Returns in the Omni-Channel Dr. Dale S. Rogers Professor, Logistics & Supply Chain Management Co-Director, Center for Supply Chain Management Rutgers University Leader in Sustainability and Reverse Logistics Practices ILOS - Instituto de Logística

Returns in the Omni-Channel Unit Name Returns in the Omni-Channel Retailers and manufacturers are increasingly finding that their sales are distributed across many different channels and supply chains. This creates greater complexity and becomes a difficult problem to solve efficiently. Additionally, issues such as assert recovery and the secondary market further complicate the returns mission. End-of-life concerns and new regulation impact reverse logistics processes. In this session Dr. Dale S. Rogers of Rutgers University will describe the new realities surrounding returns. He will explain relevant regulation, end-of-life issues and changes in the secondary market. Integrative strategies for managing returns across multiple channels will be discussed.

Returns in the Omni-Channel Omni Channel Web Store MobileMobile Call Center Physical Store Kiosk Direct Mail Display Ads Unit Name

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Returns in the Omni-Channel Reducing Consumer Risk Unit Name

Returns in the Omni-Channel OmniChannel? Unit Name

Returns in the Omni-Channel OmniChannel Unit Name

Returns in the Omni-Channel Victoria’s Secret Unit Name

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ameame Returns in the Omni-Channel System “Drains” Unit N

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Returns in the Omni-Channel Unit Name Secondary Markets Secondary markets are effective in diverting a large number of products from landfills, creating numerous jobs, resulting in substantial economic value in the process. Although not reflected in current government metrics, a conservative estimate is that the secondary market represents 2.88 percent of the 2012 U.S. Gross Domestic Product.

Returns in the Omni-Channel Secondary Market Unit Name 13

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Returns in the Omni-Channel Product Responsibility Curve Product Life Cycle End of Responsibility Unit Name Product Responsibility Curve Birth End of Life

Un 16 Returns in the Omni-Channel Reverse is Different ForwardReverseReverse Product quality uniformProduct quality not uniform Disposition options clearDisposition not clear Routing of product unambiguousRouting of product ambiguous Forward distribution costs more easily understandable Reverse costs less understandable Pricing of product uniformPricing of product not uniform Inventory management consistentInventory management not consistent Product life cycle manageableProduct lifecycle less manageable Financial Management issues clearerFinancial Management issues unclear Negotiation between parties more straightforward Negotiation less straightforward Type of customer easy to identify and market to Type of customer difficult to identify and market to Visibility of process more transparent it Name Visibility of process less transparent

Unit Name Returns in the Omni-Channel 17 Inventory Driven Carrying Costs Time 100% 50% 0% Product Introduction Obsolescence And Volume Sales Product Bargain Basement Discounts Product Salvaged

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Returns in the Omni-Channel Scoping The Issues Unit Name Sample Logistics Costs Meant To Be Purely Illustrative Source: Kevin Winneroski Top Line Retail Sales$50,000,000,000 Sample Return Rate9.0% Total Returns$4,500,000,000 Sample Avg. Ticket Units Returned45,000,000 ~25% Resold In Stores9,000,000 Net Distribution Flow36,000,000 Sample Cost Per Unit$1.85 Sample Processing Cost From Returns >$60,000,000

Returns in the Omni-Channel Scoping The Issues Retailers incur a baseline cost / margin loss from end-to-end Reverse Product Flow; primarily from net DWO/EOL liquidation. Non-PRC reverse f low (e.g., repairs, warranty, Geek Squad) 3 TBDTBD 196 TBDTBDTBDTBD 17 5 TBDTBD $ in millions Transportation to DDC / PRC In-store return processing PRC physical processing Not-addressable (out of baseline) Vendor / outbound inf ormation f lows Optimize SKU codes and setup Redesign vendor terms and network f lows Next steps: + Identif y what portion of the $196M is addressable by the Reverse Flow work + Verif y the estimated impact of the in- f light work (Kim Anders, Paul Mann, etc.) $1.84 per unit Source: Kevin Winneroski Unit Name Illustrative Example StoreTransportDDC PRCPRCPRCPRCTotalTotalShrinkShrinkNet DWO/Net DWO/TotalTotal dispositionto DDChandlingto PRCto PRCprocessingOutboundOpexOpex (net loss) EOLEOL labortransport& overheadTransport liquidation (net loss) 1

Returns in the Omni-Channel Date Codes Unit Name

Returns in the Omni-Channel Central Return Centers Unit Name

Returns in the Omni-Channel End of Life Innovate use of end- of-life Recycle Good corporate citizenship “Cradle-to-Cradle” Unit Name