Beefing up your (supply chain) back end

The SCOR model provides a framework for all the steps that comprise a supply chain – plan, buy, make, move, store, sell and return. I praise all of the work poured into the elements it takes to get product from design to the consumer hands. But there is something missing: the stages for capturing incremental revenue through the back end of the supply chain.

Some industries such as high-tech are already well versed in dealing with 2 hour SLAs and how to service their client base. Manufacturers such as automotive and aerospace understand the importance of managing spare parts and service. One industry that is just waking up to this phenomenon and getting into the game is retail.

The Economist recently pointed out that North American retailers lost over $14 billion in 2011 because of return fraud. This number will only continue to grow. Why?

1.  Growth of cross channel retail (online and brick & mortar) -  As retailers start offering more paths to purchase, they will need to be savvier in the way they track and trace the movement of inventory.  Did the consumer that claims they purchased an item online and returned it to the store really do that?

2. Increased speed of inventory flow - Companies like Zappos offer to ship a customer multiple sizes and colors., Without stringent return policies, this can is a return fraud deathtrap (not to mention the complexity Zappos likely faces in monitoring all its inventory!).

3.The elongating long tail - These consumer friendly return policies force the retailer to monitor more closely the long tail of products and potential costs associated with future returns. A classic case of this is LL Bean, whose life-time guarantee has been engrained in its culture for decades. With online purchases and the company's growth into new markets, this marketing tool could turn into a return fraud weapon.

Add to this complexity – retailers leveraging legacy, home grown and siloed systems and you find yourself trying to track and trace, partially blind. As retailers focus more attention on return fraud they need to ensure their systems can keep pace – have clarity in what is happening, recognize patterns that indicate irregular activity and finally have the rules to rectify the situation.

As consumers, we expect world class customer service and will accept nothing less. I applaud retailers for continuing to offer innovative and customized solutions to meet this anytime, anywhere mentality. However, the current model is not a sustainable one, unless they mature the systems and processes behind it. In short, retailers need to in order to be effective in providing premier customer service.