Beyond the headache: Smarter returns management with the 5Ps

Editor’s note: This article first appeared on the University of Tennessee, Knoxville’s Global Supply Chain Institute’s blog. It is being reprinted with permission. You can read the original post here.

Authors' note: In September, the University of Tennessee Global Supply Chain Institute published “The 5Ps of Returns Management: An Integrative Approach,” by Huseyn Abdulla and Tom Goldsby. The white paper summarizes research conducted by the Advanced Supply Chain Collaborative, a think tank that partners faculty experts with industry professionals to enhance business performance, enrich teaching, and cultivate supply chain excellence.

Returns are a fact of life in retail and e-commerce. Nearly 17% of online purchases are returned, costing companies billions while straining customer relationships. But what if returns could become a source of value rather than a headache?

A new white paper from the UT Global Supply Chain Institute shows that leaders can reduce costs and improve customer loyalty by managing returns holistically. Authors Huseyn Abdulla and Thomas J. Goldsby introduce the 5Ps of Returns Management framework—people, policies, processes, products, and partners—as a roadmap for turning reverse logistics into competitive advantage.

Here’s what supply chain professionals should consider when tackling returns:

• People. Train frontline associates and customer service teams to make fair, consistent return decisions. Human judgment is the starting point for every return
• Policies. Strike the right balance between leniency and protection. Overly strict policies may cut return rates but drive customers away
• Processes. Don’t just process returns—design them. From returnless refunds to in-store drop-offs, smart processes reduce friction and capture value
• Products. Customize policies by category. A one-size-fits-all return window doesn’t reflect differences between apparel, appliances, or seasonal goods
• Partners. Work with third-party providers to detect and prevent return abuse as well as for refurbishment, donation, and resale of the returned goods

Their research, produced for the Advanced Supply Chain Collaborative, highlights that managing any one of these elements in isolation is rarely enough. Instead, it’s the interaction of all five together that determines whether a company will succeed or struggle with returns.

Consider Amazon’s partnership with Kohl’s. Designed to provide hassle-free returns for Amazon customers, the arrangement initially boosted store traffic for Kohl’s. However, it also created long lines, strained employees, and didn’t deliver the profits Kohl’s expected: an example of how one dimension of returns management, if not carefully balanced with others, can backfire.

By contrast, Philips Consumer Electronics in the early 2000s faced massive returns problems but solved them by implementing a coordinated, cross-functional strategy. The company created a dedicated returns management team, standardized policies, partnered with retailers, and integrated consumer feedback into product design. The result: a $100 million annual reduction in returns.

“The best return is the one that never happens,” Abdulla and Goldsby note. But when returns do happen, using the 5Ps ensures they’re managed strategically rather than reactively.

Returns management doesn’t have to be a drain on your supply chain. With the right policies, processes, and partnerships in place—and a strong focus on people and products—companies can transform returns from a cost center into a source of value.

Download the white paper, “The 5Ps of Returns Management: An Integrative Approach,” to explore case studies and practical strategies you can apply today.

To learn more about how your company can partner with the Advanced Supply Chain Collaborative to explore advanced concepts in supply chain management, visit ASCC.

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