Effective reverse logistics can satisfy compliance needs, improve the industry’s global impact and bolster profits.
For the technology sector, a high performing supply chain is vital in the race to get the latest products into consumers’ hands. Short product life cycles and the high value of returns mean that reverse logistics is a core part of that supply chain solution; getting returned products back into circulation is critical in protecting revenues.
Here are four key factors that are raising the importance of the 21st century returns process.
1. Consumer habits
In the technology sector, consumer buying habits cover a wide spectrum of behaviours. At one end of the scale are the early adopters queuing for the latest Apple product. At the other, ‘digital immigrants’ (those of us born outside the so-called digital age) adapt to the march of technology with varying degrees of success.
Digitising the shopping experience has changed supply chains dramatically. Online shopping now offers many of the same rights as offline shopping, meaning that customers do many more things online – from banking to buying perishable food.
Just as you might buy several pairs of shoes to choose your favourite colour, you can do the same with a mobile phone or a laptop and still have the right to return it. Statistically, at least 67% of shoppers check returns policies before they buy. 30% of online orders are then returned, compared to about 9% of in-store purchases.
Tech companies bring out numerous new models each year, and of those, many are offered in different sizes and colours. (Sony, for example, has announced 11 new TVs for 2019.) Supply chain operators must manage a varied inventory and react to changing priorities for sellers, for example wishing to transport, store and sell off items before new ones are launched.
Consumers will also try to predict whether they should buy now or wait for potential new releases, so the supply chain requires flexibility to adapt to changing demand. (Another aspect is the global nature of the supply chain, transporting products across long distances as they are manufactured in one continent and sold in several others.)
For such high-value items as electronics and electricals, customers will also expect a certain amount of security for their purchase. Measures such as good-quality packaging, tracking and some form of signature collection will add expense across the supply chain.
2. Depreciation in product worth
Electronics companies have tried to keep customers loyal to their contracts by offering upgrades to more recent products. This necessitates managing the flow of these new and old models. However, replacement as a customer-retention technique is dying – consumers are now keeping old mobile phones for longer as prices rise and value falls.
Certain technology products depreciate in value very rapidly. For mobile phones, the depreciation figures for the first year are between 57% (Apple phones) and about 75% (LG). Being packed with new features means they command higher selling prices initially, but value drops as improvements are made to newer competitors.
3. Compliance and regulation
Heightened consumer awareness of social issues in the supply chain have driven technology firms’ increased focus on environmental and human rights issues means an added pressure on the supply chain.
Strict compliance laws increasingly focus on protecting the environment, avoiding waste and monitoring the use of precious resources. Media attention is often focused on the use of a rare metal — tantalum — in mobile phones, for example. Tantalum is also present in most consumer electronic devices (as well as electric car batteries and many medical devices).
Tantalum (or coltan) is closely associated with funding conflict in the Congo but has also been connected with smuggling and dangerous conditions in underdeveloped regions. The industry has also been forced to confront accusations of child labour in mining. The monitoring of mining and resources remains a difficult subject due to lack of visibility.
Waste management is another key social issue for technology providers. Manufacturers can no longer expect consumers to buy new products every year and discard the old ones as easily as throwing away a teabag.
Regulation has increased responsibility for recycling but firms have also identified the capability to repair items. Unipart’s work with one company allowed us to repair 92% of stock that would have previously been recycled, meaning that it could be returned to sale. Effective reverse logistics can satisfy compliance needs, improve the industry’s global impact and bolster profits.
4. Technology and planning to make returns more efficient
Supply chain technology has become a hot topic in recent years. The growing sophistication of artificial intelligence (AI), the internet of things (IoT) and machine learning increases the potential for gathering data to manage supply chains more effectively.
Integrated data use has value in stock and inventory control, including predicting shortages or delays. It can assist in better planning for last-mile delivery/collection or be used to sense rough handling of containers that might result in damage to products.
Blockchain technology – with its time-stamped, tamper-proof records – has also been identified as a way to track the source of materials. Apple is reported to be drafting Blockchain guidelines for the Responsible Minerals Initiative, aimed at protecting workers.
At Unipart, successful reverse logistics is not just about monitoring products during their journey. Instead, our involvement in improving the early stages – upstream activity like production and packaging – extends a product’s useful life.
Improving product life cycles in this way is a turnaround for the technology industry, which has been criticised for making items with ‘planned obsolescence’. However, one way to cut the cost of returns is to decrease their number. The benefits are financial as well as ecological.
Unipart has successfully worked with our technology customers to provide detailed analysis of the returns and proposed product improvements that have reduced return volumes significantly.
Also key are partnerships that involve managing the complete supply chain, including the warehousing of products. Working with an end-to-end supply chain provider can mean products do not actually enter a seller’s own warehouse.
This means there is one less transferral stage – with its associated paperwork, plus different systems – to manage. In a fast-moving supply loop. This increases efficiency and removes a major pressure point from the equation.
Want to manage returns better? Take a holistic approach
Returns can be an expensive business. It’s estimated that they cost UK retailers £60 billion a year (£20 billion from online purchases). Consumer expectations have risen to match more generous returns policies and a wider choice of returns methods.
Making gains in this scenario can be as simple as planning effective communication with customers – for example, encouraging in-store returns by highlighting this as the fastest, most reliable way to get a refund.
As prices rise and value depreciates, the returns issue is more crucial than ever. Supply chain firms have to be able to cut costs, move swiftly, avoid losses and damage and keep customers happy.
Today’s supply chain technologies offer massive advances in efficiency, but it’s good planning and management that prevents profits disappearing into a black hole of refunds and return delivery charges.
That requires taking a holistic view of the entire supply chain, and identifying and stopping any issues that create more returns. It also means managing each stage effectively, whether it’s large pick-ups from stores, small-load last-mile delivery or the most cost-effective recycling.
One thing is certain: in today’s highly pressurised and competitive consumer tech market, returns and reverse logistics is a fundamental area for focus and continuous improvement.