What A True Omnichannel Returns Process Looks Like With TGW’s Stipe Galic | Ask An Expert

Foreign welcome to another exciting and elucidating episode of the Omnitalk Ask an Expert series.

I'm your host, Chris Walton.

And I'm Anne Mazinga.

And we are the founders of omnitalk, the fast growing retail media outlet that is all about the companies, the technologies and the people that are coming together to shape the future of retail.

And I'm excited for today's discussion and for those watching live, you can probably tell from the title, which is how to get your head around retail returns.

Because returns are what I would call Ann, the Omni Channel fulfillment thorn in what appears to be everyone's side at this point in time.

Would you agree, Ann?

Without a doubt.

Without a doubt, yes.

And so joining us to share his perspective and to help everyone get their arms or heads around returns, keep your arms heads inside the the moving vehicle at all times during this webinar is Stipe Galic, the VP of Business development and Marketing at tgw.

Stipe, welcome to omnitalk.

Thanks for being here.

Hey, thank you for sharing this time with me.

Yeah, we cannot wait to.

We've been so excited to have you on and I want to just give a quick reminder to all those of you who are joining us live.

You can ask your questions for Stipe, which we know there's going to be a lot of questions on returns, but you could ask those in the chat session to your right.

Just type it in and Stipe and the TGW team will do their best to get to all of your questions during the session.

But Stipe, let's start out how we always do.

Tell us a little bit about TGW for those who are joining us for the first time and then your specific role at the company.

Perfect.

So warehouse automation and robotics provider.

The company was founded more than 50 years in Austria and Europe and I would say that's also where we experienced our first growth.

But we are present in the US already also since around 15 years.

And now in the last three years, we are really trying to boost this market and make it as big as as Europe for us.

So as of today, we are around the one billion dollar company.

We do 80% of our revenues in Europe and 20 in the US so.

And about my role.

I'm, I'm a TGW kid somehow.

You know, I started directly after school.

Did you really?

I did, I did, I did.

Yeah.

Okay.

Okay.

My background is mechanical engineering.

So I was drawing layouts, designing solutions.

And I started exactly during the phase where GW was moving away from being A pure technology provider to being really an integrator and working with the biggest brands, retailers, food companies, and really looking holistically how they can provide the most value within.

Within the four walls in their distribution center.

I had the chance to work with great teams all around the globe with really big, big brands and.

And learn a lot.

And after that, I was also heading up parts of our R and D organization, the front end of it, really connecting the market to technical needs and translating it into the right language.

I would say so.

And then a bit more than two years ago, a team of us would say, came to the US and really we had already a team here and really forced joint forces to try to make America really big, really big for DGW and boost.

Boost the success here.

So now since two and a half years and I was seeing the front end of the organization.

So it's really about early customer engagement, about consultation, and then the other part of it, which is quite new.

I mean, I'm not.

I'm not a marketing person.

From a background perspective, I would say I'm quite good in dealing with customers.

That's probably why I'm doing it.

I'm telling the stories and I have a fantastic people who can do great stuff.

So it's really about boosting this brand awareness, getting the TGW name out there so people know who we are and.

And what can we can contribute to their success.

That's great.

That's great.

See, but I don't know.

I don't.

The way you said that too.

A TGW kid.

I don't know if you know the reference, but.

And you know, like when he grows up, he wants to be a TGW kid, I guess.

You know, I know.

I just.

Toys are jingle.

I know.

I actually pictured you like after school as a young child, Stipe, like not just after college or university, but, but.

Like going in head.

Yes, it is.

It totally is.

Yeah.

That's awesome.

I didn't go to university, so I was still quite a.

Quite a young child.

So.

Wow.

So I made my.

I made my way for the company really by working in a lot of different roles and getting a lot of different experiences.

And a fun fact there, you know, next to our DW headquarters, we have a kindergarten.

And when I bring my daughter there and she's just three or four, she already tells me, you know, dad, I'm gonna work at W.

All right.

The apple doesn't fall far from the tree.

That's awesome.

All right, so let's get to it.

So now this question CB it might be basic for some of our watchers, but I think, I think it's still a good place to start the interview.

You know, mainly for grounding purposes particularly why have returns become such a challenge for retailers to handle?

Beyond the obvious, of course, I mean.

If I would choose just one word is because of Omnichannel.

