Reverse logistics is a logistical procedure that involves bringing a product back to the distribution site from the point of consumption, such as when a delivery attempt fails or when a product is returned to the store.

Reverse logistics has become increasingly more critical in operations in recent years as e-commerce sales have grown. Invesp conducted a survey that revealed that 30% of online purchases worldwide result in returns or exchanges. This can happen for various reasons, including the fact that the customer has never seen the goods in person before making a purchase and has different expectations regarding its appearance, size, or efficiency.

6 Unheard Tips to Optimize Reverse Logistics in Your Business | Image source: Pexels

Any company that wishes to provide better service for exchanging or returning goods, or that wants to lower the proportion of goods that are returned following failed delivery attempts, must have a solid reverse logistics plan. As a result, it’s crucial to pay attention to several pointers that enhance the reverse logistics sector. When Is Reverse Logistics Used?

Since the e-commerce era has arrived, reverse logistics has gained even more significance. There are, however, a number of other factors that make it necessary. Here are a few instances:

Customer returns: This scenario mostly involves online transactions. The product is frequently not what the buyer expected when shopping online because the decision is made based on photographs, and for this reason, they ask for a return.

Unsuccessful deliveries: There are a number of reasons why a delivery may not take place, including an incorrect address or a customer who is not available to receive the product at the time. The sequence must therefore go back to where it started.

Driver returning damaged products or parts: If the customer or delivery person notices a damaged product during delivery, they must notify and return the damaged item.

B2B returns: Unsold goods may be delivered to distributors or distribution centers for resale.

How To Optimize Reverse Logistics?

Offer the following two types of reverse operations: The exchange or return process for a product must be simple for the customer. Offering the customer a variety of options for how this procedure will be carried out allows them to select the one that will work best for them. One alternative is for the customer to mail the item or for the carrier to pick it up, either for free or for an extra charge.

Invest in an exchange and return policy: The customer must be made aware of the company’s return policy and how it operates. It is crucial to be aware of all dates, the detailed instructions for returning the item, the deadline for refunds, and the requirements for exchange or return (such as the item being unused and in its original packing, etc.). By making everything clear, you may increase consumer confidence and negotiating security.

Inform the customer: It’s critical to keep customers updated on the status of their orders as they are being shipped and returned. Send regular information on the status of the purchase, delivery, and pickup. The consumer won’t have to get in touch with the business multiple times to raise questions or request further information if the procedure is transparent.

Analyze the financial effects: An effective reverse logistics plan lowers the company’s storage and transportation costs. In order to reduce delivery costs, it’s important to take into account things like the chosen delivery routes, frequency of collection, expected operating expenses, amount and weight of commodities, and the requirement for specialized vehicles. Finding the ideal delivery option for the business and its clients will be attainable in this manner.

Agility is key: The client has the chance to rate the business after the return procedure. The customer is more likely to give the store a positive review, tell others about it, and return to conduct business if the procedure is simple and swiftly addressed.

Delivery optimization tools: Using a transportation optimization tool might be crucial for helping with delivery and accelerating the process. It allows for the management of unsuccessful collection attempts, route calculations, and complete shipment tracking.

Customer Loyalty: The Importance of Positive Reverse Logistics

It is crucial to invest in a strong product return procedure because, in the event of a poor reverse logistics experience, it is normal for the client to be hesitant about returning to conduct business out of fear of experiencing the same problem again. According to the Invesp survey, 92% of consumers stated they would continue to shop in stores provided the return process was straightforward and 79% wanted it to not add to their costs.

A positive experience also ensures that the consumer will refer the business and its goods to others, enhancing the company’s reputation.

Unlocking Customer Satisfaction: Is Your Fulfilment Strategy Aligned with Expectations? | Image source: Pexels

According to our memory, the field of flexible fulfillment hit a tipping point around 15 years ago. At this point, a new age in the use of technology and fulfillment operations throughout an expanding supply chain network began.

