Reverse logistics management is an important factor for success in ecommerce - perhaps more than you may realize. To help paint a picture of all the different ways reverse logistics impacts businesses and their customers, we'll take a look at some fascinating data points from around the web and examine their importance in developing broad logistics strategies.
Stat: Ecommerce purchases are 3x more likely than retail purchases to be returned (USPS)
Takeaway: It’s all too easy to let outbound logistics absorb all your focus, but remember: the more you ship, the more returns you’ll have to process (statistically speaking). Plus, because they are such a significant aspect of ecommerce, returns are also a major component of the customer experience your business becomes known for. Streamlining your management processes for reverse logistics today will help you (and your customers) save time and money as the number of returns you process inevitably grows alongside your sales.
Stat: 20% of ecommerce returns occur because of shipping damage (Invesp)
Takeaway: Considering that the cost to replace a damaged product can be 17x the original cost to ship it, ecommerce companies would be wise to prevent those losses by modifying their approach to reverse logistics. Customizing your packaging to an optimal size and level of protection can be simple yet effective change that gets better DIM shipping rates, improves return rates for damaged products, and generates less packaging waste for a cleaner environment. And speaking of reverse logistics and the environment…
Stat: About 5 billion pounds of returned merchandise ends up in landfills (Retail Dive)
Takeaway: That’s a huge amount of waste – and it doesn’t even include waste from excess packaging materials or the fuel spent trucking products from fulfillment center to customer, then back to the fulfillment center and off to the dump. If you want your business to be more eco-friendly, sustainable, and profitable, think about ways you could be recouping costs from returns or donating them.
Stat: 58% of shoppers say they are “increasingly not satisfied” with the ease of making returns. 72% of shoppers are willing to spend more per order, and order more frequently, from online stores with a customer-friendly returns process (Shopify)
Takeaway: As the saying goes: “The customer is always right.” Optimizing your reverse logistics has the potential to do wonders for your brand reputation and customer trust levels.
The experience that shoppers have with your ecommerce brand isn't limited to interactions with your website. It continues offline through the product fulfillment process – including how an order is packaged, the condition of the items in an order, and efficiency of the returns process. While your direct control over shipping and handling is limited during the last mile, there are a few things you can do before packages leave your warehouse that will go a long way toward giving customers a delivery experience that makes a good impression.
In a Harris Poll survey (funded by packaging manufacturer, Sealed Air) of more than 2,000 U.S. adult consumers, 66% believed that an item’s packaging tells them something about how much the brand cares about them. From excessive or messy dunnage (like Styrofoam peanuts) to small products in oversized containers – when customers are left to do the dirty work of cleaning up all that wasteful material, their experience with your brand suffers. Customizing your packaging to an optimal size can not only help create a better brand image in the eyes of your customers, it can reduce shipping and materials costs over the long-term.
In the previously mentioned survey, 59% of consumers believed that retailers and carriers are equally responsible for damage to a product that was ordered online. By right-sizing your containers and using the latest in dunnage technology, you can better protect your shipments and spare your customers the disappointing experience of waiting for an order, only for it to arrive in less than mint condition. Additionally, since customers are more likely to place the blame on you if your products arrived damaged, strive to work more closely with your carriers and/or 3PL provider to find solutions for reducing damaged inventory.
By mastering reverse logistics, you can minimize the cost of the returns processing and recoup lost profit from the returned product. But more importantly, customers love a smooth returns process, so your customer satisfaction can increase as well. Remember: Every return is another point of engagement with your customer. It should reflect the same focus and attention to detail as every other part of the customer experience. Once you assure a customer that your returns process is easy, then you eliminate hesitation from the next purchase and convince them to shop with you again and again.
Continuous process improvement strategies can make or break businesses in the order fulfillment industry. But with day-to-day operations as complex as they are, it can be challenging to rethink processes in order to find and fix inefficiencies. If you find yourself struggling with improving your fulfillment capabilities, stop and look closely at these essential areas.
Costs per order
Group and measure your fulfillment expenses into categories of
- Direct and indirect labor
- Facilities (including operating expenses like utilities and security)
- Shipping supplies
By understanding the financial impact each area has, you'll be better prepared for identifying where improvements will net the greatest ROI. Since freight expenses are usually greater than all of the other areas combined, renegotiating with carriers for better rates is a common starting point for improving cost efficiency. Enterprise shipping systems (like what we provide to our clients at Fulfillment Works) are excellent for streamlining this process for ongoing freight cost optimization.
