Returns efficiency is key to e-commerce profitability

Flexibility within the warehouse process is key to making a good profit but, according to Esther Dutton from MACS Software, a proficient returns process is also essential.

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Photo: Esther Dutton

With technology moving at ever increasing speeds, the logistics industry battles to meet customers’ service level expectations and keep prices low. But now we have another dimension added to the melting pot: Brexit!  The uncertainty Brexit creates will require more than mere efficiency when dealing with e-commerce returns; now we have to provide a totally flexible approach.

In the past, shopping was a high street or catalogue occupation, today it’s not, with technology changing the face of shopping. Today we are firmly in the grip of the ‘click and buy’ phenomenon that encourages consumers to expect next-day deliveries to any part of the country without having to pay extra for it. It’s a constant battle between providing the service the customer wants and making a profit. Faced with this apparently insoluble equation, sometimes the only way to cover these extra costs is by finding ways to further improve accuracy and efficiency levels.

This phenomenon has also created a world in which consumers order items in every size, colour and style and then reject most, retaining only the chosen few. With this level of returns, understood to be up to 30% for some types of product, the way in which returns are processed can easily be the difference between profit and loss.

But it’s often an area that does not necessarily receive the focus it deserves. Returns that come in ‘under the radar’ and that are not properly logged and processed come straight off the bottom line and puts cash flow under pressure. Thus the cost of handling returns needs to be factored into the pricing of the product. If those costs are not accurately identified, it’s very easy for margins to be eroded without it being obvious.

Perhaps more importantly, an outdated or inefficient system will not produce the necessary information for managers to manage. If it’s not recorded, it can’t be managed. Worse perhaps, managers can become untrusting of the information their systems do provide: they simply don’t believe it. This can easily lead to indecision or poor decision making.

To manage returns efficiency, it’s necessary to employ software that can easily be adaptable to each customer’s specific needs and can effectively report on ever-changing returns levels. At MACS we have various reporting tools: our interactive dashboard gives remote access to real-time performance data to support daily operations, whilst our Extractor reporting system allows the user access to every ‘field of data’ in our WMS to create meaningful reports for different departments. Having easy access to analytical data allows the user to make informed decisions and maintain ever-squeezed profit levels.

E-commerce is a rapidly changing entity and we can all be confident that the market requirements of the future will be different from those of today. That would have been a statement of the blindingly obvious even without Brexit, but now that we are set for a market change unlike anything we have seen in the last 40 years we’d best be prepared for whatever is around the corner. As well as having a system that can be adapted to what’s needed today, it needs to be sufficiently flexible to meet the market demands that we don’t yet know about. It needs to be ready for anything.

Like it or not, Brexit is just around the corner. Despite what some may say, nobody knows, at this stage, how it will affect their business.  Many speculate and most can see both good and bad scenarios, but ‘certainty’ is a very rare commodity right now.

For this reason, we recommend that warehouse managers do two things in preparation for an uncertain future: 1) make sure that their existing processes are as efficient as they can possibly be as the margin for error is already perilously small and 2) ask just how flexible their WMS system is, especially where it relates to the handling of returns.  Can it adapt to meet the challenges ahead, whatever Brexit throws at us?