Sending orders to a few drop shipping companies and distribution facilities was no longer sufficient. It was time to integrate the fulfillment network with the retail network, greatly boosting the potential for revenue generation and the sophistication necessary to do so.

Many retail CEOs have folded their arms throughout these years of change and said, “My store associates will never take the time to put a shirt in a box.” But in the end, the significant rise in revenue and margin increases proved to be simply too strong to ignore.

It is challenging to manage a successful and efficient fulfillment operation from retailers for a variety of reasons. Labor, inventory accuracy, and split shipping are a few examples. But in this post, we’ll focus on what is arguably the trickiest and most important topic of all: how to place inventory in the “Omni” consumer era across the entire network.

Prior to the “Omni” consumer, the majority of retail businesses ran two entirely different channels. Stores were planned, assigned, restocked, and conducted business with customers fully independently from the digital channel when it comes to inventory planning and optimization.

The digital channel generally included one or more specialized locations, which strangely were frequently organized and run like a separate physical location.

Imagine a portion of the demand that would have been met by the digital distribution center being brought into the supply chain and now manifesting up as demand in a physical location to understand the disruptive effect of the omni-consumer and the resulting ship-from-store programs.

When attempting to define what precisely falls under the category of a digital transaction, the situation becomes even more unclear. Visiting a nearby store to look at the merchandise but not making a purchase? Do considerable online research before choosing drive-thru pickup for quickness as opposed to delivering to your address.

In the end, “omni” consumer behavior across all channels necessitates operational excellence in two critical areas: first, much more sophisticated demand forecasting and inventory deployment strategies; and second, the capacity to continuously assess the condition of each stock unit in the network and adjust the order fulfillment algorithm’s decision-making accordingly.

Let’s start with inventory deployment and demand forecasts. We must comprehend the primary causes for which the majority of retailers have launched an in-store fulfillment program in order to comprehend why this procedure over the past ten years required a complete reinvention.

We like to divide these motives into two groups: those that are largely motivated by the retailer’s aim to fully and profitably monetize their owned inventory, and those motivated by the desire to provide customer service and convenience.

If we acknowledge that consumer behavior has changed over the past ten years, preferring that a portion of their online order fulfillment be carried out in a store near them — traditional BOPIS (Buy Online, Pick Up in Store) or drive-thru pickup — or delivered on the same day, then logically, demand that would have previously been met by a carrier delivering products from a shelf in a distribution center must now be met by store inventory and local labor in some way.

Another factor centered on the customer experience is the ambition to even ship ground service from stores to deliver more purchases within two work days.

The demand forecasting algorithm must now shift some of the digital demand away from the Distribution Center and toward specific stores due to the increased popularity of in-store pickup and ship-from-store (same-day and ground deliveries).

Unlocking Customer Satisfaction: Is Your Fulfilment Strategy Aligned with Expectations? | Image source: Pexels

The fulfillment algorithm of the order management system must decide which physical retailer to send an order from if the consumer now directs their digital demand to a particular one. In order to maximize sales while simultaneously lowering overall order fulfillment costs, inventory must now be moved from the distribution center to the storefronts.

We have only discussed the reasons why moving certain demand and supply farther up the supply chain, to stores rather than distribution hubs, is necessary to improve the customer experience so far. Now let’s examine the aspects of the retail business that make in-store shipment necessary.

The capacity to maximize gross margin across the network during the selling season is the most crucial element.

There will always be stock units at less-than-ideal locations throughout the season because no demand forecasting method can foresee the future with absolute accuracy. The best solution to the “problem items” challenge is to link digital demand to retail inventory.

Why? As a result, the local supply/demand matching issue (i.e., local demand meeting shop inventory) becomes a more global issue (i.e., the network as a whole, encompassing all stores, driving digital demand).

In addition to allowing markdown items to be sold at a higher price, connecting both requests greatly lowers the possibility that an item will be offered at a discount.

