Edition 113, April 2021

Unified Operating Standards: Integrating Fragmented Processes to Gain Visibility and Insight in Reverse Logistics

By Amit Gautam, Innover Digital

The rapid growth of the retail and e-commerce industry over the last The rapid growth of the retail and e-commerce industry over the last decade has been nothing less than remarkable. Some of the key factors that fueled this meteoric rise are the optimization of digital innovations, smart cataloging, and personalization of offerings. The advent of virtual assistants, connected devices, and social media has not only changed how businesses market their products and services, but has also radically changed consumption habits and customer expectations. As things stand, retail e-commerce revenue is projected to top $6.54 trillion by 2022.

Since online shopping emerged as one of the most popular activities on the internet, e-commerce enterprise recognized the need for robust logistical processes. While fast delivery of products is essential, easy return of products is also a necessary element of consumer experience. This makes both onward as well as reverse logistics important to e-commerce organizations. However, reverse logistics poses various challenges to growing enterprises, mainly due to their fragmented processes and absence of unified operating standards.

Reverse Logistics: An Important, but Often Forgotten Component of E-commerce

E-commerce players have continued to innovate their service delivery and supply chain models to ensure optimum customer experience and service excellence. A key aspect of that pursuit is ensuring customers have the ease of ordering and returning goods as desired. To sweeten the deal, early e-commerce initiatives included free shipping, both for delivery as well as return of products. As a result, customers became used to paying for the products, while the responsibility of fast, seamless logistics fell on enterprises. This resulted in the establishment of fulfillment centers, which assured the assembly and categorizing of products, as well as easy returns. However, this has also created a mélange of complex logistical processes, with enterprises incurring substantial capital and operational costs.

While enterprises have managed to simplify processes and factor in costs of onward logistics, they have not been able to manage the fragmented reverse logistics process as well. The very uncertain nature of product returns renders it next to impossible to make accurate projections. And as a result, enterprises struggle to create unified standards for operating procedures within their reverse logistics operations. To put the challenge in perspective, almost $550 billion worth of returns are made every year, and with free shipping on returns, the e-commerce industry is seeing their supply chain suffer about $50 billion a year losses. And this will only grow with time.

The key problem plaguing e-commerce enterprises with reverse logistics is the absence of unified operating standards for product returns. While in case of onward logistics, the job is easier as there is a set destination and process of delivery. But, in case of reverse logistics, products are not only shipped back from across the globe, but is also shipped back to either the fulfillment stores or directly to brick-and-mortar stores. This makes evaluation and sorting of these products essential before they can be put back on retail shelves or be repurposed or remaindered. Evaluating returned products for damages and defects is a complicated and time-consuming process, which is further exacerbated by the lack of unified standards. This results in not only costing e-commerce enterprises a fortune, but also hurts their customer satisfaction metrics for greater impact on future business.

Unified Operating Standards: Real-time Visibility, Logistical Insights, Supply Chain Transparency

Supply chain business networks are increasingly becoming complex and extensive as the e-commerce business grows in leaps and bounds. In such a scenario, business process monitoring and supply chain observability becomes imperative for fast-evolving, global businesses. As such, reverse logistics has to be given the same importance as onward logistics, with real-time supply chain visibility, business insights, and transparency being the focal points.

Reasons for product returns range from impulsive purchases to defects to expectation mismatches. With such varied reasons, enterprises cannot devise a method to regulate return of products. But, with the right operating standards and holistic processes, they can control reverse logistics better. To begin with, enterprises must make better use of control towers that provide real-time data on unified dashboards and offer actionable insights that eases the upstream movement in the supply chain.

The answer to reverse logistics challenges is a natively unified supply chain orchestration platform that offers end-to-end visibility of the supply chain. This will lead to robust systems integration and standardized processes while also eliminating enterprise silos and bringing all order-specific information on to a single platform. Insights drawn from process flows will help enterprises identify the exact pain points in the supply chain, bottlenecks and cost seepage, and long-term hazards. Unified operating standards and a robust orchestration platform are critical for enterprises to speed up their logistics at lower cost.

This is where new and emerging solutions built on a distributed ledger system are showing great promise for business leaders, helping them achieve greater transparency within the supply chains. Proactive use of this blockchain methodology instills greater data trust by decentralizing digital records of all transactions and product movements – both upstream and downstream. Blockchain also helps unify disparate systems and provides necessary information and insights on quality, authenticity, eligibility, and the real-time status of items. This allows enterprises to ensure standardized processes, track products across the supply chain, share status details of the products with the customers, maintain records and reconcile inventories, and make informed decisions on “next-best action” for returned items.

Evolution with Technology Innovation

As established, mismanagement of reverse logistics is hurting e-commerce businesses to the tune of billions of dollars. But, that is only the visible, measurable cost to companies. The loss of revenue in the form of customer dissatisfaction and grievances is a far more dire cost that can’t even be accurately measured. As a result, the importance of unified operating standards in reverse logistics cannot be overstated. With the help of the right tools and process innovations, enterprises have much to gain from innovations in their reverse logistics practices.

By introducing intelligent automation tools in process flow observability, enterprises can tap on the true potential of reverse logistics. This will help enterprises gain competitive edge, improve consumer experience and loyalty, and pave the path for business growth. In other words, reverse logistics is a challenge that is at the cusp of being turned into an opportunity, but for that to happen, future-facing e-commerce players must act swiftly and definitively.

Amit Gautam
In his role as President and Chief Strategy Officer for Innover, Amit Gautam  has responsibility for all aspects of the company’s product & services strategy & execution, as well as its financial performance and growth. Amit has a relentless focus on Growth and Innovation and holds a strong personal commitment towards “Outcome-Driven” Digital Transformation for businesses. Amit collaborates with the C-suite executives of Fortune 1000 companies and guides them to adopt a digital-first mindset, delivering bold transformations and exceptional experiences. Prior to Innover, Amit worked with firms like GE and Cognizant in various leadership roles. Amit studied Data Science at Harvard and holds a Bachelors Degree in Engineering from India.