Mastering returns logistics - with automation solutions

The Christmas holidays are over, but Christmas gifts often turn out to be the wrong size or not to the taste of their recipients. This means that, all over the world, millions of returns are initiated. In times of COVID-19, most of these are submitted through online channels. But when (too) many shipments are returned to merchants at the same time, for example after Christmas, a backlog can build up at the distribution centers of e-commerce companies. This is where Dematic, the KION Group subsidiary specializing in automation, can help with innovative solutions that avert the collapse of the system under the weight of mounting returns.

E-commerce is a growing sector and the coronavirus crisis has fueled an unprecedented boom. The number of parcels shipped is a metric that expresses this growth trend in concrete figures. Data on parcel traffic in Germany speaks for itself. A group of researchers at the University of Bamberg concluded that shipments by e-commerce and omni-channel merchants increased by 17.4 percent year on year in the first six months of the crisis. Figures published by Deutsche Post confirm these findings. The mail service provider delivered around 1.8 billion parcels in 2020 – an increase of almost 20 percent compared with the previous year.

These figures are obviously good news for the e-commerce sector. But growing order volumes go hand in hand with an increase in returns. Based on the data they collected, the researchers from the University of Bamberg arrived at a conservative estimate of at least 315 million return shipments in 2020 in Germany alone. This is where online merchants are facing huge challenges.

A perfect storm of complexity and high customer expectations

One of the sectors at the heart of the issue is the fashion industry. Customers frequently order items of clothing in several sizes to try on at home, meaning that most of the items ordered are subsequently returned to the seller. It is therefore not unusual for fashion retailers to record return ratios of up to 50 percent . At the same time, processing returns is particularly time-consuming in the fashion industry. Returned items need to be inspected and potentially cleaned. Then, it needs to be established whether they should be returned to inventory stocks, redirected to a discount outlet, or even disposed of, depending on their condition. In any case, all returned items need to be neatly folded or put on a hanger before they can be sent to another customer. All in all, this makes for a time-consuming manual process that incurs significant costs above and beyond the return postage.

Notwithstanding the above, customers expect the return process to be just as smooth and convenient as ordering items and trying them on at home. A reliable returns processing system that accurately reflects the status of orders and swiftly issues any refunds or vouchers due to customers is therefore crucial to customer satisfaction in the e-commerce sector. For the merchant, it is equally important that internal information on returns is processed accurately so that inventory data is always up to date. And, naturally, it is also highly relevant for inventory tracking that any damage to returned items is recorded properly upon receipt.

Returns and refunds in record time

To provide a solution that covers all internal and external requirements, Dematic has developed a dedicated subsystem that combines and coordinates manual and automated processes. The subsystem comprises workstations relating to customer credit, exchange of goods, inspection, repairs, packaging, and transfer to buffer stock or long-term storage. All units are interconnected via an automated network of conveyor belts and sorters, and at all stations, employees manually execute predefined workflows. “Our returns handling subsystem introduces processes in the returns logistics environment that are more efficient, more precise, and better structured,” explains Mike Khodl, Vice President for Solution Management at Dematic. “The returns handling subsystem therefore helps customers to optimize their productivity and also enables them to increase their revenue, because items are added back to the online shop more quickly – usually within 24 hours. It also greatly improves customer satisfaction because vouchers or refunds are issued immediately upon receipt of the returned items.” Dematic’s returns handling subsystem can process between 13,500 and 200,000 items per day. These items are made available again almost immediately so that the next customer can add them to their virtual shopping basket.

Effective interfaces for faster processes

The flow of materials is controlled by Dematic’s iQ software, which communicates with the online merchant’s existing warehouse management system via a digital interface and tracks the entire returns handling workflow. In addition, a full set of interfaces to further automated systems has been incorporated in the subsystem to make processes even more efficient. For example, customers can seamlessly integrate the subsystem with the Dematic Multishuttle, a fixed lift system installed between racks that transports items to the relevant shelves in a fully-automated manner using conveyor belt technology and can even move goods across different aisles thanks to the perfect coordination of its individual shuttles.

The subsystem’s interface to the Dematic pouch sorting system, which is particularly suitable for the fashion industry, is equally reliable. To save space, the goods transport system uses pouches suspended from rollers. A wide range of goods with a maximum weight of three kilograms can be transported, sorted, and sequenced in the pouches, which are filled automatically. A conveyor belt then connects them directly to the workstations for manual returns processing. “The system can fill up to 1,200 pouches an hour with a single package each, which can be identified via an RFID tag or a barcode. The item ID and the pouch ID are then married, allowing us to see where each article is located in the system at any time,” explains Winnie Ahrens, Senior Sales Manager at Dematic. Pouches holding items that – based on experience – are likely to be resold quickly are temporarily moved to a buffer loop suspended from the ceiling until they are reallocated to a new order. The pouch collector forwards the items to the repacking stations fully automatically, where they are prepared for shipment.

From there, the items make their way to their final destination and, hopefully, find a new permanent home in wardrobe of their new owner. If not, the system stands ready to reliably process them once again upon their return. This keeps processing costs down, customer satisfaction high, and ensures that goods at the warehouse never stop flowing.

For automated conveyor technology: Dematic Conveyor ConfiKIT

Successful partnership in robot manufacturing (AMR) by KION and Quicktron