Why you Should Prioritize Reverse Logistics and Returns Management

This year, returns set an all new single-day high and certain companies are so overwhelmed that they are refunding consumers and telling them to keep the items rather than shipping them back. Returns have become a large pain point for many companies and can add a lot of extra costs when not handled correctly. A thorough understanding for reverse logistics and returns management can allow companies to minimize the added costs and recoup some value while earning increases in customer loyalty.

Returns can happen in any industry for many different reasons. Whether the reason for return is the consumer’s fault (e.g. they ordered the wrong size), a carrier’s fault (e.g. product got damaged during transit) or the distributor’s fault (e.g. shipped an expired product) every company should prepare themselves to handle reverse logistics and returns.

The What: Standardized Process with Automated Workflows

All efficient returns management strategies rely on understanding returns data so that standardized processes can be built, and workflows can be automated. This will prepare an operation to handle all the different returns and minimize the decision making happening in real-time. Defining necessary functionality and selecting appropriate support systems is good practice. A pre-screen with the consumer to allocate the return into the correct workflow allows the logistics team to predict and plan for inbound goods. Workflows can vary company to company, but a quality check is consistent. Assessing goods and distribution into pre-determined workflows leads to quick turnaround time and fastest recouping of investment.

The Why: Financial Incentive AND Customer Loyalty

Financial incentive is clear – the opportunity to resell the goods and recoup value, whether on the primary market in full or a secondary market for fractions. What is less recognized, is the influence on customer management. Customer expectations are high for returns – quick and easy response with free shipping. Managing that relationship can go a long way. Remember that returns contribute to the bigger picture: customer loyalty and repeat sales.

The How: Valuation

With every product, being able to appraise a return is absolutely necessary. Understanding why the return is being made, any repair/refurbishment costs necessary and the future-value of the product reselling (if at all) on the primary or secondary market is key. Having a system in place to do so is extremely important. It has even led to some companies leaving the product with consumer free of charge.

Goods valuation does not paint the entire picture. A considerable piece of the puzzle is customer loyalty and retention. Determining value here is specific to each company, and something not to be ignored.

Looking Ahead

A trend significant of late is that of sustainability. Government regulations have taken interest in the proper disposal of goods and incentivized reuse and recycling. Secondary markets have flourished in recent years, leading to the development of closed-loop supply chains – those with 0 waste. We predict that 2021 continues to bring a focus to ESG initiatives, and that those not invested there will be left behind.

Warehouse Automation: Where to Start?

In the days of the pandemic (and even pre-pandemic), the trends and challenges facing the warehouse industry are clear: difficulty finding labor. As such, exploring automation for warehouses has never made more sense. However, it is a daunting task to understand and explore how to start. Below, we explore basic options to explore warehouse automation.

Automated Repeated Material Movements

Automating activities that only people can do is difficult to achieve currently; however, there are repetitive movements such as walking or transporting material that can be automated, typically at a good ROI.

For carts, something like CartConnect works well. Also, conveyance is always a good option. For repeatable pallet load movements, AGV forklifts are good at moving loads from one end of an operation to another.

Automated Storage and Retrieval

The second option is arguably the most automated – automated storage and retrieval (ASRS). There are many systems under this umbrella, but the concept remains the same for all: the ASRS will take product the operation has received, automatically store them, then pick/deliver them to an operator as needed.

Systems range from a mini-load system to a full pallet ASRS to the new solutions on the market for smaller product like the AutoStore. Also included are dense/fast-pick solutions such as vertical lift modules (VLMs) and horizontal and vertical carousels.

Whichever system is selected, the benefits are the same: more efficient storage space and reduced warehouse labor in putaway and picking, 2 of the most time-consuming processes in distribution operations.

Transaction Automation

Though perhaps not the first thing to come to one’s mind when thinking of warehouse automation, transaction automation is arguably the most important. This is a very broad term but stands for eliminating manual operator interactions to log transactions. The default way for an operator to log inventory movements, receipts, etc. is to manually type it in to the ERP or WMS. The ways to automate this are varied, from RF guns/scanning to RFID to voice picking to put-to-light/push buttons. Regardless of the method, automating transactions improves

5 Supply Chain Trends for 2021

This past year has created many new challenges for everyone, causing consumers and companies to adapt. We expect some of the supply chain changes to be temporary but that many of them will have a lasting impact on the supply chain industry going forward. Below, we discuss some of the trends that we expect to see in 2021.

