Returns in the Omni-Channel
Dr. Dale S. Rogers
Professor, Logistics & Supply Chain Management
Co-Director, Center for Supply Chain Management
Rutgers University
Leader in Sustainability and Reverse Logistics Practices
ILOS - Instituto de Logística
Returns in the Omni-Channel
Returns in the Omni-Channel
• Retailers and manufacturers are increasingly finding that their sales
are distributed across many different channels and supply chains.
This creates greater complexity and becomes a difficult problem to
solve efficiently. Additionally, issues such as assert recovery and the
secondary market further complicate the returns mission. End-of-life
concerns and new regulation impact reverse logistics processes.
• In this session Dr. Dale S. Rogers of Rutgers University will describe
the new realities surrounding returns. He will explain relevant
regulation, end-of-life issues and changes in the secondary market.
Integrative strategies for managing returns across multiple channels
will be discussed.
Unit Name
Returns in the Omni-Channel
Omni Channel
Web
Store
Display
Ads
Mobile
Call
Center
Email
Direct
Mail
Physical
Store
Kiosk
Unit Name
Returns in the Omni-Channel
Unit Name
Returns in the Omni-Channel
Reducing Consumer Risk
Unit Name
Returns in the Omni-Channel
OmniChannel?
Unit Name
Returns in the Omni-Channel
OmniChannel
Unit Name
Returns in the Omni-Channel
Victoria’s Secret
Unit Name
Returns in the Omni-Channel
Unit Name
Returns in the Omni-Channel
System “Drains”
Unit Name
Returns in the Omni-Channel
Unit Name
Returns in the Omni-Channel
Secondary Markets
• Secondary markets are effective in diverting a large number
of products from landfills, creating numerous jobs, resulting in
substantial economic value in the process.
• Although not reflected in current government metrics, a
conservative estimate is that the secondary market represents
2.88 percent of the 2012 U.S. Gross
Domestic Product.
Unit Name
Returns in the Omni-Channel
Secondary Market
Unit Name
13
Returns in the Omni-Channel
Unit Name
Returns in the Omni-Channel
Product Responsibility Curve
Product Responsibility Curve
Product Life Cycle
End of
Responsibility
Birth
Unit Name
End of Life
Returns in the Omni-Channel
Reverse is Different
Forward
Product quality uniform
Reverse
Product quality not uniform
Disposition options clear
Disposition not clear
Routing of product unambiguous
Routing of product ambiguous
Forward distribution costs more easily
understandable
Pricing of product uniform
Reverse costs less understandable
Inventory management consistent
Inventory management not consistent
Product life cycle manageable
Product lifecycle less manageable
Financial Management issues clearer
Financial Management issues unclear
Negotiation between parties more
straightforward
Type of customer easy to identify and
market to
Visibility of process more transparent
Negotiation less straightforward
it Name
Pricing of product not uniform
Type of customer difficult to identify and
market to
Visibility of process less transparent
Un
16
Returns in the Omni-Channel
Inventory Driven Carrying Costs
Product
Salvaged
100%
Bargain
Basement
Discounts
50%
Product
Product
Introduction Obsolescence
And Volume
Sales
0%
Time
Unit Name
17
Returns in the Omni-Channel
Unit Name
Returns in the Omni-Channel
Scoping The Issues
Sample Logistics Costs Meant To Be Purely Illustrative
Top Line Retail Sales
$50,000,000,000
Sample Return Rate
9.0%
Total Returns
$4,500,000,000
Sample Avg. Ticket
100.00
Units Returned
45,000,000
~25% Resold In Stores
9,000,000
Net Distribution Flow
36,000,000
Sample Cost Per Unit
$1.85
Sample Processing Cost
From Returns
>$60,000,000
Source: Kevin Winneroski
Unit Name
Returns in the Omni-Channel
Scoping The Issues
Retailers incur a baseline cost / margin loss from end-to-end
Reverse Product Flow; primarily from net DWO/EOL liquidation.
No n-P RC rev ers e f lo w (e.g ., rep airs , warranty , G eek S q uad )
O p timize S K U
c o d es and
s etup
Red es ig n
v end o r term s and
netwo rk f lo ws
In-s to re return
p ro c es s ing
$ in millions
Trans p o rtatio n
to D D C / P RC
P RC p hy s ic al
p ro c es s ing
196
Next steps:
+ Id entif y what p o rtio n o f the $196M is
ad d res s ab le b y the Rev ers e Flo w wo rk
+ V erif y the es tim ated im p ac t o f the in f lig ht wo rk (K im A nd ers , P aul M ann, etc .)
No t-ad d res s ab le
(o ut o f b as eline)
V end o r / o utb o und
inf o rm atio n f lo ws
TB D
TB D
TBD
TBD
3
5
17
4
Store
disposition
labor
34
5
Transport
0. 4
DDC
to DDC
handling
DDC
PRC
PRC
Total
Shrink
Net DWO/
to PRC
transport
processing
& overhead
Outbound
Transport
Opex
(net loss)
EOL
liquidation
(net loss) 1
$1.84 p er unit
Illustrative Example
Unit Name
Source: Kevin Winneroski
Total
Returns in the Omni-Channel
Date Codes
Unit Name
Returns in the Omni-Channel
Central Return Centers
Unit Name
Returns in the Omni-Channel
End of Life
• Innovate use of endof-life
• Recycle
• Good corporate
citizenship
• “Cradle-to-Cradle”
Unit Name