2023 Gartner® Market Guide for Retail Store Inventory Management Applications
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Most of us have been guilty at some point in our consumer lives. You order a few sizes, styles or colors of the same product, knowing full well that you will ultimately keep – at most – one of them. So what happens to the other items? They get packaged and taped up, label secured, to be shipped off on a long journey back to a warehouse where they may or may not end up getting restocked for sale.
To keep up with Amazon, ecommerce retailers have no choice but to offer fast and free returns. While this service makes the consumer’s life easier, it wreaks havoc on the environment, warehouse resources and the bottom line.
The returns (or reverse logistics) process is costly and complex, involving customers, retailers, manufacturers and logistics providers. In fact, the cost of an average return (including related transportation, handling and processing costs) is approximately 59% of the original sales price of the item. And with online shoppers returning purchases at a rate of more than two times that of in-store shoppers, ecommerce retailers are feeling the related profit pinch.
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At the same time, the impact of returns on the environment is staggering. The disposal of returned goods generates nearly 6 billion pounds of landfill waste and 16 million metric tons of carbon dioxide emissions annually. To put that in context, the amount of waste generated is comparable to what 3.3 million Americans produce in a year. Engaging in unsustainable practices can significantly harm a company’s reputation, especially if returned products are mishandled or disposed of incorrectly.
The amount of returns-related waste generated annually is comparable to what 3.3 million Americans produce in a year.
Let’s say you order a pair of socks online. Perhaps you tried a new style, material or color. Whatever the case, when it gets to your house, you hate it. So begins the returns process.
You likely go back to the site, answer a few questions, print a return label and package up the pair of socks. Then drop it in the mailbox or drive to the nearest carrier. After its long journey back to the originating fulfillment center, or maybe to a dedicated returns warehouse, you get a refund. What happens to the socks? Perhaps they go through a QC process, get retagged and are put away into the right bin for resale. Or maybe they are shipped out yet again to another warehouse location. Or, more often than not, they end up in an ever-growing pile of low-value returns that ultimately get discarded, adding to the billions of pounds of landfill waste.
A fulfillment execution and orchestration platform powered by Artificial Intelligence (AI) and machine learning connects discrete warehouse systems and automation solutions to ensure end-to-end productivity and control. Fulfillment orchestration and automation can increase the efficiency and sustainability of this very sock return in several ways:
Faster restocking and priority picking
By continuously optimizing warehouse actions and flows, warehouse orchestration can enable advanced automation technologies like robots and conveyors to process returns more quickly and accurately. This cuts manual labor requirements and reduces costs.
A warehouse orchestration platform is constantly searching for steps or paths to shorten the overall dock-to-stock time. As each process is optimized – from receiving through sortation and consolidation – retailers can achieve higher efficiency and faster SKU restocking.
Robotic automation can also prioritize returned inventory that passes through QC and VAS. The items are quickly made available for outbound order picking, increasing the likelihood that the pair of socks is repurchased.
Inventory optimization for higher availability
Orchestration consolidates returns from multiple channels, eliminating the confusion and costs associated with tracking separate inventory for each channel. And to increase the speed of returned products to inventory, an orchestration platform assigns reverse logistics tasks to a diverse fleet of robots, people and other execution agents, such as doors and elevators. Smart conveying solutions can move returns to the optimal next location – whether for liquidation, quality check, value-added services, putaway or cross-dock.
Efficient space utilization
By effectively handling multiple returned SKUs in a single location, warehouse orchestration optimizes space utilization for active inventory. Also, continuously generating and applying the best possible returns process allows warehouses to streamline restocking and maximize available space via the rapid allocation of predetermined locations for putaway operations.
In recent years, innovative retailers have brought fulfillment orchestration closer to their customers, whether by building new microfulfillment centers (MFCs) or breathing new life into unused retail space with dark store fulfillment.
An MFC is a highly automated facility specifically designed for fulfilling online orders. It is smaller than a traditional warehouse in or near a city and utilizes vertical storage and robotics to quickly and efficiently pick and pack orders. For customer delivery and/or pickup, MFCs can help increase order accuracy, cut fulfillment costs and reduce human labor by 75%. These are just a few of the reasons it makes sense to use MFCs for returns.
Packaging production uses a significant amount of energy, emitting greenhouse gasses that are harmful to the environment. Since customers do not have to package and label returns for shipping, MFCs reduce waste and promote sustainability. Moreover, the combination of proximity, automation and optimized inventory management in MFCs minimizes the carbon footprint associated with the returns process.
Driven by AI-powered fulfillment orchestration, MFCs enable faster, more convenient returns processing. The resulting speed of refunds or exchanges can improve overall customer satisfaction and loyalty. In fact, 92% of customers will shop with a brand again if the returns process is simple and seamless.
When an MFC is connected to a smart retail store, a store ops app can guide associates to encourage an exchange rather than a return, prompt customers to buy a higher-priced version of the original purchase, or recommend additional items that would be a good fit based on the original purchase and reason for return.
The impact of returns on both the environment and the bottom line is a growing concern for ecommerce retailers. However, with the rise of fulfillment orchestration, there is hope for a more efficient and sustainable returns process. With faster restocking, priority picking, efficient space utilization and the option to process returns via MFC, retailers can cut labor requirements, optimize inventory management, improve overall customer satisfaction and reduce transportation-related emissions. It’s time for retailers to prioritize sustainable and customer-centric returns solutions, and fulfillment orchestration may just be the answer.