Each week seems to bring a new supply chain issue. First there was the backlog of cargo ships in Southern California, then the “Christmas is canceled” crisis due to shipping delays, and now businesses and consumers are dealing with a war-fueled global supply chain crisis for gasoline.

While there will never be one solution to ending a supply chain slump, smaller, manageable steps can lead to less reliance on upstream supply chains or newly manufactured inbound inventory. One step to consider is optimizing returns. 

COVID-19 has caused an e-commerce boom. According to a U.S. Department of Commerce Retail Indicator Division trade report, e-commerce sales grew 50% to $870 billion during the pandemic. With the increase of online shopping comes an increase in returns. 

Returns jumped nearly 6% from 2020 to 2021, according to a survey by the National Retail Federation. These returns can be a supply chain nightmare for retailers. On top of losing revenue, they often mean adding workers, increasing warehouse space and establishing separate departments to manage all the back-end logistics. 

Managing returns is never as simple as placing an item back on the shelf. With increasing volume of returns paired with online orders, returns are requiring a more involved quality-control process, and ultimately more time. How companies choose to manage their returns will influence the overall management of many facets of the business that impact profitability, including inventory and warehousing storage. 

The major impacts returns can have on supply chain include:

• Warehouse build up. With increased returns, warehouses, which are optimized for outbound fulfillment rather than inbound returns, experience huge backlogs of packages, especially during peak seasons like the holidays. 
• Staffing shortages. When companies don’t have the proper returns management protocols in place, more staff is required to manage returns and the build-up trickles downstream, impacting demand planning and inventory optimization.
• Less inventory. The longer it takes to restock returns, the less inventory is available for shoppers to buy, leading to upset customers and a pile-up of out-of-stocks for popular items. 

When a company doesn’t have an optimized returns program in place, it can cause a ripple effect that flows from a disrupted supply chain. So how can retailers get inventory back into their possession and on the shelves more quickly, mitigating risk in the supply chain? The answer: optimizing their returns process to free up valuable space in the supply chain.

Following are four steps to optimizing the returns process.

• Offer at-home pickup. At-home pickup can be a great alternative to in-store drop-off, one that ultimately gets products back on shelves faster. It has also become the preferred method for customers over the pandemic and is three to four times more popular than the alternatives.  
• Compare prices and contracts among multiple carrier partners to ensure the best shipping options. While the channels to import merchandise are internationally backlogged, returns don’t need to be. Companies should look to partner with a carrier that can provide the best service options for the most reasonable price for shipping products back to stores and warehouses.
• Be transparent. A recent study found that shoppers want predictability over speed. Companies should look to implement solutions that dictate arrival timelines, track packages in real-time, purchase insurance to ensure packages arrive safely, and offer more personalization options. This can help to alleviate buyer uncertainty and worry during the supply chain slump.
• Use reverse logistics and third parties. Many retailers have deemed online returns essential, but some are taking it a step further by consulting third-party experts on their returns process. There are many reverse logistics companies that specialize in finding the most efficient way to process returns.

While not an end-all, be-all solution for supply chain woes, an optimized return policy can help mitigate risk in the supply chain. By implementing these steps, companies can help with major issues such as warehouse buildup, staffing shortages and out-of-stock inventory. 

Ben Freedman is chief executive officer of Boomerang.