Outsourcing Returns: Should You Keep Them In-House or say Good Riddance?

Mar 31, 2023 | Blog, Fulfillment, Warehouse Management Software

So, should you keep returns in-house or say good riddance? Keeping returns in-house can be costly, and thinking carefully about how best to handle this crucial part of your business is essential. Outsourcing returns can be a great option — but is it always the correct answer? Weighing the pros and cons ahead of time will help you decide if outsourcing returns is worth it for your eCommerce business. Let’s explore both sides of this debate so you can make an informed decision!

What is Outsourced Returns Management?

Navigating the world of returns management can feel like solving a complex puzzle, but when executed effectively, it can transform a potentially negative customer experience into a positive one. As an integral aspect of the supply chain and fulfillment process – returns management relies on the principles of reverse logistics to ensure that goods make their way back from customers to retailers smoothly and efficiently.

This dynamic workflow goes beyond simply receiving the returned product; it seamlessly integrates every step, from shipping and storing to updating stock levels in real time. When handled with finesse, accuracy, and a touch of tech magic, a well-coordinated returns ecosystem benefits not only the customer making the return but also potential new clients, stock managers, and payment operators.

By developing and implementing strategies to minimize the occurrence of returns, businesses can save valuable resources while ensuring maximum customer satisfaction. Remember, a well-oiled returns management machine makes the whole process more cost-effective. It fosters loyalty from customers who can trust that your business will address their concerns in a timely and friendly manner.

Advantages and Disadvantages of In-House Returns

Advantages

In-house returns can be both a blessing and a challenge for businesses, depending on the situation. One of the most significant benefits is the level of control it offers organizations over their operations, allowing them to tailor every aspect of the process to ensure the utmost customer satisfaction. This means that every returned item is handled efficiently and effectively, maintaining the trust and loyalty of the clientele.

The improved communication resulting from an in-house team’s deeper understanding of the company’s values and systems greatly benefits the organization. Since they are better equipped to represent the brand, there is a reduced risk of losing vital information due to miscommunication. 

Disadvantages

Managing in-house reverse logistics programs can be challenging for businesses, particularly regarding scalability and customer expectations. Reverse logistics necessitate a diverse array of resources, which can sometimes be limited within a company. As various departments and teams compete for these resources, the efficiency and effectiveness of reverse logistics processes can be compromised. 

Moreover, with giants like Amazon setting the bar high in terms of hassle-free return experiences, customers have come to expect a smooth and streamlined process when it comes to returns. Failing to meet these expectations can significantly impact customer satisfaction and brand image, making it imperative for businesses to invest in and prioritize a robust in-house reverse logistics program. Solidifying these crucial aspects of your business can help ensure long-term success and a loyal customer base.

Advantages and Disadvantages of Outsourcing Returns

Advantages

1. Intelligent Automation

   Embracing the advantages of outsourcing to a 3PL with intelligent automation can significantly impact an eCommerce business’s growth and success. Imagine no longer having to spend countless hours logging into various seller portals like eBay, Amazon, or Walmart.com to manage each return and refund request on your own laboriously.

   Instead, cutting-edge software takes the reins, seamlessly integrating with those very portals, while the market-driven logic works tirelessly to automate your returns management. This results in faster refunds for your customers and reduced freight costs for your business.

2. End-to-End Returns Management

   By connecting their returns gateway to a reputable third-party returns management provider, sellers can benefit from comprehensive end-to-end management, ensuring a smooth and efficient process for handling returned items.

   Partnering with a 3PL guarantees the highest possible recoveries, enabling sellers to resell returned goods at optimal value, thereby minimizing losses. A reliable 3PL can offer robust fraud protection measures, further safeguarding sellers from scams and fraudulent activities.

3. Cost-Effective Shipping and Handling

   Outsourcing returns management is a favorable decision for businesses because it leads to cost-effective shipping and handling and can help boost customer confidence. Companies can reduce operational costs and manage returns more efficiently by delegating this important aspect of the supply chain process to experts who deeply understand local and international customs. They also ensure that all returns are correctly tracked, regardless of destination, which can be essential in protecting a company’s bottom line.

