(Cycle) Time is Money: Here’s How to Reduce It

When we engage with a customer to discuss how they deal with risk inventory (customer returns, excess, discontinued, etc.) we invariably end up in a conversation about our ability to deal with recovery, volume, and cycle time. Once clearance processes have lost their effectiveness, or the sheer volume of risk inventory is overwhelming sales and supply chain capacity, then a liquidation strategy is required in order to turn this product into cash. At that point every day this inventory remains unsold is a financial drain on the company, in terms of physical handling, carrying costs, warehouse space, and lost opportunity since those inventory dollars could be reinvested in better quality stock.

A technology partner can be critical to this success, one that is focused on recommerce and with strong connections to the secondary market. They can efficiently turn risk inventory into cash in days, not weeks, and help you stay focused on forward logistics and selling A-goods.

Cut cycle time processing customer returns

Too often companies with significant return volumes focus on building an excellent reverse logistics operation that quickly credits the customer and accurately documents the returned inventory. Then they put the returned product in a big pile in the warehouse and work with a broker to negotiate a recovery price and take it away. The sale is typically a loosely managed event; not a scalable or efficient process.

By partnering with the right technology partner, returned product can be triaged into the correct disposition process and, where appropriate, immediately placed into a recommerce marketplace where it can be sold in a matter of days, significantly cutting down cycle time.

Things to consider in your reverse logistics cycle:

Focus on net recovery

Don’t invest any additional dollars into your reverse logistics process (e.g. repackaging, refurbishing, etc.) unless you can demonstrate that it drives additional recovery above the costs involved. Recovery data from your transactions can help you decide if you are better off selling it immediately.

Don’t move it unless you have to

Selling customer returns as quickly as possible, immediately after the return if feasible, will reduce shipping charges and material handling costs.

Have strategically placed return centers

By having return centers that support a region of stores and eCommerce sales, it can reduce movement and help you build a highly scalable operation.

Ask the experts

Your technology partner should advise you on how to remarket your customer returns for maximum demand and velocity, including display images, condition descriptions, category sorting and additional information that drives recovery and interest.

What about excess & obsolete inventory (E&O)?

The right technology partner can be a strategic asset for an organization when dealing with E&O inventory. Despite the best efforts of product management or demand planners, it’s expected that there will be some missed forecasts or climate impact on seasonal sales, and less expected regional impact from a pandemic.

But there’s help! By using a recommerce platform, you can expect the following benefits to your team, your cycle time, and your bottom line:

• Product management has a tool for effective product line management, a safety value to turn dead inventory into new purchasing power quickly.
• Supply Chain facilities can free up thousands of pallet positions that can be better utilized for inventory that will turn quickly at full margin.
• Finance can reduce E&O accruals and report better metrics for DSI or inventory turns.
• Sales teams, who may have been tasked with liquidating E&O product, can instead focus on meeting sales targets for A-Goods.

The 5 Key Success Factors

Remember every dollar increase in value recovery or in reducing the cost of your recommerce activities means a dollar to your bottom line. If you’re dealing with a modest return volume of $1M then a 5 percent improvement can result in $50K of additional net profit for your company. Therefore, when choosing a technology partner, look for these 5 key success factors:

1. Have a well-designed strategy in place for liquidation and integrate the chosen technology it into your reverse logistics operation or E&O inventory management process. This will move risk inventory quickly with the minimum number of touches (hopefully once).
2. For volume liquidation, verify that the partner’s technology platform can manage all of the B2B buyer transactions with a minimum of impact on your organization. You want to make it as easy to sell to thousands as it would be to a single buyer.
3. Work with an industry leading partner who can demonstrate that they can drive demand for your risk inventory. Ask about total buyers they can drive to your product, current volumes that move through their platform and average cycle time for a transaction.
4. The technology platform you choose should include controls that minimize channel conflict for your A-Goods and protect your brand in the secondary market.
5. Make sure that you have access to your transaction data and that the partner can provide strategic analysis and advice on how to improve recovery, decrease cycle time and how to potentially improve your internal processes.

Nine out of the top 10 U.S. retailers are leveraging the B-Stock platform to drive demand and achieve higher pricing, as well as a faster sales cycle—all while maintaining brand integrity. 

Let us know how we can help you offload your excess inventory by scheduling a demo today.