Fulfillment and Logistics as a Competitive Tool

Every year we continue to see consumer behavior change, and in no year has that change happened as rapidly as in 2020. People want to get quality goods for a reasonable price and quickly. Unorganized supply chains will become increasingly exposed as companies will have to choose between bad service levels or unsustainable costs to meet customer demand. The most obvious example of this trend is Amazon's move to achieve next-day or same-day shipping. As stated above, consumer expectations for service continue to rise. This means businesses that have systems in place to forecast well, stock optimal levels of inventory and fulfill efficiently have a significant advantage over those that do not.

Focusing on E-Commerce, Service Levels and Omnichannel Development

The shift from brick and mortar retail to e-commerce has been growing every year, and COVID-19 only expedited that growth even more. It's no surprise that consumer’s extreme shift to e-commerce seen in 2020 will have a lasting effect on the way people do business moving forward. In addition to the e-commerce shift, service levels are also becoming a higher focus as consumers are going to choose the quickest and most reliable option. To keep up with these shifts, companies are going to have to continue to focus on developing their omnichannel strategy. This means using support systems to create an interconnected network of stores, warehouses and 3PLs, providing the flexibility to fulfill both large wholesale purchases and small e-commerce orders. Companies can then leverage this interconnectivity within the network to optimize fulfillment strategy on an order level basis.

Shifting E-Commerce to a 3PL

Another industry trend we expect to see is a significant shift for e-commerce distribution towards third-party logistics companies (3PLs). The e-commerce industry, in comparison to brick and mortar stores, presents a complexity that is hard to tackle for smaller companies. 3PLs provide an option that will allow companies to set up much quicker than if they opened their own warehouse and allow them to avoid significant fixed costs, have access to an already established network and get specialized processes based on their needs.

Making Procurement a Focus

COVID-19 complications and global trade friction with China mixed with consumer’s increasing expectations for better service have signaled to the supply chain world that now may be the time to focus on procurement. By moving suppliers closer to home (near-shoring) and prioritizing the procurement process to make lead time and flexibility priorities, companies can improve their fulfillment times and overall supply chain. Developing a regional supply chain offers the better potential for mutually beneficial relationships and improves both time and proximity to market. This confidence in relationship management and product could challenge the prior approach of low-cost country sourcing.

Freight Normalization – A New Baselinne

COVID-19 has caused overwhelming increases to volume causing capacities to be tested and costs and rejection rates to skyrocket. As the freight companies profit on these higher rates, it can be expected that they will reinvest into capital expenditures, such as more trucks, increasing capacity to meet market demand and normalizing from the economic shifts of 2020.

 We wish everyone a safe and healthy 2021.

Managing the Q4 Peak: Considerations and Recommendations for your Supply Chain

In a time that has seen UPS impose shipping restrictions on major retailers to maintain performance (not to mention covid-19 vaccine distribution), it is all the more important to take preparatory measures to build flexibility and buffers into supply chains. Below, we discuss considerations for your network, transportation, and warehousing segments of your supply chain.

Strategy

Locations: Balancing the Workload

• Shipping from the closest fulfillment center isn’t always the best option.  There are a whole host of considerations: Do we stock that item here? How many pending orders for that location? Can it be batched with other orders? Rate of on-time delivery? Profit based on shipping costs? and many more. Rethinking distribution strategy can lead higher on-time delivery rates and maintaining service level goals.

3PL: Are you top priority?

• What we like to call finding the 'right fit' is important for these times of the year. It requires a balance  to find a 3PL that is both technologically advanced and connected across the country that is also flexible enough to work with the specifics of your business and will prioritize you when you need it the most.

Transportation

Flexibility: Expeditors, Plan B Carriers

• Understanding your relationship with your carriers and where you fit in to their network is key to success during peak season. There will undoubtably be shipping emergencies during peak/holiday season. Testing out alternative carriers and expeditors during off-times will bring confidence they will deliver in your time of need.

