Returns in the Omni-Channel Dr. Dale S. Rogers Professor, Logistics & Supply Chain Management Co-Director, Center for Supply Chain Management Rutgers University

Returns in the Omni-Channel

Dr. Dale S. Rogers Professor, Logistics & Supply Chain Management Co-Director, Center for Supply Chain Management

Rutgers UniversityLeader in Sustainability and Reverse

Logistics Practices

ILOS - Instituto de Logística


Unit Name


• 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.


Omni Channel

Web Store

Mobile

CallCenter

PhysicalStore

Kiosk

DirectMail

Email

Display Ads

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me


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Reducing Consumer Risk

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OmniChannel?

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OmniChannel

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Victoria’s Secret

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ame


System “Drains”

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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, aconservative estimate is that the secondary market represents

2.88 percent of the 2012 U.S. GrossDomestic Product.


Secondary Market

Unit Name13


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Product Responsibility Curve

Product Life CycleEnd ofResponsibility

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Product Responsibility Curve

BirthEnd of Life

Un

16


Reverse is DifferentForward ReverseProduct quality uniform Product quality not uniform

Disposition options clear Disposition not clear

Routing of product unambiguous Routing of product ambiguous

Forward distribution costs more easily understandable

Reverse costs less understandable

Pricing of product uniform Pricing of product not uniform

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

Negotiation less straightforward

Type of customer easy to identify and market to

Type of customer difficult to identify and market to

Visibility of process more transparent

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Visibility of process less transparent

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17

Inventory Driven Carrying Costs

Time

100%

50%

0%

Product

Introduction Obsolescence And Volume

Sales

Product

Bargain Basement Discounts

ProductSalvaged


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Returns in the Omni-ChannelScoping The Issues

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Sample Logistics Costs Meant To Be Purely Illustrative

Source: Kevin Winneroski

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 CostFrom Returns

>$60,000,000

Returns in the Omni-ChannelScoping The Issues

Retailers incur a baseline cost / margin loss from end-to-endReverse Product Flow; primarily from net DWO/EOL liquidation.

No n-PRC reverse f lo w (e.g ., rep airs , warranty , Geek Sq uad )

3

TBD

196

TBD

TBD

17

5

TBD

0.434

5

4

$ in millions

Transp o rtatio nto D D C / PRC

In-s to re returnp ro cess ing

PRC p hys icalp ro cess ing

No t-ad d ressab le (o ut o f b aseline)

Vend o r / o utb o undinf o rmatio n f lo ws

Op timize SKU co d es and setup

Red es ig nvend o r term s andnetwo rk f lo ws

Next steps:+ Id entif y what p o rtio n o f the $196M is ad d ressab le b y the Reverse Flo w wo rk+ Verif y the es tim ated im p ac t o f the in-f lig ht wo rk (K im And ers , Paul M ann, etc .)

$1.84 p er unit

Source: Kevin WinneroskiUnit Name

Illustrative Example

Store Transport DDC DDC PRC PRC Total Shrink Net DWO/ Total

disposition to DDC handling to PRC processing Outbound Opex (net loss) EOLlabor transport & overhead Transport liquidation

(net loss) 1


Date Codes

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Central Return Centers

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End of Life

• Innovate use of end-of-life

• Recycle• Good corporate

citizenship• “Cradle-to-

Cradle”

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Documents

Returns in the Omni-Channel Dr. Dale S. Rogers Professor, Logistics & Supply Chain Management Co-Director, Center for Supply Chain Management Rutgers University