By Kathleen J. Siviter / www.parcelindustry.com / September 6th, 2018
Earlier this year, I had a “discovery” experience when I was introduced to an entire world of which I was not very familiar. I’ve worked in the mailing/shipping industry for over 30 years, and in the last five – like many others in our ecosystem – my work has encompassed more initiatives around e-commerce and parcel delivery. It was after a panel at the 2018 PostalVision event about the growth being seen in another aspect of e-commerce – product returns – that I began to explore the world of reverse logistics and return, which led me to attend the Reverse Logistics Association (RLA) annual event earlier this year, where I discovered the complex, growing, and fascinating world of returns.
Returns Are a Growing Market
The USPS Office of Inspector General (OIG) has published two studies on the reverse logistics/returns ecosystem, with an eye toward how the U.S. Postal Service can increase its share of the returns market. In its most recent study, the USPS OIG estimated that for 2017, between $113 billion and $132 billion of e-commerce purchases were returned, with online purchases three times more likely to be returned than those made in a physical store.
Depending on your perspective, the growth in returns is a challenge (for retailers), a customer experience opportunity (for some retailers), an environmental challenge (if not handled well), or a business opportunity (for reverse logistics supply chain providers).
Many retailers are working to balance the costs of returns and the need to keep the customer experience strong. Retailers are also working to mitigate the costs of returns by promoting in-store return solutions (Buy Online Return in Store, or “BORIS”), or adjusting their returns policies in terms of the timeframe or product types. Others are exploring offerings that help reduce returns (such as technology to help determine size/fit for clothing retailers). Some retailers have made returns part of their business model by encouraging their customers to “pick out five, try them on, and return what you don’t like,” or other models that drive customer satisfaction by providing a smooth and low-cost returns solution.
For consumers, their experience with returns policies and processes can significantly impact their satisfaction with the retailer and likelihood that they will purchase from that retailer again. Market studies consistently show the impact a negative returns experience can have on consumer behavior and repeat purchases. Even at its smoothest, a consumer dealing with a return still has to re-package the product, print out a return label, take the return to a physical location for shipping/return (in most cases), and wait for refund.
In Many Ways Alike…
There are some ways that outgoing parcels and return parcels are alike – of course, first of all, they are both parcels! So, there are similarities in terms of transportation processes, equipment/sortation processes, and handling processes between the two streams. Customer demands on both sides of the parcel journey also tend to be similar in that they want fast, easy, and “free” options.
But there are many ways that return parcels differ significantly from outgoing parcels… which has led to the birth of two separate ecosystem worlds.
Yet… Vive la Différence
Despite the ways that outgoing parcels and return parcels are similar, there are some significant differences in the processes and their supply chains. These differences start with the first mile of the return journey – the customer initiating a return. Unlike the outgoing parcel process, when and where a customer may initiate a return is unknown until it happens. With outgoing parcels, there is greater ability to consolidate parcels from the point the product is ordered so that retailers and e-tailers can optimize shipping by achieving geographic density, optimizing transportation, and planning the most economical delivery options.
The unpredictability of customer returns makes optimizing the supply chain more challenging. And with the customer experience being a critical component of today’s retail equation, making returns easy, convenient and, of course, “free” adds to the complexity of the returns process.
Then there are the many different dispositions of product returns that must be accommodated in the supply chain process. Unlike outgoing parcels, which may originate from a central manufacturing or distribution center, returns often do not come back to the same place from which the product started its outgoing journey. From the first mile of returns (customer to consolidation point), to the next point in the supply chain (return processing at consolidation point going to disposition site), to the disposition process and perhaps another supply chain, return parcels take a very different path.
The potential disposition of returns is a long and varied list, each with processes involved in handling the returned product, and each having different supply chain components and players. Some returns go back to the retailer/distributor, but they often must be inspected first. Some returns go to be sold on secondary markets, some are headed to repair/refurbish supply chains, and some are headed to landfill/recycling destinations. This diverse disposition network comes with tracking and intelligence challenges as customers demand refunds early in the process, yet retailers need to ensure products are intact and mitigate fraudulent return claims.
These Worlds Should Collide
One of the things that struck me most in attending the RLA event earlier this year was the entirely different ecosystem of the returns supply chain. There were over 500 attendees representing a long list of companies not part of the outgoing parcel ecosystem! These companies provide a long list of services around returns/reverse logistics, but most are not part of the outgoing parcel supply chain. The topics, language, and acronyms prevalent at the RLA event were entirely different than those our side of the industry is familiar with!
Very few company names crossed over into both worlds, yet this is something that could bring a new wave of opportunity and innovation to both sectors! There are obvious – and not-so-obvious – synergies between the outgoing parcel supply chain and the return parcel/reverse logistics supply chain, yet rarely do the two groups come together to learn from one another, share best practices, and explore new ways to collaborate and partner.
Traditional conferences and meetings in the outgoing parcel world seldom include sessions or discussions on return parcels and vice versa. This may – and should – change in the future as e-commerce growth the volumes handled by both supply chains. One example of the two worlds colliding is the upcoming Sept. 20, 2018, one-day event being held at the Schar School of Policy and Government in Arlington, VA, which is co-sponsored by PostalVision and the RLA, and is focused on returns/reverse logistics but includes panelists and attendees from both the outgoing and return parcel worlds.
There are certain to be more events in the future where the two worlds collide, and seeing the opportunities and collaborations that will come as a result is going to be an exciting new frontier!
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