Surcharges

• Another consideration is peak-season surcharges. Discuss planned volumes with your providers in advance to minimize surprise and therefore surcharges. Overloading carriers' networks with unpredicted volumes is exactly what these charges try to avoid. By working with carriers in advance, you can negotiate these surcharges down.

Dedicated Fleet

• Depending on the size of your business and the distribution of your customer base, a dedicated fleet may be a legitimate option for you. This extra ownership over the delivery of product to customers could offer redundancy and potentially present freight cost savings.

Warehousing

Layout and Organization

• Before peak season is the time to revisit warehousing setup & storage media. Organizing the facility, utilizing space efficiently, and giving everything a place creates necessary space to succeed in peak volumes.

Extra Shifts/Staffing Agencies

• What shifts are you currently running? Can you operate another shift over the weekend or extend the hours during the day? As staffing issues plague warehousing & distribution companies, especially during Covid-19, it is important to exercise all of your options. Check with local staffing agencies to potentially supply you with temporary workers.

Technology

• If staffing does not solve the problem, consider tech solutions. Those solutions could be picking aids like voice picking, pick-to-light, and RF scanners or it could be AMR's or AGV's that move product on their own. These technologies simplify the human warehousing element, minimize error, increase efficiency, and can operate consistently for longer than 8 hours.

How to Modernize Your Warehouse/Distribution Center: Part 2

In Part 2 of our process to modernize warehouses, we discuss the systems and automated confirmations necessary to eliminate human error and increase efficiency.

Support Systems

Support systems are critical in transitioning a warehouse into the modern age of logistics. Some of the most common types of support systems include Enterprise Resource Planning (ERP) systems, Order Management Systems (OMS), Warehouse Management Systems (WMS) and Inventory Management Systems (IMS). Whether your distribution network consists of hundreds of warehouses around the globe or a single warehouse that ships to just a few customers, there is a support system that can help. There are numerous different options out there and each one has different capabilities, strengths, and weaknesses. Finding the right support system for your business is critical for any operation. These systems generally support warehouse operations by collecting and tracking data, standardizing processes and allowing operations to be executed more efficiently. The system should support all the current operations by decreasing manual work and helping implement future improvements. Without a WMS or other support system, warehouse processes and operations will be very manual and slow. Additionally, without a support system you will be limited in the further improvements and technology that can be added to the warehouse. Implementing a support system is a significant investment and might be difficult to see the exact ROI but it is one of the most important investments that can be made in a warehouse. It will support the entire operation by:

• Allowing processes to run quicker, meaning less time is spent on standard operations and higher throughput is achieved.

• Tracking and giving access to data which can be analyzed to see where further improvements can be made to reduce costs and increase output.

• Making it easier to track and manage inventory and KPIs which will result in better performance, lower costs, and higher output.

Automated Confirmation

Automated confirmation is the piece that brings together everything that we have talked about so far. We use the term ‘automated confirmations’ to be a blanket statement for all methods of an operator verifying their warehouse activity systematically, such as RF scanning, RFID, voice picking, etc. Using automated confirmation technology can drastically reduce the opportunity for human error and the time it takes to perform operations. An operator just needs to scan/speak/move a product and/or location rather than writing information down or updating the system manually. This will also provide increased visibility. Since the system is being updated at the time of the transaction, there will be a more accurate and real-time look at data which can help with knowing where products are and how much time is spent on different operations.

Adding these improvements will modernize your warehouse and allow it to operate more effectively and efficiently compared to how it operates today. They will also set you up to continuously grow and improve by making it easier to implement new improvements and technologies down the road.

How to Modernize your Warehouse/Distribution Operation, Part 1

For companies to stay successful over a long period of time, they must constantly be improving and changing with the times. This is especially true in warehousing and distribution. One of our core competencies at Establish is helping our clients logically and cost-effectively modernize and improve their warehouses and distribution centers. Over the next few weeks, we will be walking you through many of the steps necessary to modernize warehouses, from the most basic operation to a fully automated solution and everywhere in between. We start with two of the most important: Inventory Locations and Product Labeling.

