Our customers face new market conditions, competition and challenges every day, so they rely on us to deliver the technology and solutions to help them survive and thrive in this dynamic and increasingly digital environment. SAP's deep industry domain knowledge has enabled us to deliver the best and most innovative business process support for our customers for almost 50 years.
By continuously evolving our enterprise resource planning (ERP) solutions, we are helping our customers modernize business processes and helping them adjust to a new IT reality at the same time. As I've said before, this reality combines flexibility, agility, and choice for our customers: Flexibility through a modular yet integrated approach to enterprise software, agility through business processes that can be adapted as needed, and choice for customers to operate their systems on the infrastructure of their choice. And we can certainly add the need for collaborative, networked, and sustainable solutions here.
One of my favorite examples of how SAP is helping customers adapt and modernize their business processes comes from the retail sector and relates to the impact of the COVID-19 pandemic. E-commerce has surged during the pandemic as consumers faced lockdowns and sought the relative safety of online shopping. This surge in e-commerce has had dramatic implications for traditional retailers that have had to pivot quickly from primarily in-store sales to online platforms but have also had to deal with much higher levels of returns.
Consumers are more likely to return something when bought online compared to offline purchases. This is particularly true in fashion retail because there is a much higher probability that a particular size doesn't fit or the color is not quite what the consumer was expecting. Online customers also often bracket-purchase - ordering several similar items or sizes to ensure that one is the right fit and return the others.
This represents a significant problem for traditional retailers that were not used to dealing with such high levels of returns and that, in the past, often outsourced the handling of returns. Returns - or reverse logistics, as the process is sometimes called - is a costly and time-consuming part of the daily life of the supply chain.
Companies need to make decisions on where to return the stock, how to handle the stock when returned, and whether the customer will receive a refund or a replacement. Typically, these operations were optimized for time in order to keep customers happy, even if this meant destroying returned goods.
Retailers know that the return experience can break or build customer loyalty and trust, and that's why they aim to process returns and provide refunds to customers as quickly as possible. But destroying - and even storing - returned items is potentially bad for the environment and represents a monetary loss. According to UK's online retail association, 69% of shoppers confirm that the quality of the returns service strongly influences the retailers where they will shop.
Recognizing these problems, SAP has developed an innovative solution that we call SAP Intelligent Returns Management, a returns optimization solution that guides products from customers' hands to the final dispositioning steps, maximizing both the customer experience and company margins. It uses routing and dispositioning decisions driven by artificial intelligence (AI) to maximize our customers' sales and profits.
SAP Intelligent Returns Management benefits consumers, retailers, and other stakeholders - and it helps customers operate more sustainably. Consumers benefit because we help our customers make the returns process easy, and that delivers the intended consumer experience. Our retail customers know that brand loyalty is fragile and can be lost quickly if a returns process is anything but straightforward and smooth. They need to optimize their return process to be efficient and ensure a great customer experience. When goods arrive at their return centers, retailers want to be able to make fast decisions about what to do with them: Should they dispose of the goods? Should they do a quality check and re-certify them for sale, or send them to an agent such as outlet or reseller?
Our solution intelligently recommends return options for consumers optimizing for both the customer experience and the retailer and recommends disposition decisions for warehouse teams to limit value leakage. But it also provides business leaders with newfound visibility into the end-to-end returns process, enabling them to make data-based decisions.
Particularly, retailers can use the embedded analytics to understand what is selling and what is not. Does a particular item always come back because it does not meet expectations in terms of size or look? Is a particular color not selling or is a style out of fashion? Whatever the reason, they can inform the design team and stem a problem at the source by not offering products that do not meet expectations, and thereby be more sustainable.
SAP has offered a returns solution in the past, but it was a back-end, logistics solution. Now, with SAP Intelligent Returns Management sitting at the intersection of cloud ERP and SAP's industry cloud, we have closed the gap between front office and back office. That's the biggest advantage our solutions bring to fashion retailers and the like.
Thomas Saueressig is a member of the Executive Board of SAP SE for SAP Product Engineering.
This story was originally published on LinkedIn.