Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Consumers who buy merchandise online oftentimes return all or part of their orders, and when they do, they expect that transaction to be a breeze. Free shipping, preprinted labels, instant return authorizations, and the option to return e-commerce merchandise to brick-and-mortar stores have become mandatory for e-tailers if they expect to stay in the game.
That was abundantly clear in UPS Pulse of the Online Shopper: A Customer Experience Study, a survey of 3,000 consumers conducted by the research firm comScore Inc. earlier this year. Nearly two-thirds (62 percent) of respondents said they have returned products they purchased online, up 11 percent from the previous year. Eighty-two percent said they would be more likely to complete an online purchase if they knew they could return the item to a store or have free shipping for returns; 67 percent said they would buy more from a retailer that offers hassle-free returns. Returns can be a deal-breaker too: 48 percent would drop a retailer with a less-than-easy returns process.
Therein lies the source of a reverse logistics "vicious cycle." In order to attract and retain customers, online retailers must accede to consumers' demands for quick, easy, and no-cost returns. Yet by doing so, they encourage their customers to return purchases. As the consulting firm Tompkins International noted in a recent commentary on its website, consumers knowingly order more products and different sizes than they need because "they understand that the return will not cost them."
That's why the volume of e-commerce returns is growing, and knowing how to manage them is becoming an imperative for an increasing number of warehouses and DCs. There are some differences, though, between reverse logistics for online purchases and goods sold through more traditional retail channels. What follows is a look at those differences and how they can affect operations.
WHAT'S THE DIFFERENCE?
A typical industrial or retail reverse logistics operation handles consolidated pallet loads or full cartons, usually containing the same or similar products. E-commerce returns from consumers, by contrast, are far less predictable. They tend to arrive in very small and variable quantities, often just one or two items. They may be similar—shirts in different sizes or colors, say—or if the e-tailer offers a wide assortment of items for sale, they might be completely different products with wildly diverse handling characteristics.
E-commerce returns generally arrive in better condition than items returned to stores. That's because they very often are unused, and are unopened and still in the original packaging, says David Vehec, senior vice president, retail for Genco, a third-party logistics company (3PL) and reverse logistics pioneer. Store returns are more likely to have been removed from the packaging and to show signs of use.
Historically, e-commerce purchases, especially consumer electronics, have yielded more "no defect" or "no fault found" diagnoses than other types of returns, says Steve Sensing, vice president and general manager of high-tech operations at Ryder Supply Chain Solutions. One reason is that online shoppers don't have the opportunity to physically examine an item until after they have paid for and received it. "You get a higher percentage of buyer's remorse with someone who buys on the Internet than you would with someone who goes to a store and makes a purchase," he observes.
Another reason for the high rate of "no defect found" e-commerce returns is that the consumer typically obtains a returned merchandise authorization (RMA) by filling out an online form. "At a store, associates have the opportunity to challenge the customer and ask questions about why they are returning the item," Vehec says. "When you're dealing with a Web purchase, you don't have that [face-to-face] engagement with the consumer."
SEPARATELY OR TOGETHER?
All that creates some challenges for facilities that accept returns of merchandise ordered online, particularly in a multichannel or omnichannel environment. "How you handle [returned merchandise] depends on whether it is coming back through a storefront or through e-commerce," Vehec says. "When you combine the two, that's where the complexity increases."
Carrie Parris, who as director of corporate strategy at UPS is responsible for the company's reverse logistics strategy, cites the example of "noncongruent" inventory—items a customer buys online or in one store location and returns to a store that does not carry that particular stock-keeping unit (SKU). When that happens, the store staff must accept an SKU that is not in their system, be able to track its whereabouts, and make decisions about its disposition based on the retailer's policies. "Some of our retail customers have a clearance strategy [putting all returned merchandise on the clearance racks] and call it a day, while others pull noncongruent inventory back to the DC," Parris says.
Another challenge involves refunds and credits. Consumers usually receive them on the spot when they return merchandise to a store. But in e-commerce, the seller must verify that the specific items that were authorized for return have actually been received before it can issue a refund or a credit. That can stretch things out and color the online shopper's perception of service quality. Some e-tailers, therefore, rely on certain shipment tracking events to trigger refunds. Others wait until the items have gone through the entire returns handling process, Parris says.
A retailer's crediting, accounting, and inventory tracking policies may even influence physical handling procedures. If those policies differ for e-commerce and brick-and-mortar sales, Vehec says, then those parameters will influence the design of the process flow, including at which point e-commerce items should be separated out and handled differently. To make those decisions, processing facilities must be able to identify whether each arriving item was purchased online or at a store.
When a returned item arrives at a warehouse, it is "checked in" by scanning. This is especially important in e-commerce because, unlike store returns, it will be the first time a returned item is physically entered into the retailer's system, Parris says. In most processing facilities, the item will move on to a workstation where employees identify it, inspect it, and determine the best disposition. However, because most e-commerce returns arrive in their original packaging, warehouses that handle large volumes of such items usually set up "detrashing" and "unpackaging" areas with appropriate equipment. In other respects, facility layouts and material handling equipment are similar to those for other types of reverse logistics activities, according to the experts consulted for this article.
Inside the warehouse or DC, flexibility and the ability to accurately identify each item that arrives are paramount. "You need to have the flexibility to process a full pallet of one product, which you might get from a retailer, and also be able to handle different products individually," Sensing says. For that reason, the companies we spoke with for this story favor work cells where associates can identify, inspect, and make decisions about the disposition of the returned items. Ryder, for instance, organizes its cells along Lean principles that allow workers to modify their workspace to accommodate different types of products and dispositions (repair, repackaging, resale, and so forth). Applying the Lean concept of "standard work" helps operations manage the variability and unpredictability of e-commerce returns because it allows an individual who may never have seen the product being returned to follow a process that applies to every item, and thus be highly productive despite so much variability, Sensing says.
An asset-recognition program that helps associates properly identify each item is a must. Such systems usually are proprietary to the retailer. The best incorporate not just the retailer's product database but also photos and detailed descriptions of each SKU. The systems also include the retailer's business rules regarding the disposition of returned items based on value, condition, and other considerations. Some of the ones Parris has seen include example photos of various conditions, which help associates accurately identify the value that could be recovered from each item. Asset-recognition systems can be pricy, but the rapid increase in e-commerce returns makes them well worth it, she says. "The more volume you see, the more you can justify an improvement in systems that let you make a higher impact on value recovery in returns processing."
CONSTANT CHANGE
Online retailers are trying to master the art and science of handling e-commerce returns—most of them in partnership with third-party logistics companies that have long experience and deep expertise in reverse logistics. But the business of electronic commerce seems to change almost daily, and new challenges are likely to replace the old. Many e-tailers, for instance, are growing their international business, and so must deal with the complex, highly regulated process of managing returns across borders. Here again, 3PLs can lend their expertise.
Sensing expects that in the future, online retailers and providers of reverse logistics services will devote more attention to making it easier for consumers to return unwanted products. Some companies are experimenting with urban drop-off lockers and kiosks, while others are exploring how they might leverage their existing networks to bring returns services closer to consumers. Considering the continued robust growth of e-commerce sales and the concurrent increase in returned goods, it seems likely that helping online retailers improve service to consumers is where the reverse logistics action will be for some time to come.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.