James Newman, Senior Accounts Executive, GreyOrange

The Mountain of Festive Returns: Why AI and Robotics is the way forward

James Newman, Senior Accounts Executive, GreyOrange discuses how AI and robotics technology can aid the returns process for retailers.

Black Friday and Cyber Monday marked the beginning of the festive retail season which set off weeks of deals and discounts, continuing through to the January sales. Retailers offer huge discounts throughout December and January, in-store and online, while customers wait with bated breath to see where they will spend their money.

Sales are great for the customer but can cause huge issues for retailers. The sheer volume of orders, the mountain of returns and balancing the books with delivery and returns fees all present issues unique to this period of peak demand.

These issues have been exacerbated during the pandemic and post-pandemic eras as eCommerce popularity soared. The UK alone saw a 46 percent increase in online sales, which is only expected to increase over the Christmas and January sales period. This, combined with the convenience of next day or same day delivery, has exerted vast amounts of pressure on retailers to deliver quickly at no or little extra cost for the customer.

Additionally, with more eCommerce orders comes more returns. During the holidays, the returns volume of fashion and electronics spike to 40% or more on average. Consumers tend to buy more items than they need with the intention of returning them at a later date. It is vital that retailers manage the cost implications of returns while also keeping customers satisfied and secure repeat purchases.

Returns disruption 
The rise in eCommerce usage has caused the spotlight to be put on the returns process. Returns are hugely disruptive for retailers and are far more problematic to deal with than outbound logistics. A recent report suggested that it can cost a retailer twice the price of delivery for a product to be returned to the supply chain.

Returns also create a backlog in inventory, which prevents retailers from restocking faster and selling more products. COVID-19 has caused the process to stall further, as stock can’t be used until it’s sorted, cleaned in accordance with health guidelines and verified to be back on shelves.

As returns soar over the festive period, any disruption will be intensified, particularly for retailers who do not have an efficient returns handling process. This will quickly damage productivity, consumer experience and translate into loss of revenue for retailers. Retailers need to prepare for these spikes, especially when poorly planned and inefficient return handling can reduce profit by 30%.

The returns system needs to work faster to create a seamless customer experience and save company resources. Automated systems and fulfilment software solutions can allow items to be moved from the returns pile back into inventory faster, ready for other customers to purchase that item. Brands can get inventory back into sellable condition and customers get their money back faster.

Labour Shortages 
Warehouses have been plagued with issues leading up to the busiest time of year. Labour shortages, outdated warehouse technology, and unpredictable peaks and troughs in activity have put strain on already stretched fulfilment centres.

Due to the shortage of delivery drivers in the UK which can be attributed to Brexit, the pandemic and other global strains on trade, many retailers are finding it hard to maintain the speed at which outbound and reverse logistics are performed. This is causing delivery delays for customers and damaging businesses’ reputations due to the rising expectation of faster deliveries. It is not just delivery driver shortages that retailers are contending with though; labour shortages across the supply chain have been afflicting businesses for months.

A lack of demand for these kinds of jobs means employers are taking longer to hire staff than usual. Due to Brexit, the roles of warehouse workers that were commonly filled by EU nationals are now vacant and contributing significantly to shortages. As the busiest period for retailers approaches extra staff are always needed. Retailers must consider where AI driven technologies can pick up manual and menial work for a more cost-effective way to help pick up the slack.

Warehouse worries
Alongside the lack of warehouse staff, a lot of technology within warehouses and fulfilment centres is outdated and in need of a refresh. Most warehouses are still reliant on purely human labour on the centre floor. Considering labour shortages, many are seeing that this is no longer sustainable. Phasing out total reliance on human warehouse agents for menial labour has re-emphasised the highest priority of distribution- accuracy. Yes, the customers of today expect speed, but more than anything they expect their order to be correct.

With updated technology and robotics to assist teams, warehouses can work on deliveries and returns more competently, and staff can focus on more important tasks that require a level of human judgement and cannot be executed by technology. Retailers are already using these types of technologies on the front side of buying and logistics, it is simply a matter of transitioning them for use on the reverse logistics component.

Today’s warehouse management systems are a web of integrated systems designed to keep the warehouse functioning at maximum efficiency. Integrating these innovative technologies enables robots and humans to work together to create true operational efficiency within fulfilment centres.
Another issue facing fulfilment centres is the pace at which warehouses work. In a post-Amazon world, fast shipping is a necessity for retailers to stay relevant. In recent years, Amazon has globally introduced the concept of same or next day delivery which consumers have now come to expect from retailers. Ninety-six percent of consumers equate fast delivery with same day and 36% will abandon their shopping carts if shipping time is too long. As next day delivery costs more than standard delivery, retailers need to improve the efficiency of returns so they can focus on fulfilling promises made to the consumer.

Additionally, a huge cause for concern amongst suppliers is the lack of physical space available in warehouses. Distribution centres could run out of warehouse space in Britain in as little as under a year. The rise in online shopping, after the jolted opening and closing of high streets during coronavirus lockdowns, is one factor increasing demand for warehouse space.

The UK’s departure from Europe has been another root cause of the warehouse space shortage, as European suppliers want to be closer to their UK customers. Many European suppliers have re-engineered their supply lines to have a more local presence in the UK.

Focus on the consumer
With the returns process in mind, the focus for retailers will be the cost implications of returns and increasing consumer demands. Consumers are more likely to go with brands that provide speedy delivery and efficient returns, so retailers must ensure they get the right balance when prioritising cost and customer satisfaction. Using AI and robotics technology can aid this process as returns can be arranged much quicker and improve the customer experience.

In addition to this, automated systems can help sort stock out and avoid returns piling up that are unable to be restocked. This enables inventory to go back on sale and show as in-stock on retailers’ websites, avoiding customer disappointment around out-of-stock items. Given that 92% of customers are more likely to return as repeat customers if they have a positive returns experience, retailers must look to ensure that returning items is as easy as purchasing them.

Following COP 26 and the emphasis placed on businesses to become more sustainable, a focus has also been put on how retailers manage their returns. Many retailers use paper slips to identify reasons for returns, but this consumes more resources and is time-consuming for warehouse workers to sort through. Automated systems process faster, improve efficiencies, and require less energy.

AI and robotics- the future for fulfilment centres 
AI driven software is the modern approach to dealing with the immediate commerce demands. Integrating AI-software and robotics allows fulfilment centres to be more efficient and supports high demand periods such as Black Friday, Christmas, and January sales. Integrated software will autonomously orchestrate data, rapidly respond to real time events, and flexibly prescribes actions- while supporting the human workforce, something that is even more important whilst labour shortages affect the entire industry.

Technology like sophisticated robotics, AI, machine learning can all be used to fortify distribution networks, track, and document returns, and help retailers manage their inventory based on consumer buying habits. Now is the time to implement these changes, with the predicted increase in spending this year and the expected influx of returns. Without prior planning and implementation of AI software, retailers risk being overwhelmed and unable to deliver to the same standard as usual.

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