Best Practices for Your Return-to-Vendor Process
The secondary market is all too often a secondary thought for many retailers and original equipment manufacturers (OEMs). However, in the new retail supply chain, what you don't know can hurt you. Without intending to, organizations can be negatively impacted by a number of factors in their reverse supply chain — from lost margins to brand distortion — simply by missing how they're managing their returned and overstock product flows. By applying the old paradigms for managing the return-to-vendor (RTV) process, you put yourself behind in the race against your competitors.
To move from a "cost of doing business" mentality to strategic supply chain alignment, retailers need to better accommodate customers in-store and online. This includes making return policies more flexible, establishing greater control and visibility, and enabling sustainable recovery practices, all of which will ultimately benefit both the retailer's and manufacturer's brand reputations.
A common set of goals for retailers and manufacturers includes the following:
- reduce handling and transportation within the reverse supply chain;
- ensure the retailer and manufacturer's brands are protected and enhanced;
- create revenue and margin growth using secondary markets to mutual advantage; and
- align with sustainability and green initiatives — internally and externally mandated.
Understanding Your Returns Management Process
If you allow individual stores to handle RTV transactions by going directly to vendors and manufacturers, this decentralized model is unsustainable and expensive. Localized returns management can undermine your company's sustainability efforts and compliance to ongoing regulations, leading to fines or, even worse, more controllership issues as your retail store footprint grows. In addition, less effective transportation creates additional carbon output and lost opportunity costs you might have leveraged with your manufacturers, not to mention less recovery for those products.
If your company's RTV products are being sent back to centralized warehouses, you may have already saved the logistics and in-store costs, but you've probably also incurred hidden costs by expending efforts on anything beyond your core competencies — namely, driving revenue growth in your stores. In addition, the burden of tens or hundreds of different vendor agreements combined with lack of market data on product value can negatively impact the total supply chain value and corporate sustainability efforts.
Optimizing the Multichannel Retailing Experience
A multichannel approach to the secondary markets, including your own e-commerce channels, in concert with the right reverse supply chain partner can turn these "return costs of retail" into margin and customer growth opportunities while redirecting employees efforts to sales and customer experience enhancement. The retailer gains secondary market expertise and world-class e-commerce services, along with the ability to effectively optimize multichannel recovery. Once this partnership is established, you can jointly seek to rework existing vendor agreements through utilization of a single partner the manufacturers and retailers trust. This can further streamline core processes while ensuring corporate brand and sustainability goals for all parties are achieved.
Breaking away from traditional RTV processes helps retailers and OEMs stay ahead and deliver value while embracing the realities of the new retail supply chain — secondary marketplaces, sustainability requirements and pressures, increasing transportation costs, and increased online shopping. As retailers and OEMs seize opportunities to transform the supply chain, your returns processing and the resulting retailer/vendor agreements hold the potential to go from an overlooked area of frustration to a source of revenue, customer growth and substantive impact on the bottom line.
Cayce Roy is president of the retail supply chain group at Liquidity Services, an online marketplace for surplus goods. Cayce can be reached atcayce.roy@liquidityservicesinc.com.
