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As e-commerce sales continue to grow, reverse logistics — the processing of items for return, recycling or disposal — presents particular challenges for retailers. But this growing market also provides ample opportunities for third-party logistics providers to streamline the process and ensure sustainable practices.
Reverse logistics can be complicated. Goods leave distribution hubs packaged to fit neatly on a shipping pallet, but they often return in a jumbled mess of boxes containing returned items, paperwork and excess packaging from the original shipment. While an inbound truckload of products from a supplier could take as little as two to eight hours of sorting, it can take up to 48 hours to process a truck full of returns because each item has to be individually checked. All in all, we’ve found it takes about 20% more space and twice the labor to process a return as it does to send out a package.
With the holiday online shopping season just barely in the rearview mirror, now is a particularly good time to consider how reverse logistics can become more efficient — returns have become an increasingly key part of the holiday season aftermath. In fact, anywhere from 20% to 30% of items bought online will be returned after the holidays, compared to 8% of goods bought in brick-and-mortar stores, according to technology provider Invesp. Little wonder that 83% of consumers consider a retailer’s online return policy before they shop, according to a recent XPO survey. How quickly a retailer handles a customer’s return and processes a refund can be just as critical to creating loyalty as the initial purchase. Plus, if returns are processed too slowly, goods don’t get back on shelves soon enough, causing price markdowns.
Retailers need to be ready.
This has sparked opportunities for third-party logistics providers to help retailers with reverse logistics services for returns. This can range from a bit of support up to a company that can customize a dedicated distribution hub and technology to a retailer’s specific operations.
Reverse logistics operations may include technologies to help manage inventory and the workflow, such as automation — specifically robots working alongside employees — and predictive analytics that use historical data and algorithms to predict future demand. Having the right expertise to handle quick returns, as well as technologies to get items back out the door can serve as the backbone of these operations.
Another constant challenge of scaling e-commerce operations is sustainability. A 3PL can work with its retail partners to reduce their environmental footprint by forming action plans to improve the sustainability of their supply chains. The growing reverse logistics business is an opportunity to help reduce the resources used to produce items and the overall environmental impact of the supply chain.
For example, the right technology can determine when one customer has returned a product and another has ordered the same item. Rerouting the product to a return center closer to the end customer, rather than sending it to a far-away warehouse, can limit the item’s travel distance, and thus, fuel emissions.
Reverse logistics isn’t always about returns, either. It can incorporate anything that happens to an item after it leaves a customer, including recycling or disposal. For example, most people who buy a new kitchen appliance don’t give a second thought to what happens to their old appliance. A 3PL can disassemble the machine safely, recycle the materials that can be reused and dispose of the rest in an environmentally friendly way as part of its reverse logistics offerings.
While reverse logistics may just be one piece of the supply chain puzzle, it’s an important one. As e-commerce continues to grow, particularly during the holiday season, so does the need for robust capabilities at a massive scale.
Erik Caldwell is chief operating officer of supply chain for XPO Logistics. He has more than 15 years of leadership experience with supply chain operations in the consumer and industrial sectors.
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