Executive Briefings

Too Many Happy Returns: The Struggle to Predict Reverse Logistics

The mostly unwanted gifts are piled in the corner, the relatives have slowly made their way to the airport and a mountain of dishes awaits attention in the kitchen. This is what late December looks like for most American consumers. But for logisticians, the holiday work is only half done - it's time for gift returns season.

Every year, UPS keeps track of what it calls "National Returns Day," which usually occurs shortly after New Year's Day. This year, 1.3 million packages were shipped back to retailers in a single day, Jan. 5, and 5.8 million return packages shipped back the first week of January, UPS said.

Traditionally, these returns are scrutinized after the holiday shopping spree, but in today’s e-commerce era, the date on the calendar means less and less every year as returns policies become more accommodating. According to the Reverse Logistics Association, the typical return rate on in-store purchases is about 8 percent, but for online shopping, the rate leaps to between 25 and 40 percent.

The process of e-commerce tends to work best as a one-way street, with automated systems built to speed products to consumers in a ruthlessly efficient manner. But e-commerce has also enabled these customers to have greater influence over the supply chain process, and today they demand the same speed to reverse the process.

As e-commerce eventually becomes the dominant form of shopping, retailers will need to rethink their current supply chain strategies for inventory, deliveries and returns, said Robert Iaria, general manager of reverse logistics at 3PL C.H. Robinson. “The increase in reverse logistics requirements, are powering a ‘new normal’ of disruptive reality that is leading companies to reconsider their existing practices,” he added. “And as logistics strategy continues to evolve, it is becoming more difficult than ever to be predictive.”

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Every year, UPS keeps track of what it calls "National Returns Day," which usually occurs shortly after New Year's Day. This year, 1.3 million packages were shipped back to retailers in a single day, Jan. 5, and 5.8 million return packages shipped back the first week of January, UPS said.

Traditionally, these returns are scrutinized after the holiday shopping spree, but in today’s e-commerce era, the date on the calendar means less and less every year as returns policies become more accommodating. According to the Reverse Logistics Association, the typical return rate on in-store purchases is about 8 percent, but for online shopping, the rate leaps to between 25 and 40 percent.

The process of e-commerce tends to work best as a one-way street, with automated systems built to speed products to consumers in a ruthlessly efficient manner. But e-commerce has also enabled these customers to have greater influence over the supply chain process, and today they demand the same speed to reverse the process.

As e-commerce eventually becomes the dominant form of shopping, retailers will need to rethink their current supply chain strategies for inventory, deliveries and returns, said Robert Iaria, general manager of reverse logistics at 3PL C.H. Robinson. “The increase in reverse logistics requirements, are powering a ‘new normal’ of disruptive reality that is leading companies to reconsider their existing practices,” he added. “And as logistics strategy continues to evolve, it is becoming more difficult than ever to be predictive.”

Read Full Article