Organizations with formal returns management processes spend more to manage their logistics and warehousing functions and also see a larger percentage of their logistics costs dedicated to managing and processing product returns.
Returns management is often considered a process that has little effect on the enterprise as a whole. Yet evolving competitive and customer pressures as well as increasingly complex environmental regulations have made the establishment of formal returns management processes a priority for some organizations.
Returns management involves such practices as recycling, materials substitution, reuse of materials and waste disposal, as well as refurbishing, repairing and re-manufacturing returned products. According to APQC’s Open Standards Benchmarking Logistics, 78% of responding organizations have adopted formal returns management practices to some degree (Figure 1). Nearly one-quarter of responding organizations have no formal returns management process at all.
To gain insight into the effects of adopting formal returns management practices, APQC compared the logistics performance of organizations with three different degrees of returns management process implementation: extensive implementation, some implementation, and no implementation. The results indicate that having formal returns management practices is associated with a higher cost for managing logistics and warehousing. However, organizations should consider whether product reuse or refurbishment could result in additional revenue that would justify the potential for higher logistics costs.