Avoiding markdowns is a crucial component that is currently the least practiced in the retail industry. This tactic necessitates constant communication—one might even argue unification—between order fulfillment and inventory optimization algorithms, which route orders 24 hours a day.

When it comes time to route the next order, the order management system algorithm goes beyond the most basic factors (stock availability, transportation costs, availability, labor cost, delivery time, etc.) and takes into account the current health—or difficulty level—of each unit for fulfillment. This is made possible by the effective coordination between these two AI-based processes.

One can, for instance, do this to avoid a future markdown that would really end up costing the retailer much more in absolute terms by trading a little bit more shipping or delivery time.

The initial inventory planning process, the inventory health management process throughout the selling season, and the digital demand fulfillment optimization process must all be integrated for inventory management in the era of omni-consumers.

The potential to capture as many sales as possible that require omni fulfillment (BOPIS, same day, ship from store) while lowering operating expenses and boosting gross profit on each transaction is increased by this unification, during the inventory’s lifetime.

Everything You Need to Know About Inventory Management | Image source: Pexels

Inventory management is a crucial investment for businesses that want to increase productivity, cut expenses, and deliver top-notch customer service.

Understanding needs and making the best decisions for the company’s performance are made possible by effective product management.

Following that, we’ll define inventory and go over its different types and management methods.

What is Inventory Management?

The procedure that makes it possible to plan, carry out, and regulate the resources kept on hand by a business is known as inventory management.

The following decisions are made during these processes:

What to supply?
How much to supply?
And when to supply?

3 main goals of inventory control are as follows:

1. Increase service quality or the ability to meet demand by keeping inventory on hand.
2. Reduce total inventory costs by increasing turnover or by lowering expenditures and investments.
3. Reduce expenses while increasing the operational effectiveness of supply processes.

It should be noted that these goals are in opposition to one another, which means that if one is improved, the performance of the others may suffer.

The definition of inventory management, however, is the skill of managing these conflicting aims, directing strategies, and appropriately prioritizing objectives in the face of this scenario.

Why is good inventory management important for your company?

When done correctly, inventory management shows how much you’ve lost due to ineffective product control. If you’re still unsure as to why your business has to engage in inventory management, we’ll explain its significance in the points below:

1. Maintains productive tasks in motion;
2. Increases client happiness when they discover the goods on the shelf;
3. It is directly related to the business’s financial performance;
4. It serves as a key competitive edge.

Now that you are aware of the significance of this activity inside an organization, it is critical to grasp all of its variations and which one your company falls under. Discover which sort of stock best suits the timing and structure of your firm by reading about the various varieties below.

What are the main types of stock?

Anticipation Inventory

It is a form of inventory that a company keeps on hand as a preventative step to make sure there are enough products on board to fulfill potential demand.

When a rise in demand is anticipated or when there is a question mark over the availability of raw materials or finished goods in the future, this inventory is typically retained.

Consigned Stock

Consignment inventory is a business strategy where a manufacturer or supplier distributes their goods to a retailer or reseller who sells them in their enterprise or store but has not yet made a purchase.

Instead, the retailer pays the manufacturer or supplier on a consignment basis only for the goods that are actually sold.

With this strategy, the shop may maintain a wide range of products in stock without having to make significant upfront purchases.

The supplier or manufacturer, on the other hand, gets an additional sales channel for their goods without having to assume the financial risk of maintaining a sizable inventory.

Cycle stock

Businesses that sell products with sales cycles use it. Since the corporation must keep stocks vigilant to prevent losses, it is one of the most challenging forms of inventory to handle.

With cycle inventory, a company may efficiently satisfy consumer demand without running out of products when demand is strong or having extra inventory when demand is low. This might be particularly crucial in sectors like the retail business where demand is highly unpredictable or seasonal.

Inactive stock

Inventory that has not been sold or used for a long time is referred to as inactive inventory. This may happen when a product is rendered obsolete, no longer desired by consumers, or when demand for a specific product has sharply declined.