Inventory Locations

Throughout a warehouse, there are many different places that inventory is stored. Simply adding names to each of those locations can help pave the way to a modernized warehouse so that an item and quantity can be tied to for efficiency and accuracy.

The naming structure can be virtually anything and should be relatively easy to follow. Each individual location should have a unique name and be labeled, with the labels being be easy to read and including barcodes to allow for scanning capabilities or check numbers. At a minimum, inventory location labels should have the location name and barcode, but they can also include more information such as color coding and the product(s) stored there. Below is a sample location name for a warehouse with standard pallet racking aisles:

The benefits of adding inventory locations to your warehouse include:

• Better tracking and traceability of inventory.

• Improved inventory accuracy and easier cycle counting.

• The ability to implement more robust warehouse practices such as barcoding.

• Improvement to current picking and put away processes.

• More functionality out of the current support systems.

Product Labeling

In addition to labeling the inventory locations, all the products in the warehouse should be properly labeled. These labels should include the product name, associated barcode, lot/batch/expiration date (if applicable) and be clear and easy to read. Products should be labeled directly upon receipt, prior to being put into storage. Even better, it can also be coordinated with suppliers to include these labels on the products that they come in already labeled. Labeling allows products to be identified seamlessly during receiving, picking and inventory counts and will help reduce human error and manual processing.

Next time, we talk about the IT and Support Systems as well as Automated Confirmations (RF scanning, voice, RFID, etc.).

Blockchain in Logistics: How it Started and How It's Going

Blockchain’s origin is rooted in the release of the whitepaper written under the name Satoshi Nakamoto explaining the foundation of what we know as today, Bitcoin. Bitcoin offered an avenue to worry-free digital transactions due to transparency and decentralization of the data. This ensured that information could not be altered and prompted the crypto-currency boom. The core-principles of blockchain and success of Bitcoin started a wave of curiosity into other possible applications, thus the development of the technology began to arise.

One of these applications was supply chain. Blockchain emerged and appeared to be the solution to everyone’s problems. In 2019, The Port of Rotterdam and The Port of Busan pilot tested blockchain into their maritime logistics and found success in automation and reducing operation cost.

What is Blockchain? As Explained from Blocklab:

• A “digital ledger” or spreadsheet that is duplicated and stored in a distributed network in multiple locations which can be updated instantly at any location.

• Data is decentralized since it is in multiple places at once. Thus, becomes a secure network as data cannot be modified without all approval of all the members and makes it difficult to hack.

• Information is constantly monitored which makes it difficult to change data and ensures that the information is distributed but not copied.

• Agreements become mutual and documented which enhances security and traceability as transactions are logged into the ledgers which reduces the worry of parties keeping their end of the deal.

• This results in lower costs, improved efficiency, increased transparency and increased trust.

Blockchain enables users to record and store data more easily and in a decentralized way which allows for transparency from all parties, accurate/real-time data, and improved traceability from production to delivery. Currently most companies manage their data individually on independent software support systems. The information is not shared across platforms which can cause confusion and miscommunication when the information does not align. Now, imagine the ability to track end-to-end performance of your goods and trust in the data being viewed. Blockchain provides exactly that solution. Participants in the network will provide information that would be difficult to change. The transparency allows anyone to audit any point in the supply-chain and reduce errors. Goods come as expected and as a result, increase trust amongst parties and reduce operation costs.

So Why isn’t Blockchain Used More?

 A study published in 2020 in the Journal of International Trade and Commerce, delved into the blockchain adoption focusing on Port of Busan and Port of Incheon. Despite all the possible applications of blockchain, the finding suggest it may be more difficult to sell than people think.

1. Logisticians have difficulties getting a clear idea on the benefits and successful blockchain adoptions.

2. Consultants and academics worry about the technological maturity of blockchain.

3. Competitive edge of the industry is highly influenced by economic factors related to financial and time-related aspects.

