouse in New Jersey, equipped with multi-tier shelving from Mecalux to store hanging garments, Rent the Runway houses over 65,000 dresses and 25,000 earrings, bracelets and necklaces.
Warehouse operations comprise receiving the items returned by customers, cleaning them and storing them until they are rented to another customer in the future. To manage these operations efficiently, the company’s facility needs to be optimally organised. When Rent the Runway receives the garments, it temporarily places them on racks to remove any potential stains, sterilise the jewellery and sew torn clothing. The garments are ready to be reused, that is, to be rented again by other customers.
2) Outlet store (Motocard)
Outlet sales are another way to manage reverse logistics. The main aim of this type of retail is to obtain a financial return on products that can’t be sold via the usual sales channels. It constitutes marketing, at a discounted price, items that have been sent back to the warehouse because they are out of season or have minor defects.
Outlets are a common option in fashion companies. An example of this is Motocard, a chain specialising in equipment and accessories for motorcyclists. The company offers its customers the option to purchase some of its refurbished items in its online outlet at a lower cost.
Its facility in Solsona, Spain, was equipped by the Mecalux Group with storage systems and the Easy WMS, the warehouse management system. The building has an area with shelving boltless system, where all returned products are stored temporarily. There, operators check the returns with the help of the WMS, which gives them detailed instructions on storing and reconditioning the products.
3) Product repair (Cosgra)
The repair of damaged products is an operation composed of taking an item that has stopped working or doesn’t work properly and putting it back into operation. Generally, the repair involves replacing a part or component that has reached the end of its useful life.
The warehouse of Cosgra, a parts distributor for automotive and electronics companies, houses products sold in over 20 countries in Europe, Africa and Latin America. Additionally, it carried out repairs in a space set up for that purpose.
To organise returns and repairs, the company uses the WMS from the Mecalux Group, which sends instructions to operators on what to do at every turn. This can include storing the product on the pallet racking or repairing it to prolong its useful life.
4) Cannibalisation or recovery of parts (Surplus Motos)
In reverse logistics, cannibalisation refers to the recovery of a product part or component that has reached the end of its service life. This process involves the disassembly of a used item and the inspection of the parts that can be reused in other processes, such as repair and remanufacturing. This is an extremely rigorous process in which the recovered parts must meet certain quality standards in order to be reused.
Surplus Motos, a retailer of spare parts for used motorcycles, bases its business on cannibalisation. At its logistics centre, the company decontaminates, disassembles and cleans its motorbike components. The parts are then photographed, stored and put on sale at a price 30%-70% cheaper compared to new parts.
To efficiently organise all the goods, the company has outfitted its distribution centre in Gaillac, France, with a stacker crane for boxes or miniload from the Mecalux Group. This automated storage and retrieval system (AS/RS) holds 300,000 parts, a sufficient volume to reach its objective: to recycle up to 10,000 motorcycles a year.
5) Returns rate reduction (Espace des Marques)
Reverse logistics management is a real headache for many companies, as it requires time and resources. Therefore, it’s essential to minimise returns.
A prime example of how to do this is that of French online fashion store Espace des Marques. The retailer has considerably lowered its number of returns with the Mecalux Group’s Easy WMS, which sends operators specific instructions on how to prepare each order, thus, avoiding mistakes.
With this solution, the company has completely eliminated errors in order picking. Consequently, its customers are happier and don’t return as many purchases. Of course, there is still a percentage of returns not necessarily due to mistakes in the warehouse (e.g., changes in sizes, colours and models).
Reverse logistics: strategies for every need
The various examples of reverse logistics we’ve seen in this post demonstrate that reverse logistics is a competitive opportunity for many businesses. They can benefit from giving merchandise a second chance, recovering its value. And, if there’s no alternative, they can dispose of it properly.
To implement reverse logistics effectively, the warehouse must be designed well. For example, it could be equipped with an area for refurbishing items and with storage and management systems that facilitate proper organisation of the goods. At Mecalux, we have extensive expertise in devising the most appropriate storage solution for each need. Get in touch so we can give you helpful advice on how to design your warehouse.