You know, I think this omnichannel, everybody was chasing it and you, you needed to develop in that direction.

And then obviously with Omnichannel E commerce came into the place.

And then I think omnichannel comes with a lot of different challenges.

And I mean on the one side in front of end consumers, a company always needs to be omnichannel.

But you know, in the back end there is a lot of stuff going on and very often a lot of different ways how to, how to deal with that.

In our field, if you look for example at the supply chain, you had companies who had distribution centers who are purely made for retail store replenishment.

Then the had some disease for purely E commerce.

Then you had companies who merged it under the roof but couldn't share inventory because they use different SKUs for each of them.

And then it's a bit the new normal approach.

The approach which we try to take is really put everything together, make it one true omnichannel thing which can deal with all these processes.

But coming from the back, you know, then you, you got the returns and you got the seeds which were maybe not having the capabilities to deal with this stuff.

So you were putting stuff aside, dealing with it maybe later than you should.

Because bringing fast back into inventory and be able to allocate against it was is quite an important thing I would say for returns.

And then I think obviously, I mean if you look at the fashion at the fashion industry, which is one of our core elements also, I mean the fashion is changing.

So far the cycles where you launch a fashion very often are very, very, very, very short.

I mean a lot of technology is going out there trying to reduce returns by introducing maybe mirrors, maybe better sizing, maybe better comments how to these things.

But in the end I feel it's quite difficult to follow the short cycles.

How how fashion brands want to launch stuff, you know, and be attractive to the consumers.

Talk us through step by step what that looks like as goods are coming back from the stores and E commerce.

How are the processes different?

How are you helping them to make the most profit from their returns?

We built this distribution center which can handle all this stuff.

Our customer in that Case was Urban Outfitters which, which they took quite a bold move to say, look, let's, let's try this and let's build a true omnichannel dist distribution centers.

And then if we talk about returns, you know, when they come back into the, into the distribution center, usually the way how we store SKUs is a single skus in within toads.

But when returns come back, we do all the inspections and all this stuff and we put them together as, as mixed SQ mixed SQ toads because we can't, we don't want to wait that long to fill up a full toll with, with the same SQ because we want to bring it as fast as possible back to the inventory.

So we create mixed sq toads which contain maybe 10 to 15 items and put them back to storage and allow immediate allocation allocation against it.

Then on the one side, I mean we can, we can choose, we can still always choose, hey, do we want to ship out of a single SQ toad or do we want to ship a return out of a mixed SQ toad?

Depending what performance we need to achieve.

Because picking out of mixed skew toads and picking returns is a bit slower than it is, you know, picking out of single single skus.

So we can always balance this out to make sure that the system performs in the best possible way and gets the items out of the door, which is in the end the most most important thing to me to meet the SLAs.

And how do you make that determination then?

So it sounds like, so it sounds like as the returns come in, you're putting them in mixed return totes.

Like how do you, how do you make the determination of how best to pick them should you want to sell them again?

I mean in general, from an automation perspective, we would always choose the strategy.

Empty, empty the inventory toads to get them out and get new inventory back.

So I think we would always choose to empty up multi sku toad with returns because for a cubic feet which they have, they store the least amount of items.

So we try to empty them up.

The only way where we would not choose them to do so is if we see, hey, we are really hitting a peak in terms of items which we need to process and we believe we are much faster by taking single SQ cases.

That's where we would run for, for single sku.

But it needs to be a clever balance because as I said before, data shows us that if we can ship, if we can make sure that we ship this stuff out, it sells, it really sells a lot in the first couple of days.

So we need to make sure that we can, that we can use them.

So then like always in these conversations and like, and cbam this back to you again, like, software is a key piece of this then because you have to understand the dynamics here of understanding those cycle times in terms of the picks and, and the demand and the volume movement going out of that building to be able to decide, okay, you know, where do we want to pick these, these returns from, whether current shelf stock or the actual return stock.

Is that right?

Exactly, exactly.

So it's really software plays a big role in there.

Even though I think, I mean GW as a company, we focused on fashion a lot and we started an initiative where we really looked at these things and with multiple retailers and brands.

And I would say software packages as of today include these standard elements about choosing, you know, what's the right thing based on the output and the SLAs SLA is needed.

So from my perspective, what I took from you is the omnichannel way with which retailers do business has really exacerbated the problem that it goes beyond just the proliferation of E commerce.