Analyze your service workflows and their performance metrics. Compare your metrics with industry averages to see how you measure up. Similar to understanding your costs per order, the goal here is to hone in on the areas that will benefit the most by improving efficiency.
Optimizing the layout of your facility and how you slot inventory can yield major efficiency improvements. Be sure to periodically review your slotting assignments to account for feedback from pickers or changes in order volume.
Consider whether opening more distribution centers would help you reduce shipping costs and delivery times. Strategically located DCs put inventory closer to customers, which improves sales through better satisfaction rates. In most cases, an in-house multi-DC network is not cost-effective to implement – but that doesn't mean you can't enjoy the logistical advantages of a new distribution center. For many companies, outsourcing fulfillment to a third-party logistics provider (3PL) is a better way to efficiently set the stage for rapid growth and improvement of services. Since 3PL providers already have robust distribution networks established, they can help clients ship products to more customers, faster and at reduced cost.
Most folks think of warehouse buildings as big empty rooms for sale or lease. But if you've ever considered expanding your ecommerce business by opening or moving to a new distribution center, you know there's a lot more to those "big empty rooms" than meets the eye. Before touring potential properties, identifying your space requirements in detail is crucial for finding facilities that meet your needs today, and in the future. When shopping for warehouses, keep the following ideas in mind to help you find facilities that will fit your space and functionality requirements.
In product fulfillment and distribution, the height of a warehouse is just as important as its square footage. A low ceiling building obviously requires many more square feet of footprint space to have the same cubic capacity. Use square feet when planning how much space is needed for all department functions (staging areas, packing stations, office areas, etc.). Use cubic feet when planning bulk storage areas - making sure to account for your maximum pallet height, the total number of pallets you are planning to store, and the minimum clear height required by local regulations.
Finding a building with the right amount of cubic space doesn’t mean much if it’s arranged in a sub-optimal footprint. Consider how the warehouse’s shape will influence space planning, workflow, and peak productivity. For example, a long, narrow, or L-shaped building may negatively affect the flow of merchandise, create congestion points, and extend travel time for pickers.
Lot size & expansion potential
If you were to expand a facility in the future, what’s the maximum footprint you could achieve? Would there still be sufficient space for employee parking and shipping truck access? If you’d only be able to expand linearly, beware of creating a sub-optimal building shape.
Certain types of products and warehouse devices need stable and clean environments with minimal exposure to things like dust, temperature swings (which create condensation), humidity, and excessive heat. Evaluate facilities for the quality of climate control units, airflow, ambient temperature, and maintenance requirements for minimizing dust and dirt.
Expanding an ecommerce business is more than just expanding product catalogs and opening more distribution centers. The administrative strategy and operational support functions of your back office are vital – and their capabilities need to scale alongside business growth for overall success. In this blog post, we'll cover some fundamental elements to consider when evaluating your current back office's capabilities and ensuring they keep pace with the growth of your business.
You need more than just a well-designed website to provide a great customer experience. Accessible and attentive customer service shape the final perception of unsatisfactory experiences and are a must for long-term success – so it's critical to assess your company's approach to customer relations from multiple angles and improve where necessary. Periodically review customer service call monitoring stats, product reviews, and fulfillment reporting you have in place and look for gaps to fill. If your reporting doesn't identify any ongoing problems, you may be able to find new growth opportunities through customer satisfaction surveys.
Taxes & Accounting
Tax laws and financial reporting requirements relevant to ecommerce can be more difficult and time consuming to manage as your business expands. Evaluate whether the software, staff, and strategies you’re using to maintain compliance are "right sized" for your current, and future, business goals.
Billing & Invoicing
Providing multiple payment options for your customers certainly has its benefits, but it can add complexity to back office operations. Verify your level of protection from payment fraud, optimize your chargeback management process, and ensure you are able to efficiently process refunds for all of the payment methods you accept.
Data Reporting & Analysis
Data plays a big role in the decision-making process for product expansions/reductions and is important for growing your audience and sales numbers. You’ll need to make sure your warehouse management solution can provide this data in actionable reports that can provide clear insight into the future of your business.
At Fulfillment Works, we support our clients’ back office operations with Manhattan Active™ Supply Chain software, which provides enterprise-level solutions for all of the above areas (and then some). To learn more about how we can support your business growth behind the scenes, contact us today.