Blockchain Takes a Huge Shift in Infrastructure to Implement

Blockchain performs its best with more participants because there is more information. Without participants, the use case of blockchain no longer becomes applicable. Therefore, a decent size number of entities must agree on implementing blockchain which is harder than it sounds. Blockchain requires a huge shift in infrastructure.  Instead of storing information on their own subscription platform, the information will instead be widely available to anyone in the network which may be intimidating. Not only that, but the technology is new, and companies are hesitant on uplifting their entire structure. The pilot program by The Port of Rotterdam and Busan has shown that blockchain does perform up to expectation, but only provides a single example of the tangible benefits of adoption. A few ports have started pilot testing since, but until we see more entities willing to integrate this technology, it will be a long time till we see any major shifts in supply chain management.

Blockchain is the Future of Logistics

As supply chains become increasingly complex to meet the needs of consumers, the benefits of blockchain are far too good to not be considered as a solution. Not only does it provide relief to cumbersome problems in logistics, but transparency is becoming an important factor to consumers. Ethical sourcing and detailed package tracking are just a few factors that consumers are starting to consider. Blockchain allows for trusted end-to-end product visibility, which will become more vital to companies and consumers alike.

Supply Chain Network Optimization – How to Do it Right

The time is right to re-align your Supply Chain Strategy, for many reasons including:

• Logistics and fulfillment are the new storefronts and sales tools

• The explosion of direct-to-consumer business forces all companies to have an omnichannel strategy.

• The sourcing landscape is rapidly changing with more near-sourcing and risk minimizing.

• Sustainability awareness is increasingly unavoidable - and transportation is a big piece.

The traditional approach very often leads to more of an endless data crunch and, in best case, a mathematical answer that minimizes the theoretical logistics costs but does little to create an implementable supply chain strategy.

But you don’t do a network optimization to relive the linear programming classes from college and show your mathematical acumen. Well, some of us may. For the rest of you, here are some crucial hard-earned learning points from many network optimization projects:

1. Avoid Spending Time and Money Feeding the Monster with Data

Nobody has perfect data. A proper strategy for cleaning and curate the data will be one key to the success of the project.

The important thing is to know what data really matters and how to curate the imperfections into a usable dataset.  The most critical data for the outcome is the shipment data and it is often the hardest data to get. If you don’t have access to this data internally, the carriers do have it. They are not always keen on sharing it, but they are still the best source. The order data is usually readily available and can be used to recreate shipments though the dim/weight can complicate things. This is an area where data-enrichment from firms specializing on this can work and also item profiling to reduce the complexity to where it matters.

Most advanced models require much more data to run, but the impact of other data is less critical and can in many cases be handled with benchmarks to get a starting point and sensitivity analysis where you rerun the model with the critical datapoint varied until you find the breaking point where the recommendation changes. It is much easier to make a call when you see where it really matters and have clear choices.

2. The model will not give you a strategy. It will only tell you which alternative is mathematically the best.

Before you run the model; use the data that has been collected to profile your supply chain. This will enable you to evaluate relevant solutions.         

• Customer profiles and requirements: Delivering to the big retailers demands a different solution than direct to consumer deliveries. Two separate networks?

• Inventory profile: Certain products may have demand patterns very tilted geographically or being critical from a supply perspective. Slow-movers vs best sellers. Examples of facts that would determine the eligible alternative network structures to optimize such as Central DC, Regional DCs, Satellites, Forward Stocking Locations, etc.

• Order profile, supply profile, product profile are other examples of facts that are important to analyze pre-modelling.

3. Sensitivity Analysis

Instead of trying to create the perfect dataset. Use the model to find out with what value on critical but uncertain data that the recommendation changes. This saves a lot of time and makes the decisions relevant.

4. Use the Right Software Tool for your Challenge

The most advanced optimization tools are expensive and require a lot of effort to configure. You’ve spent a lot of time and money before you are ready to run the model. This is totally worth the investment if your supply chain is very complex and you intend to, once configured, use the model frequently. Those software tools are sophisticated and awesome with all their possible add-ons.

Most companies have a more straightforward supply chain or can optimize the network in North America, or Europe, Asia, etc. separately and then piece them together. If this is the case, the most complex tools are complicating things without the added value. Spend the time and money you save on an adequate optimizing tool to focus on strategy development instead.