It's really the omnichannel nature of it.

And that being the products being returned via the stores back into the channels as well as, you know, via E commerce back into the channels.

And particularly that's, that's really profound because of the way that most retailers have set up their infrastructure.

Is that right?

So like most, most retailers are set up to process their shipments via E commerce channels or to the stores.

And so returns throw a big wrench in that.

That's essentially what you're saying.

Exactly.

And I think on top of that, on the one side it's obviously supply chain aspect, but on the other side it's really the fight for competitiveness.

You know, you need, you need to provide this omnichannel.

So it's not really a question do you want or do you don't want?

It's really how you're going to make it possible that you get the seamless experience, but other side, you can still keep it profitable.

I mean this, this is the clue behind it, I would say.

CB that makes sense if we're thinking about this taking an omnichannel approach, making sure that we're set up to accommodate, you know, both the online returns and the in store returns.

But it all sounds kind of daunting.

I mean, what advice do you have for how these retailers can process these returns more profitably and more efficiently?

I think it's really about creating, taking a holistic view on it.

You know, what do you.

What, what.

What do you need to process from all aspects and then trying a way to.

To.

To merge this together.

I mean if we take a step back, you know, previously the way how you were dealing with this stuff, you know, you might have a retail dc you might have an E commerce dc, you might have a, a returns handling, maybe even autos to a 3 PL or whatever this might might be.

But, but a very fragmented things.

And to be honest, it was the right choice.

Maybe at volumes were that high, maybe the fluctuations between the channels were not that level and so on.

But, but as of today we would, we would say this industry gets quite unpredictable.

So this means you need to get something in place which can deal with all of it at any time, you know, in any, in any share in this case.

So our recommendation would really be to build a process flow which requires as less touches as possible to use goods to personal solutions as order fulfillment systems which can deal with E commerce, retail returns wholesale, any distribution channel at any time and try to put in as much possible as it as the business allows.

Because in the end to make these business cases it's really about high utilization.

So you need to make sure to keep the utilization high at these systems and that's where they pay back.

And if you look at processing unit curves for E Commerce, for retail, for wholesale, or even how returns come in, they all are a bit different.

So if you find a very clever logic, you can stack them up and actually without cannibalizing each other, they actually add on each other and just make you even more profitable.

So I think it's really about the holistic view.

Merging all these flows together into one and making sure that you are really, really responsive.

Responsiveness matters much more than speed.

Just.

And maybe to use an analogy to it, we compare.

We said what we do is a bridge principle.

So every car represents a retail order, an E commerce order, a return coming in, a wholesale order.

And everything needs to flow continuously.

There should not be any dependencies in between them.

And previously the way our systems were built were much more like ferry systems.

You know, everything comes together, they wait till the boat is there, they get on the boat and they get it does the job.

But not really flexible and not responsive as it, as it should be.

Got it.

I love that analogy.

So cars versus ferries.

So you're saying basically.

You're basically saying that in a nutshell.

The idea here is you got to merge your systems, you got to find A way to merge the operations at the distribution center level.

So I'm curious then do you let's.

I want to understand like okay, if somebody does that, what does that actually look like?

How are the processes different before versus post making that effort?

And do you have a good example you can share of someone you're working with that is doing that?

And I will give you an example of a high value fashion brand.

I can't say the name right now but the way how they were set up, they, they had a retail dc they had an E commerce DC and dealt with these things completely separately.

So they, they came to us or we came to them and started discussing how we can boost their store replenishment part.

And in the end I mean they had an 800000 square feet distribution centers and just a hundred thousand square feet were really available to do something to boost throughput and increase profitability at the, at the same time.

So when we started putting in the solution, looking at the data, what's going on in there at one moment we said but what if we take a look and try to include also this E commerce volumes out of the separate distribution center on this side.

And.

And that's how this journey started.

And then suddenly when we added up all these processing capabilities and what needs to be done and how it needs to be done actually we recognized it's just adding to the business case.

It's not really taking away because we can use the same SKUs so we don't need to hold that much inventory in both dcs.

We can do it just at one stuff and at the same time allow for extremely fast processing.

Previously you would walk into such a dc everything would be manual.

A lot of touches at the inbound people would be climbing racks to get stuff out.

They do manual picking then they would do sortation afterwards and then ship this stuff.