Inactive inventories are a common source of trouble for businesses since they need storage space and money that could be used to purchase other goods with higher demand.

These inventories may also become out of date or expire, which could cause the business to lose money.

Dropshipping

When a consumer puts an order, the retailer buys the product from a third party – usually a wholesaler or manufacturer – who then distributes the product directly to the end customer. This business model is known as dropshipping.

The supplier manages every aspect of the process, so the retailer need not worry about product storage, management, or shipment.

Dropshipping enables retailers to sell a wide range of goods without needing to make significant inventory investments.

Everything You Need to Know About Inventory Management | Image source: Pexels

Safety stock

The quantity of extra inventory kept in addition to regular inventory to fulfill unforeseen demand or changes in market demand is referred to as protective stock, also known as safety stock.

Buffer stock is used to guarantee that there are adequate products on hand to fulfill client orders and to prevent supply chain disruptions.

Based on the demand’s cyclical nature and the time needed to refill the stock, the protective stock is determined. Depending on the type of product, the predictability of demand, and the accessibility of suppliers, a different amount of protective stock may be necessary.

Contingency stock

In order to deal with unanticipated occurrences that can impact the supply chain, the supplementary stock is kept in addition to normal stock and protective stock.

These occurrences could include strikes, natural catastrophes, delays in raw material supplies, production interruptions, or other unforeseen circumstances that could have an impact on product supply.

Contingency stock, as opposed to protective stock, which is intended to handle typical variations in demand, is kept in expectation of events that could impair the company’s capacity to complete customer orders.

What are the main methods of inventory management?

Inventory management tools are available on the market, and they make up a crucial part of management control. Therefore, we shall discuss the six methods used in the market in this context.

Specific cost or specific price method

Each unit of inventory is given a value using this procedure. It is therefore only applied in situations when it is possible to calculate the price or cost of each item. The remaining steps involve adding everything up to determine the stock’s final worth.

Due to the high stock movement, it is not a recommended strategy for retail. Just imagining it makes you exhausted, having to price one item at a time.

ABC curve

Using the ABC curve, inventory items are divided into three groups according to their monetary value or significance to the company.

Inventory items falling under Category A tend to be more valuable or significant, making up typically 20% of total inventory but 80% of its worth.

The products in Category B, which account for about 30% of the inventory’s total items and 15% of its worth, are intermediate items.

The remaining goods, which make up around 50% of the stock items and amount to about 5% of the stock’s overall worth, fall under category C.

The ABC curve is beneficial to businesses because it enables them to concentrate their inventory management efforts on the most significant or valuable products, ensuring that these things are always available and reducing the risk of production or operational interruptions.

PEPS

PEPS stands for the “First In, First Out” methodology, which suggests that older things should be used or sold before more recent ones.

In this method, older stock products won’t go out of date or expire, which could result in a loss for the business.

One strategy for regulating the output of stock items and preserving the accuracy of the business’s accounting data is the PEPS methodology.

Average cost

The average cost can also be referred to as the average price or weighted moving average, which means that a new cost average is calculated for every new transaction.

In this method, the value of the recently purchased items is added to the previously purchased ones to determine the ultimate price of the sold goods.

It is also possible to fix the average price. If this approach is used, the permanent inventory should have a single average applied to it, and interim sales should not be taken into account.

This concludes our post on everything you need to know about inventory management. We hope we managed to educate you further on the subject of Inventory Management and that you gained knowledge and insights that you can apply to your company’s operations.

The Role of Robotic Process Automation (RPA) in Supply Chain Management | Image source: mobisoftinfotech.com

Through the use of technologies like Machine Learning and Artificial Intelligence, robotic process automation (RPA) applications let you do operations for a set amount of time using software solutions or bots stored on servers.

They are intelligent agents that can learn to develop highly particular jobs and then repeat them, removing the chance of human failure and error and lowering operating expenses.

Routine and repetitive operations that were previously carried out manually can now be carried out automatically by software or a robot thanks to RPA resources.

