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Blockchain and the challenges of reverse logistics

Consumers today expect simple and convenient returns. But managing the reverse logistics process remains a challenge for many retailers.

By
Neil Soni
,
Posted on
January 28, 2020
by
Neil Soni

Having an easy, convenient and simple returns process is a critical part of providing a positive customer experience today. Yet while beneficial to consumers, returns are one of the biggest supply chain management challenges for the modern brand or retailer. As noted by DC Velocity, “The sophisticated automated systems they've designed for processing high volumes of outgoing orders typically don't run as well when shifted into reverse.”

Return shipping

Common problems with reverse logistics

  • The main problem that companies face with reverse logistics is that products are being returned from a mix of places. For instance, some online orders are shipped straight back to the fulfillment center, while others are being returned to brick-and-mortar stores.
  • Then comes the headache of evaluating and sorting out the returns.
  • Should products returned to stores be put back on the shelf?
  • How do we separate the products being returned due to defects or damages?
  • Is refurbishing or repackaging necessary?
  • Which products will go to secondary markets?
  • The result is a complicated and labor-intensive process, which hinders efficiency and actually hurts customer satisfaction—especially when the process takes longer than expected. Uncertainties easily emerge around a product’s status, which can make it difficult to respond to customer inquiries.

Returns can also take a financial toll on a business. There’s the cost of shipping products back upstream in the supply chain, which some companies choose to pass onto the consumer while others don’t in fear it can deter purchases. When products enter secondary markets, that can eat into profits as well.

All these problems are only magnified during the holiday season, when purchase volume—along with return volume—spikes.

Unwrapping holiday returns

In just 2019, the retail industry saw a record-breaking number of holiday purchases. According to Mastercard’s SpendingPulse™ report, consumer spending surpassed 2018 by an increase of 3.4 percent, including a nearly 19 percent jump in online sales.

Over the season though, UPS estimates that it facilitated over 1 million returns each day from December through early January. Holiday returns reached their peak, climbing to nearly 2 million on Jan. 2, or “National Returns Day.”

Holiday returns

These returns amounted to $41.6 billion worth of products, according to forecasts. That’s a lot of money to leave to risk on account of inefficient or improper reverse logistics.

Transparency is the key to better returns

How can brands and retailers better manage the return process? It starts with having transparency across the supply chain. A distributed ledger, or “blockchain,” offers this through a decentralized, digital record of all product movements and transactions, including back upstream into the supply chain.

Blockchain and the challenges of reverse logistics

With data visible to all connected parties, a distributed ledger provides brands and retailers with real-time information on what consumers are returning. Tying together multiple disparate systems, it eliminates silos and uncertainties around item status, authenticity, eligibility, and quality.

Companies thereby benefit from accurate, timely information on returned products, enabling them to:

  • Intelligently track products through the return process
  • Share status updates with consumers
  • Streamline returns overall and accelerate the time it takes consumers to get their money back
  • Reconcile returned products with current inventories
  • Proactively determine next best action for an item
  • Maintain records of any items in need of repair or refurbishment

Ultimately, better reverse logistics management—powered by blockchain—means you can keep consumers happy while protecting your business from losses.

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