So a lot of people involved.

I would call it a bit of a tic tac process flow through the, through the warehouse.

And now what we are trying to do for them is really merge these channels and build a clear line how product needs to flow through this disease.

Got it.

So that's interesting.

So then, so is this an approach you'd advise everyone to take then?

So like should everyone just ship their their store returns and back to the same place that their E commerce returns are coming as well?

Like is that just a general good approach?

Because it sounds like channel agnostic like what you're espousing.

Like what am I missing?

Or is that what you would say.

I mean, I think obviously depends at which stage you are as a company and what, what kind of profit or revenues you're making.

But I do, I, I would recommend any, any big enough, a big enough retailer to take this into consideration.

There might be other reasons based on historical things or whatever that this will not work.

But, but I think there is really a good chance to make this work for anybody who really has the power and capabilities to take a look at.

Because supply chain used to be a cost, you know, in this environment, very often distribution centers.

But I think if you look at the biggest brands in the world, I mean, look at Inditex, look at even Amazon in this case.

Supply chain is an asset there.

And the reason why it's an asset, because they are dealing with it.

They want to have it in their hands and making sure, hey, I can utilize in the best possible way.

And we are trying to give them solutions which, which provide what we call really true flexibility where they can choose, hey, how do I need to process my orders?

What is the responsiveness I need?

What are urgent orders?

When do I process what to make assure the business really gets, gets out of this what they need.

I'm wondering as fashion and apparel retailers specifically are using tools to help produce and get garments from concept phase to roll out.

And now some, some are, some companies, Walmart just, they're doing this in like 6 to 12 weeks.

How, how is that changing how retailers need to be thinking about returns and processing the, the existing product that they have, you know, on their website, in their stores and that they're trying to get through.

Is, is it.

Are you seeing more retailers kind of move towards an investment in a faster and more responsive back or processing center for these returns?

Because they've got product that seems to be coming out at a much higher frequency these days.

I mean, look, one of our customers is Inditex already since more than 20 years.

And I think they are the champions in terms of fast fashion, if you look at it so.

Right.

But if you would ask Index, I mean, the supply chain is a massive asset for them.

They look at it as an asset.

They don't look at it as a cost.

And I think that's a transition which is already quite far, to be honest, in this, in this fashion retail environment.

But I think, for example, Index recognized that all the years ago, supply chain is a critical asset to make sure that this is, that this is possible.

Because if you can design, develop and build the clothes, you need to make sure to be able to be as fast in in getting them at the right place, you know, at the right time and then, and that's a crucial thing.

So I do believe that the investments there will need to happen and then there are different ways you can run in a more or less automated way.

So I'm not, I'm not saying that it's really just fully automation and hundreds of millions of, there are different steps you can take from lower investment and scale these things up as they, as they grow.

And I don't think it's, it's a one shot thing.

You know, I think we look at it like, hey, let's make a step which enables you to do that and really creates a backbone and then let this backbone grow as your business grows.

In the end, what are some of the outcomes that some of these retailers are seeing once they have automation in play?

Where are the areas that they're able to deploy that?

And then what, what are some of the results that they've seen?

I think the results, I mean starting with the cost thing of it, if you look at the cost per piece because that's, I would say that's the most important metric for most of them.

They cut it nearly by half by doing that.

And really it comes together to lifting the digitalization of a seamless process flow.

Second thing is the footprint which they need in terms of square feet is, is much less, but also very important.

It's when you see people working in these distribution centers, it's a completely different environment.

And I mean, I'm going to show you an example.

We talked about outfitters.

When Urban Outfitters opened up the dc, I talked to their senior director of fulfillment and, and, and she told me, you know, I used to work at a lot of companies and I want, when, when I tried to hire people, it took me quite a long time to get them in, you know.

And now with your solutions and automation you have built in.

I have a queue of people waiting outside of distribution center saying hey, I really want to work with there.

Because it's a nice touch between human and technology.

It's a good, it's a nice working environment.

It's, it's, it's.

And that, that, that makes a difference in my opinion also.

Well, and how has this changed?

Like the stores operations and like order flow and that kind of thing too.

Because I imagine as a result of the people, the automation coming into play to support some of those more mundane tasks that people were doing.

I imagine that the speed to get product back to market is also helping change, you know, how much Product needs to be made in the first place.