As a matter of fact, the usage of these technologies has spread to a number of organizational areas, including the field of logistics, giving them a highly relevant significance in the supply chain.

According to a Gartner report, 85% of businesses are predicted to have some form of RPA solution in place by the end of 2022. As a result, we can claim that this tool has evolved into a potent strategic asset.

Would you like to learn more about the application of RPA in the supply chain?

Read this article all the way through to uncover many fascinating details about this subject.

What is the impact of Robotic Process Automation (RPA) on the supply chain?

In terms of how RPA helps improve the agility and quality of supply chain processes, the tool makes it possible to manage invoicing more effectively by automating actions like sending purchase orders and downloading and uploading documents and receipts.

The establishment of inventory management procedures is also aided by RPA, which enables automatic reports to be prepared with information on product supply and availability, raising the level of satisfaction among suppliers, employees, and customers.

Additionally, this kind of resource enables the industry to be alerted when product inventory levels fall below the required minimum, maintaining the capacity to meet demand.

7 benefits of Robotic Process Automation (RPA) in the supply chain

As you can see, innovations in technology have had a significant impact on logistics management. These advancements optimize operational efficiency by speeding up the development of activities and procedures and lowering the costs associated with these tasks, which is reflected in increased productivity and, as a result, in the profitability of the company.

The competitiveness of the supply chain industry is closely correlated with the efficiency and accuracy of logistical procedures, beginning with planning.

Planning the supply chain management used to be difficult, especially when it came to predicting product demand because the staff in charge of this duty had to manually calculate and generate estimates during unending meetings.

This circumstance is no longer an issue, and the execution of these points is considerably quicker, and more effective as a result of RPA!

Programs that centrally manage the data now automatically acquire and analyze data relating to consumption patterns, orders, and supplies.

Despite being a key distinction, RPA also offers a number of highly intriguing advantages, including:

1. Cutting supply-chain expenses

One of the key benefits of employing this resource is the gradual decline in the frequency of mistakes made during the processes, which leads to a considerable decrease in rework and, simultaneously, in the expenses associated with this waste.

2. Flexibility and simplicity

Any professional can utilize this type of technology to its fullest extent because it does not require special IT knowledge, such as an understanding of codes or programming languages.

Since it is easy to assign a robot to carry out a tedious or repetitive operation, RPA solutions significantly increase the flexibility of the transfer of logistical activities.

3. Accuracy in defining and analyzing metrics

Data on the supply chain may be easily accessed thanks to the storage of the tasks carried out by the robots. With this simplicity, RPA optimizes search, analysis, and decision-making by making it easy to find information as soon as it is required.

4. More productivity

The robotic automation of processes is raising the level of performance of modern businesses because it minimizes the use of resources in the various links of the chain, enhances workflow, and reduces response time while always maintaining quality.

5. More attention to the core business

Regarding the delegation of supplementary tasks, which inadvertently jeopardizes the productivity of work teams, the automation of tasks is also highly valued.

By implementing RPA innovations, managers and their staff can focus their attention on adhering to procedures and business-related operations. As a result, the performance and outcomes fundamental to the core business have significantly improved.

In a nutshell, the time saved by automation can be used to carry out more crucial tasks that will help the company’s profitability.

6. Supply and demand planning

The robots automatically examine past sales data and market indicators in accordance with a predetermined set of rules to then estimate supply and demand.

The quantity of inputs required to expand the business’s operations and maintain a sufficient safety stock can be ensured in this way.

#7 Follow up after product delivery

RPA technology enables the monitoring of delivery progress, notice of departure from the warehouse and arrival at the destination, alerting of potential inconveniences, and automatic messaging production of an electronic delivery document.

As you can see, implementing an excellent RPA solution in the supply chain can lead to excellent outcomes in terms of both productivity and finances.

Contact our consultants to see how we can assist you in achieving this objective if you like our piece of writing and are now considering using a resource of this kind in your business.