Reducing costs through improved returns processing

Purpose – To provide fashion catalog distributors with an approach to reduce costs from returns processing by considering an array of characteristics related to demand, lead‐time, and inventory level. Design/methodology/approach – Apparel return rates from catalog sales are frequently 10‐30 percent of shipped orders. Despite the magnitude of returns processing, return operations are characterized by high backlogs, inefficiency, and excess material handling. Typical catalog clothing returns processing considers the condition of the returned item, fashion obsolescence, and back‐order status to make disposition decisions. In the proposed algorithm, added considerations to select a disposition option for a return include inventory level, demand pattern, cost and lead‐time factors. Findings – The current and proposed algorithms are tested using disguised data from a fashion catalog sales company. It is shown that the proposed algorithm fills back‐orders more quickly, while reducing the returns‐processing cost and time by over 20 percent. Research limitations/implications – By combining the tasks, open packaging, credit customer, and evaluate item characteristics including backorder status at the first workstation, the training for staff at the first workstation is increased. Practical implications – Fashion catalog distributors should examine their returns‐processing system for opportunities to reduce returns‐processing time and costs by consolidating and eliminating tasks and by considering inventory level, demand pattern, cost, and lead‐time when selecting a disposition option for a return. The proposed algorithm can be integrated into the information technology system at the fashion catalog distributor. Originality/value – This paper addresses how to reduce inefficiency and excess material handling in returns processing at a fashion catalog distributor.