Putting forward reverse logistics

Reverse Logistics Trails Forward Logistics

Despite these alarming statistics, technology around reverse logistics has trailed behind forward logistics.

Reasons for the historic lag are many: Retailers have, until recently, looked at returns as almost solely a cost of business, not a potential revenue source. Getting goods back from the customer is more convoluted, expensive and time consuming than shipping to the customer. It usually requires some kind of interaction with customer service, then a trip to the post office or drop shipping center with a box that may or may not be properly wrapped and secured.

The whole process at the warehouse also is much more complicated than forward logistics. Where the particular item heads is a function of its condition, resale value, what its return means to inventory as a whole. Determining the condition of an item is a labor-intensive activity, which, by its very nature, is hard to automate.

With so many challenges, many retailers have defaulted to the quickest and easiest approach: Simply toss return goods, or outsource returns to a third-party provider and wash their hands of the entire process.

“It’s natural for the retailer to focus on selling their product first and not putting the same emphasis on the returns process because it represents a smaller percentage of the revenue in their business,” said Michael Manzione, president and CEO of Rakuten Super Logistics, the US fulfillment arm of a Tokyo-based ecommerce company. “What they typically miss is that this can be the difference in their profit and loss for the year, those smaller details like returns.”

A growing number of technology providers has begun to concentrate on the returns process, with much of the impetus coming from advanced software systems. Others are laying the groundwork for future technology breakthroughs. Robotics and machine learning will take longer to develop, but are definitely on the horizon.

Those in the industry believe this technology drive will only accelerate in the months and years ahead and impact all aspects of the returns supply chain, from transport to recycling, restocking to reselling.

“There definitely has been a technology lag,” said Emma Hawkins, London-based associate director of the logistics consultancy arm of real estate giant JLL. “But it’s quickly catching up [to forward logistics], and that’s purely driven by the need to meet that consumer expectation of being able to return. Our behavior is changing. We buy to return.”

Visibility is one watchword that’s often tossed around. Just having better knowledge of where an item is at any point in time is essential. That’s become standard in forward logistics, but hasn’t been nearly as developed in reverse logistics. Technology is necessary.

“Anybody who is handling distribution needs had better visibility into returns that are coming back,” said Kirk Waldrop, vice president, supply chain operations for the supply chain consultancy, Chainalytics. It starts with the customer’s decision to send something back. “More often than not there’s not a robust process or technology in place for customers to setup a return authorization,” said Waldrop.

Some of the breakthroughs are coming from existing technology that can be repurposed for reverse logistics, said Brian Thompson, chief commercial officer at SMC3, a data and technology provider for the trucking industry. “There is better connectivity between shippers, retailers and carriers,” said Thompson, citing transportation management systems, which assist in scheduling, dispatching, and track and tracing. “All of those things are starting to generate some additional interest on the reverse logistics businesses.”

Streamlining returns is necessary for recovering more value from those items, said Manzione, who added that for many retailers, there are months between the time a product is returned and it’s processed, by which time it holds little value. “Think of the disruption to the supply chains in terms of inventory levels and how the time is lost between selling the product having a return determining its value to return back into inventory reselling and the actual sale again for the second time,” he said. “The shorter you can make that time, the better your chances are of recovering some of those lost dollars.”