With the rise in e-commerce, it has become no longer possible to park concerns about reverse logistics.
The efficient handling of returns used to be far down the list of supply chain managers’ priorities, for a couple of reasons: It didn’t constitute a huge proportion of most businesses’ supply chain activities. And it was far more complex. If well-managed “conventional” distribution was Fred Astaire, reverse logistics was Ginger Rogers — doing the same thing backwards, and in high heels.
Nowadays, ignoring the problem doesn’t cut it. The typical online shopper buys three or four sizes or styles of high heels, keeps one pair and returns the rest. According to the National Retail Federation and Appriss Retail, retailers expect more than $761 billion in merchandise sold in 2021 to be returned by consumers, or an astonishing average of 16.6% of total U.S. retail sales. That’s up from an estimated $221.7 billion in 2015, according to a report from MarketWatch that year. With online sales receiving a boost from COVID-19 lockdowns, that figure is only going to rise.
That’s why reverse logistics are becoming just as closely monitored by C-level executives. But it’s also why the practice is under intense scrutiny from green-conscious consumers who demand increased sustainability.
And most companies are failing; not only in implementing sustainable reverse logistics practices, but in keeping track of them in order to gain credibility with consumers, according to Abe Eshkenazi, chief executive officer of the Association for Supply Chain Management (ASCM).
“Not enough organizations have taken the necessary steps, not only to establish the sustainability of reverse logistics, but to measure it,” Eshkenazi says. “We’re making some progress, and that’s partly because of the attention our industry is getting, including the fact that the general public knows the term ‘supply chain’ now. So awareness of the impact is not just with professionals but also in our personal lives. The focus has intensified significantly, especially with e-commerce.”
Eshkenazi says the organizations that are getting it right tend to begin by investing in visibility technology. “Visibility allows them to combine the front-end activities that should be implemented to reduce the carbon footprint, maximize recycling and so on,” he says. “Then, on the back end, it enables organizations to apply Lean principles to reverse logistics. But there, we find there’s not as significant an emphasis on sustainability as we’d like to see. The rhetoric is there, but the action isn’t consistent.”
The factor most often overlooked in making reverse logistics, or any logistics, more sustainable is people, Eshkenazi says.
“I think we’ve made significant steps forward, but that investment in technology needs to be matched with investment in human talent. We’re not seeing knowledge workers being developed at the same rate as we’re developing these great technologies.” He argues that technology platforms are fantastic, but unless you have individuals who can translate the data they spit out into smart decisions, they’re of limited use. He feels there’s a shortage of people trained in the high-level thinking that’s required. “It’s not about lack of investment in technology. There’s almost no one who can’t get access to financing for that. But it’s not being matched by investment in people.”
Eshkenazi laments the short-sighted mentality that keeps investment in skilled workers on the back burner. “We’re looking for quick wins in this digital transformation that’s been a long time coming,” he says. “But supply chain management tends to think on a linear path: plan, make, deliver.” What we’re seeing now is more of a supply matrix or supply network than a supply chain, he notes, as multiple stakeholders share critical information across systems.
Such efforts can only be enabled through technology, he says. “But we see a huge disconnect in the necessary corresponding investment in people.” Eshkenazi points to what’s being called The Great Resignation, where millions are ditching dull and repetitive jobs. Supply chains had a talent shortage prior to the pandemic, with one candidate for every six jobs. “Now you’ve got it at every level: warehouse workers, drivers, everybody. We need to enable individuals to see it’s not just an opportunity for a job, but an opportunity for a career.”
The organizations getting reverse logistics sustainability right — or close to it — at first tended to be web-native ones, such as Amazon. “Amazon clearly understands the impact of reverse logistics, because it’s always been a critical part of their business,” Eshkenazi says. Now he sees other companies making strides in innovations that help in eliminating or reducing returns. These include designing packaging that a customer can use it to return an item, rather than throwing it away and using something else. Another way of reducing returns is making sure that customers know where an order is and when it’s going to get to them. Under the typical model of online sales, an umbrella merchandiser administrates the sale, but then leaves the actual seller of the product to manage the tracking process. Often, it falls down on the job, and the customer either buys the same product elsewhere, making the original order redundant, or changes their mind and returns it anyway.
“Treating returns as part of the sales experience is a good idea,” Eshkenazi says. Returns can be reduced by having the selling platform let the customer know where the product is, rather than the company that sold it to them. This dovetails with the general trend in e-commerce that allows the end-customer to gain access to accurate visibility data that used to be reserved for carriers.
Other innovations abound. Eshkenazi points to clothing retailers that have developed driverless robots that come to the buyer’s home with an array of pre-selected clothing to try on, allowing them to keep what they want and send the rest away. He sees untapped potential in the current trend of mass customization, whereby products can be cheaply and quickly tailored to individual customers’ requirements. When the shoe fits, the consumer is far less likely to return it.
In the end, Eshkenazi says, the true cutting edge in making reverse logistics more sustainable is in eliminating the need for it in the first place. And that’s where people play an important role. It takes human intelligence, aided by technology, to come up with fresh ideas for reducing waste in the supply chain, including that generated by reverse logistics.
Timely, incisive articles delivered directly to your inbox.