Perhaps.

Definitely.

I think exactly.

It helps that it helps you to keep as less inventory as possible because if you run multiple distribution centers, you will need a lot of inventory stored everywhere.

And it's quite tricky to keep it, to keep it accurate.

So I think that's a cost on it.

And I think it's really this responsiveness thing which allows you to make sure you have the right inventory in stores, you have the right inventory in your distribution centers, and that's how you can best serve your customers in the best possible way.

For in the end, the best possible costs.

Yeah, goes back to, it goes back to what kind of said before to discrete ordering versus batching or the ferry versus the car analogy as well, you.

Know, and maybe just to add on that, I mean this, this, this ferry versus bridge thing is the bridge thing.

The main driver for that is really the unpredictability of it.

And we, we saw that, you know, we had customers who built solutions like I was talking about, you know, and during Corona they were built to do 80 or 90% of their business in retail via stores, you 10% via e commerce.

But they had these solutions in place, you know, and during Corona it switched completely.

And these solutions were just processing E commerce for them, you know, and they actually, we had funny conversation because luckily we bought it and, and established it because they didn't care if it's retail or E Commerce because it was, they were possible to process any of it.

Right, right, right.

Yeah, yeah.

Bridge.

Bridge versus a fairy.

Yeah.

I mean the other point too that I'd make here, you know, from what I'm taking away from you, is this isn't a hard thing to try either.

Like you could just, like you said, you just take a section of the warehouse and automation is really the, the first way you hit automation is probably through software on this, right?

The goods are coming in the building, you have the software that helps you decide where to put them.

Then you can get fancier with the automation.

But then the day you're just taking a piece of the warehouse, you're putting whatever human labor you need to till you understand the actual puts and takes with even greater forms of automation.

And you just start doing it this way and you start to learn the value and the, the value that can be gained from the approach.

Is that right in closing stipe or is there anything you'd add here in terms of, you know, what you want people to finally take away from this discussion?

I think, I think you're absolutely Right.

Very often people think about it, hey, it's a massive, massive investment which you need to do to really get the journey started right.

I do believe, you know, you can start on a small scale and this system can grow as your business grows and as, as you learn.

But what we definitely see when you, when you start with it, it grows extremely fast because you see the profitability of it and also you see how great it is for people to work with it in the end.

And the last thing of advice, what I would recommend people, is really to take a holistic view on that.

I think the biggest issue which we very often see is that we are chasing islands of automation.

We want to create a great automation solution for returns and a great one for e commerce and a great one for, for retail.

But, but it's really about being, being agnostic and making sure it's placed seamlessly together.

That's, that's, that's much more important than to have the best possible automation in, in one segment.

And I'm gonna share one insight with you.

We, we are hosting some events and we had 25 VPC level senior directors of retailers in the room.

And I asked a question, you know, and I asked the same question a couple of years ago.

I asked if you could choose cutting ed technology versus seamless integration, what would you choose as of today?

And finally, 90% of them said, today it's seamless integration.

Looking five, six years back, this was completely different because everybody was chasing cutting edge technology.

But I think we, we all learned our lessons out of this.

And really this holistic view and the seamless integration, the process, that's what, what.

Makes a difference, that's a great nugget to end on because, yeah, back in the day, like the business model wasn't evolving to the degree it is.

And so now you have to approach to be successful, which is why we have Omni in our name and we'll have Omni until the day at least I die.

I don't know if Anne feels the same way, but at least the day until I die, despite how much grief we sometimes take for it.

So that, that's a great point to end on.

Thanks, Steve.

Yes, thank you so much, CB for taking the time today.

I imagine there'll be lots of folks who want to reach out after this to connect with you directly.

What's the best way for them to do that?

LinkedIn is the best place.

I think that's where you can reach me.

All right, yeah.

If you're watching now, just shoot him a DM.

Slide into his DMs.

That's how the kids say it today.

Right?

And slide into Steve's dm.

I wouldn't know.

I wouldn't know.

I have no idea that no one slides into my DMs and no one slides into my DMs.

Yep.

Just shoot Stephen a message on LinkedIn.

So, thanks to Steve Golich of TGW for sitting down with us.

And as always, on behalf of all of us at omnitalk retail to all of you listening live or.

Or watching live, I should say, or listening later.

As always, be careful out there.