Automating returns processing in fulfilment: from parcel to credit note

Automating returns processing rarely starts at the returns desk. Opening a return and putting it away takes a few minutes on the floor. The returns administration around it is harder. Someone has to find the right order for the parcel, record the grade, tell the webshop what came in and make sure the handling ends up on the invoice. In e-commerce fulfilment that work comes back every day, and after a sale week or the holidays it arrives in a wave.

What is the difference between returns processing and returns administration?

Returns processing is the whole returns process. Returns administration is what you record and pass on about a returned parcel, from the moment it comes in until the webshop has refunded its customer and you have invoiced the handling. The physical part is reverse logistics: receiving the parcel, opening it, grading it and putting it back or disposing of it. The administration is what has to end up in your systems about it, and what you have to tell other people.

In a fulfilment provider’s quote, returns are often a line of their own, next to fulfilment and storage, with a price of their own. Even so, returns management often runs partly outside the WMS, in a spreadsheet or a shared mailbox. Every webshop wants to know something different about it.

Where do the hours go with 3PL returns?

Most of the hours go into searching and passing things on. With 3PL returns there is a party between the consumer and the webshop, and that party is you. Whatever you see on the returns desk, you also have to tell someone else, in the form they want it.

Finding the order for the parcel

A return rarely arrives neatly. The carrier’s return label belongs to a shipment, and a shipment is not always an order. Inside the box there is a note with the webshop’s order number, a printed returns form or nothing at all. Sometimes two orders share one box. Or someone sends back an item that belongs to another webshop you also serve. Then someone searches the WMS by name, postcode or item.

Recording the grade and the decision

After opening comes a judgement. Is the item new and complete, is the packaging open, is it damaged, or is there something in the box other than what was ordered? A decision hangs on that judgement: back into stock, repack or repair, write off, or send back to the client. Every webshop has its own rules for this. They sit in the SLA, in an email from two years ago or only in the team lead’s head. The person on the returns desk has to know all of them.

Reporting to the webshop

The webshop wants to know what came in and in what condition, because that is what it refunds its customer on. One client wants an export every day. Another wants a message in its own platform, and a third emails a question per return. If the report is late or ungraded, the webshop’s customer service calls yours.

How fast do returns have to be credited?

Within fourteen days of receiving the consumer’s withdrawal, the webshop has to refund all payments, delivery costs included (Dutch Civil Code, article 6:230r). The consumer may withdraw from a distance purchase without giving a reason until fourteen days after receiving the item (article 6:230o).

Unless the webshop offered to collect the item itself, it may hold the refund until it has the item back, or until the consumer shows they have sent it back, whichever comes first. For you that means the webshop’s clock is already running while the parcel is still on its way to your dock. Your report is the webshop’s proof that the item really is back.

The grade counts too. The consumer is only liable for a drop in value if they handled the item more than needed to establish its nature, characteristics and functioning (article 6:230s). If the webshop wants to withhold part of the refund for that reason, it relies on your grade, ideally with a photo. A grade that is only a letter or a code does not help much then.

How do you bill return handling under your 3PL contract?

You bill what the contract says. That only works if every handling has been recorded. Next to a price per return, a fulfilment contract often has rates for repacking, relabelling, a photo, an extra inspection or disposal.

The returns desk often does more than the rate per return covers. Someone repacks a coat, sticks on a new label, takes photos for the webshop or disposes of a broken lamp. If that is not a handling in the WMS, it does not reach the invoice. How to find that kind of work is in unbilled work. How those lines fit into the rest of the monthly invoice is in 3PL billing.

The webshop in turn wants to be able to check what you charge. An invoice line that points to the return and the grade saves an argument at the end of the month.

How can you automate returns processing with AI?

An AI system takes over the paperwork around the return, and your people keep processing returns at the desk as they do now: the person at the desk opens the parcel and chooses what happens to it. Robots and sorting machines are a different kind of project, and we do not build them.

• The system reads what is in and on the parcel: the return label, a note with an order number, a returns form or the consumer’s email that the webshop forwards. A language model often reads messy forms and handwriting well, but not always. Anything uncertain goes to a person.
• Then it sets the return against the orders in the WMS and proposes a match. If two orders fit or the item is unknown, it shows the candidates and a person chooses.
• At grading it puts that client’s rules on screen. If the person picks open packaging, they see straight away what this webshop wants done with it.
• The report to the webshop comes out in the format that client uses, with the grade and a photo.
• Every handling is prepared as an invoice line under the rate in the contract.

The system grades nothing by itself and credits nothing. Refunding is the webshop’s job, and your own people decide on the condition of the item. It runs in your WMS and the systems around it, with a layer that translates each client’s formats. How such a layer works is in connecting WMS, TMS and ERP. Reading messy documents is close to what we do with incoming orders, see orders from email into your WMS.

What do you measure before you automate the returns process?

First you measure how it goes now, so that later you can see whether the system does what it should. That baseline covers things you can already count yourself:

• how many returns come in per week, per client
• how many of them you cannot match to an order straight away
• how much time the administration takes per return, apart from the grading itself
• how long it takes before the webshop has the report
• which handlings on the returns desk never reach the invoice

Then you pick one step to start with. For one fulfilment provider that is matching parcel to order, for another it is the report to the webshop. The next step comes only once this one works and has been measured, as our way of working says.

Which returns do you put on the table first?

Take one client’s returns from the week after a busy sales period and count how many still have no report or no invoice line. We can go through that list together in an introductory call.