Returns processing, or reverse logistics as it has become known, involves the handling of product returns, transit packaging and surplus items. The processes associated with this operation include repair, reuse, refurbishment, recycling and disposal. The processing of returns has gained increasing importance in the warehouse over the past few years. There is now an increasing awareness of the
economic value of reusing products and the effect on cash flow of perfectly serviceable items that can be repackaged and made available for sale. There is also the possibility of fines if products and packaging are not disposed of in an environmentally friendly way. Doing nothing about returns costs money. They take up space, are difficult to count during stock takes, difficult to value and, more importantly, could be back on sale rather than taking up much-needed space within the warehouse.
The alternative is ordering further stock with all its inherent costs.
There has also been a greater environmental awareness backed up by legislation such as the Waste Electrical and Electronic Equipment Directive (WEEE), hazardous waste disposal legislation and more stringent waste packaging directives.
The Waste Electrical and Electronic Equipment Directive came into force in January 2007 in the EU. Its aim is to both reduce the amount of electrical and electronic equipment being produced and to encourage everyone to reuse, recycle and recover. The WEEE Directive also aims to improve the environmental performance of businesses that manufacture, supply, use, recycle and recover electrical and electronic equipment. The increase in e-retailing has also seen a significant increase in the level of returns into the warehouse. Catalogue retailing has always had significant amounts of returns, especially in terms of textiles and clothing. These retailers have, in the past, set up returns-processing areas to not only receive the items but also clean them, iron them and pack them for resale. Other such returns include products despatched on a sale-or-return basis and those where customers are given the option of a 14-day returns policy. These items are likely to be good stock and can be returned to stock almost immediately. Other groups of returns include reusable packaging such as barrels, kegs, bins, cages, trays, totes and pallets. Product recalls are also a significant area, needing to be handled carefully. These products need to be quarantined on return so that the company can
ensure, firstly, that all items have been received and are no longer a potential
danger to the public – which is normally one of the main reasons for recall –
and secondly, that they are not mixed with good product and sent out in error.
Recently introduced legislation, the cost of landfill both in money and
environmental terms and the realization that returns can be an expensive area
to neglect have triggered the growth of reverse logistics programmes and the
establishment of warehouses built specifically to handle the returns process.
This type of warehouse needs to be set up very differently from a stockholding
facility. Space needs to be set aside for sortation, inspection, repair,
refurbishment and disposal. The idea behind returns processing is to either
return stock into the supply chain as quickly as possible in whatever format,
be it finished goods or spares, or dispose of it efficiently.
Returned items shouldn’t remain in the facility for too long.
Should you decide to operate the returns function within an existing warehouse
operation then you are likely to set up a warehouse within a warehouse.
This needs to be carefully planned to avoid cross contamination – for example,
when dealing with damaged or defective items, chemicals and hazardous
products.
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