What Do You Know About Your Reverse Logistics Operations?

Do you know how many total returns your company receives on a given day or month or even how much it costs to accept and handle your returns?

Most, if not all, companies have yet to unlock the mysteries around reverse logistics.

Reverse logistics is everything that happens after a sale, according to the Reverse Logistics Association (RLA), including the following:

  • Returns
  • Repair/refurbishment
  • Repackaging
  • Resell
  • Reuse
  • Recycling

Reverse logistics processes are often difficult to measure, labor-intensive, and costly. For many companies, reverse logistics is a cash drain rather than a bottom-line booster.

Even the largest and most prominent retailers, such as Home Depot, Walmart, and Amazon, struggle with costs related to reverse logistics. They will often reimburse consumers for a returned item but allow them to keep it because it costs too much for them in shipping and handling to take back the item. This is not a smart practice for retailers. There are many options to handle such returns, such as donating to a local charity or partnering up with startups like FloorFound to repurpose and resell returned items in local markets. Establishing the right processes and measurements via technology can be beneficial to companies.

But why the fuss? Why should companies care about their reverse logistics operations?

Returns Measured in the Billions

The number of returns is quickly increasing. In January, the National Retail Federation (NRF) reported that:

  • Retailers expect consumers to return more than $761 billion in merchandise purchased in 2021.
  • Of that total, nearly 30% ($218 billion) were online purchases.
  • Though the percentage of online returns held steady at 20.8%, the total rate of returns jumped to 16.6%, up from 10.6% the year prior.

That's a lot of returns and expenses. According to the RLA, the costs continue to rise due to transportation fees, capacity restraints, labor shortages, and inefficiencies in reverse logistics operations. However, help is arriving with emerging technology startups eager to help manage things in the reverse logistics space.

Offering a Helping Hand

Among these startups is FloorFound. In partnerships with carriers and warehouse operators, FloorFound contracts to pick up large returns (like furniture) and transports them to a warehouse for inspection. If no damage is found, FloorFound will resell the item(s) on behalf of the retailer via the retailer's website, Facebook, eBay, or another online platform. FloorFound says it can recover 30% or more revenue for a retail customer and reduce the estimated 9 million tons of furniture and 2 million tons of appliances that go to a landfill every year, according to Environmental Protection Agency estimates. As of December 2021, FloorFound has helped clients such as Joybird re-circulate almost 200,000 pounds of oversized items.

Another startup, ReverseLogix, offers a cloud-based modular platform that manages reverse logistics processes for customers such as FedEx, Electrolux, Cole Haan, BNSF Logistics, Amer Sports, Samsonite, and Tumi. The ReverseLogix platform is a configurable plug-and-play system. Customers can select from modules for returns initiation, returns processing, repair management, warehouse management, and inventory optimization.

Happy Returns, founded in 2015 and acquired by PayPal in 2021, offers almost 3,000 drop-off locations where shoppers can return products for an immediate refund or exchange. It embraces sustainability by relying on reusable totes instead of cardboard boxes to transport returns back to facilities where it manages returns based on customers' requirements. Happy Returns works with retailers such as Rothy's, Revolve, Everlane, Dressbarn, and Steve Madden.

The Search for More Solutions

While many technology solutions are emerging to help retailers and other businesses become more efficient in handling returns, that influx of assistance might not be enough. RLA Executive Director Tony Sciarrotta told the Journal of Commerce, "At the end of the day, we need to also work towards reducing the number of returns and increasing asset recovery, or else our landfills will be overflowing; with returns that nobody wants."

Indeed, one of the best ways to reduce returns is to audit your website, make sure the images depict the right colors, the sizing chart is accurate, and utilize virtual dressing rooms.

According to Shopify, 30% of e-commerce returns happen because the size is too small. Another 22% occur because the item is too big. Offering a virtual fitting room can help solve that problem.

Get In the Know and Take Control of Reverse Logistics with Intelligent Audit's Help

Reverse logistics, an often overlooked facet of any supply chain, is finally getting the spotlight it deserves, as more and more retailers and other businesses are focusing attention on this area. There is much to learn when striving to turn this facet of the operation into a revenue-generating machine. If you don't know much about reverse logistics, don't worry! Intelligent Audit can help. Check out 10 Best Practices in Parcel Reverse Logistics, then contact our experts to start a deeper discussion about how shipping data can drive improvements in your reverse logistics processes.

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