Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
If there is one thing about e-commerce with which everyone agrees, it's that it will spawn unprecedented volumes of returns. One factor is the expected surge in overall e-commerce transactions, which would proportionately boost the number of returns. The other is the inability of consumers to examine or try on a product before they buy it. This, it is reckoned, will lead to more "buyer's remorse" and, by extension, returns.
Another scenario, and one expected to become more commonplace, is that buyers will order two, three, or even four units of the same product, then keep one of the items and return the rest. Why? Because they can!
Returns are a major cost center, but they are also a brand resource if done right. Today's consumers increasingly view the returns process, or "experience," as a key differentiator. Though there isn't the same sense of urgency as in fulfilling the forward move, a timely returns process is important because it dictates when the original customer will be reimbursed. A slow returns program only feeds perceptions of a shoddy operation, which is a key reason people don't use their devices to shop. A 2014 consumer survey by Indicia Ltd. found that the main reason people are reluctant to buy online is because of perceived problems with the returns process.
As more businesses get serious about developing some form of a returns policy—if for no other reason than just to get returns out of their warehouses—demand for reverse logistics support—whether internally or through an outsourced relationship—will undoubtedly grow. The question is (as it always is), by how much?
For now, reverse logistics is a small piece of the overall retail puzzle. But it's not expected to stay that way. North American e-commerce sales and returns are each growing at a 15-percent annual rate, according to David Egan, Americas head of industrial research for CBRE Inc., one of the world's largest commercial real estate services firm.
Last year, $290 billion of sales in the U.S. and Canada were returned, or about 8 percent of total retail sales, according to CBRE. But 30 percent of e-commerce sales were returned, according to CBRE data. Returns that end up being sold at deep discounts or that must otherwise be disposed of equal a 4.4-percent loss of aggregate retail industry revenue, CBRE said.
The e-commerce numbers are a growing part of that equation, and they "are not going to get smaller," said Egan.
Those working in e-commerce—which today includes most everyone—will need to make a choice if and when their returns traffic begins to swell: Build a dedicated physical network to handle the stuff, offload the work to a third-party logistics provider (3PL), or find ways to sync returns flows with the traditional supply chain, which is still largely driven by the forward move. And that could mean increasing pressure on an industrial-property network that in many markets is already tight.
"We hear from customers that are already capacity-constrained who tell us to get the returns out of their warehouse," said Ryan Kelly, vice president of strategy and communications for Genco, a Pittsburgh-based unit of FedEx Corp. that handles a large amount of returns. Kelly said that customers aren't particular about whether their returns are supported by a centralized or a regional supply chain. He added that demand for warehouse and DC space would come both from the 3PL sector and from a portion of the direct-shipper community that is heavily into e-commerce.
Most of the top-tier markets are supply-tight, which has helped create the lowest U.S. industrial-vacancy rate on record. The total vacancy rate of the top 50 U.S. markets stood at 6.4 percent in the fourth quarter, according to data from real estate and logistics firm JLL. Just three markets--Boston, Pittsburgh, and Portland, Ore.—had vacancy rates at 10 percent or higher. Available space—defined as space currently occupied but on the market, generally because the current tenant is leaving at the end of its lease—is generally higher than the stated vacancy rate.
Robert Silverman, JLL's executive vice president, supply chain and logistics solutions, said he doesn't think an increase in e-returns will translate to a dramatic rise in warehouse and DC demand. He said companies are gradually "baking in" reverse flows through their internal systems and processes, such as reconfiguring one or two network facilities to effectively carve out separate paths for e-returns.
Silverman said companies are moving patiently to address the issue because the pace of returns activity allows them to be systematic in their approach.
Integrating elevated returns flow into an existing facility might not be workable, because the facility is designed to optimize the traditional forward move, said Egan of CBRE. That leaves a company to either build out its own reverse network by buying additional space or adding on to an existing facility, or farm out the services to a third-party logistics provider, which may eventually need its own additional space as well. Either way, it spells more demand for the industrial property sector.
Unlike the forward move, returns don't have to be returned from whence they were shipped. The nonlinear nature of returns may create demand in some markets that have more available supply. That, in turn, will absorb still more capacity, Egan reckons.
The complexity of managing e-returns and the challenge of scaling up operations for peak returns periods, could be good reasons to farm out the work. Genco, for example, has systems and technology designed just to support reverse moves, even though forward logistics accounts for more of its business than reverse. It also has several "all-in-one" centers that handle forward and reverse moves, but can support all types of reverse disposal as well as "recommerce," under which Genco repositions qualified returns into the forward logistics flow.
However companies go about it, it seems clear that for those who have truly high stakes in retail, a robust physical network, along with strong inventory control technology, will likely be the price of admission to compete at the big levels. "If you don't have a best-in-class returns policy, you're uncompetitive," said Egan.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
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.