4.  Access to Experience

   One of the most significant benefits lies in gaining access to a wealth of experience through a 3PL. Having an expert team handling return logistics eliminates the daunting upfront costs associated with establishing an in-house returns center and ensures that seasoned professionals manage the entire process.

   The knowledge and expertise of these experienced staff members can greatly enhance the efficiency and effectiveness of your return operations, fostering stronger customer relations and promoting a seamless overall experience. A close partnership with a reliable returns management provider can be an invaluable asset for businesses of all sizes.

5. Reporting Capabilities

   Migrating this process into expert hands provides the reassurance of relying on their robust reporting capabilities and well-established protocols. This essential collaboration allows for seamless tracking of returned items and a clear understanding of the costs involved. As a result, you gain valuable insights, enabling you to make well-informed decisions and optimize your business processes for better performance.

Disadvantages

1. No Control of the Returns Process

   One of the most prominent concerns is losing control over this aspect of the business, which might leave you uncertain about the future. Even though most logistics providers go the extra mile to adopt your brand’s identity, ensuring a seamless experience for your customers, it’s understandable that handing over this responsibility might be unsettling.

   The key is to weigh the pros and cons carefully, evaluate the expertise and experience of the third-party company, and remember that building a robust and transparent partnership can help alleviate some of the challenges associated with outsourcing returns management.

2. Integrating Technology

   One significant challenge that arises with outsourcing is integrating technology smoothly between partners. This issue becomes critical as data must flow seamlessly between systems, and all parties involved need to have profound visibility to manage and optimize their shared networks effectively.

   To achieve this, customers must be prepared to adapt to new systems and technological platforms, which can sometimes be daunting. Moreover, a lack of support and commitment from a company’s internal IT department can jeopardize the partnership’s success.

3. Up-Front Costs

   It’s important to appreciate that upfront costs, while seemingly daunting, are only part of the journey of unlocking value and potential growth for your business. When forming a partnership with a logistics provider, clients must be aware of the monetary implications and work towards establishing a shared strategic vision complemented by jointly determined KPIs. An outsourcing relationship should not be viewed as merely an expense but rather an investment in a strategic alliance that fosters innovation and contributes to a competitive advantage.

Does Outsourcing Really Save Money?

The concept of reverse outsourcing logistics might strike some as questionable when aiming to save money. It’s easy to wonder just how much reverse logistics costs can impact a company’s bottom line. 

However, when we consider that approximately 15% of all goods are returned, and around 30% of those end up in landfills, it becomes evident that a staggering 4.5% of goods sold are essentially a lost cause from the get-go. 

Imagine transforming this seemingly grim picture by enabling retailers to swiftly handle returns, repackage, relabel, and liquidate products. This potential twist in the narrative is precisely why many retailers are turning to third-party logistics (3PL) providers. 

Through their collaborations with these providers, retailers are discovering innovative ways of making the returns process more sustainable, ultimately leading to substantial cost savings in the long run.

Make Returns Hassle-Free With ShipHero

In conclusion, the eCommerce returns process can be a complex undertaking. It may seem like a difficult decision to make when deciding between keeping returns in-house or outsourced. By understanding the advantages and disadvantages of both solutions, you are better prepared to decide for your business and customers’ needs. When staying in-house can help create more efficient processes and an enhanced customer experience. 

On the other hand, outsourcing offers total peace of mind that all returns will be handled expertly and efficiently. Regardless of your business’s route, if you’re looking for easy access to a network of service specialists and solutions tailored to your fulfillment needs, consider taking advantage of what outsourced returns management offers. Are you ready to outsource? Call us today, and we’ll walk you through the process!

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Aaron Rubin, Founder & CEO – ShipHero 

About the author:  Aaron Rubin is the Founder & CEO of ShipHero. He is responsible for planning and executing the overall vision and strategy of the organization. Rubin’s greatest strengths are leadership, change management, strategic planning, and a passion for progression. He is known for having his finger on the pulse of ShipHero’s significant initiatives, entrepreneurial spirit, and keen business acumen. His leadership of ShipHero is grounded in providing excellent customer service that drives improved business operations. His passion for ShipHero comes from the culture and his ability to impact the lives of employees, customers, partners, and investors.

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