Robotics can help speed up the returns process—but only if you’ve laid the groundwork with a detailed, technology-enabled protocol for getting those surging volumes under control.
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
Managing post-holiday returns can be a headache for even the best-run distribution centers, and it’s getting more intense as the volume of returns soars in today’s era of e-commerce. Consumers returned about $760 billion worth of merchandise in 2021, according to data from the National Retail Federation (NRF)—a figure some industry watchers expect to top $1 trillion this year. The staggering volume is shining a light on reverse logistics, and more companies are looking for ways to better manage the process, including applying robotics and automation.
“Returns are a massive problem for the whole industry—because the volume is so high,” explains Gaurav Saran, founder and CEO of ReverseLogix, a developer of returns management software (RMS) for business-to-business (B2B) and business-to-consumer (B2C) clients. “And all indications are that we will continue the trend, with returns being exceptionally high every year.”
Retailers deal with an average 17% returns rate—also according to NRF data from 2021—but Saran and others say that figure can reach as high as 30% during peak holiday season. At those levels, reverse logistics is ripe for automation, but companies have been slow to apply it for a variety of reasons.
First and foremost, returns are a far more complex process than forward logistics, in which inventory is received in mint condition—often neatly stacked on pallets or in boxes—and can be scanned and entered into inventory without too much hassle. From there, companies can apply robotics in a variety of ways to help speed putaway, fulfillment, and shipping. Returns are another story, requiring additional layers of processing to check a product’s condition before determining whether it can be sent back to inventory or should be dispatched to one of many other possible destinations—layers that add time and labor to the process, making automating returns more challenging.
But there is progress. Companies with detailed, tech-enabled processes for handling returns are finding success applying robotics to the problem, and Saran and others say 2023 may be the year the application finally takes off.
“I think it’s becoming really relevant,” Saran explains, emphasizing the importance of an intelligent returns management process that can integrate with robotic solutions. “If robotics is helping on forward fulfillment, and you know [that as much as] 30% is coming back, then robotics can add value.”
SETTING THE STAGE WITH BACK-END TECHNOLOGY
There are two main stages of the returns journey: initiation of the return on the front end, with the customer; and then processing the return when it arrives at the DC. For the most part, robotics come into play at the DC. Items often arrive piled up in gaylords—large cardboard containers the size of a pallet—from which they must be removed, inspected, and sorted.
“When items come back to the physical warehouse, you want to be prepared, from a technology perspective, to process those returns as quickly as you can,” Saran says, explaining that a centralized software system that provides visibility from the start of the return through receipt of the item can help speed things along. Digital details about what type of item is being returned and why are vital, as is guidance on what to do at each step along the way.
Most commonly, DC workers will manually remove and scan each returned item to determine its next stop on the journey. The level of detail provided in that scan can streamline the process and allow robotics to kick in and help. Does a returned sweater simply require repackaging so it can be put back into stock as first quality, or is it slightly worn, requiring a different strategy? Robotics can only take over after the electronic scan tells the system where to send the item.
“The retailer or brand has to look at how they make the front-end experience good, but when it arrives, they have to be able to process it in the most efficient and transparent way and then ‘apply’ the right disposition,” Saran says. “Robotics can help with the movement, but if you don’t have the right system in place to improve the overall process, it won’t matter.”
Sean O’Farrell, vice president of operations for Tompkins Robotics, agrees. Companies can program their IT systems to sort returns to a variety of locations from the DC—a repair area; back to inventory; to a wholesaler, charity, or waste bin; or back to the vendor, for example—and that information can then be integrated with a robotics system. Tompkins Robotics is applying its tSort robots to returns with a handful of customers who have those technological capabilities, which account for about 10% of the company’s business. O’Farrell says he expects that business to grow considerably over the next few years, primarily because of the accelerating volume of returns and because companies are increasingly outsourcing returns to third-party logistics service providers (3PLs)—often large players with sophisticated DCs that are looking for high-tech solutions for handling returns.
“Because of the accelerating growth on the retail side of the business, companies are pushing returns out to 3PLs, who have been quite successful in securing that business,” O’Farrell explains. “Returns are labor intensive, and that means a push toward automation.”
GETTING IT DONE WITH AMRs, AGVs, AND MORE
The most common types of robotics used for returns are autonomous mobile robots (AMRs), robotic arms for pick and place, robotic pick walls, and automated guided vehicles (AGVs), which can be used to move full pallets and gaylords around the DC, according to O’Farrell. Tompkins Robotics’ tSort robots fall into the AMR category. The small robots act like a tilt-tray or crossbelt sorter without a fixed track, moving independently to any divert or induction station along the shortest path. The robots come in different sizes to accommodate a range of items—from jewelry and pharmaceuticals to cartons and heavy goods—and the robot fleets can be scaled up or down to meet seasonal demands. That scalability and flexibility have made AMRs an attractive option for many companies looking to automate their DCs, especially organizations that are looking to dip their toe into robotics without a large-scale investment.
“AMRs have really revolutionized warehousing with many companies over the last few years,” O’Farrell explains. “Companies understand the tangible benefits that AMRs bring to their operations, and they like not having automation fixed [or] fastened to the floor. AMR [systems] can easily be expanded, especially during peak holiday times. One of my favorite aspects of AMRs is [that they allow] smaller companies to get into automation to compete and grow their [business].”
Those factors are also what makes AMRs easily adaptable for returns. One of Tompkins Robotics’ 3PL customers is using tSort robots to handle cellphone returns for a manufacturing client, addressing a labor challenge that was slowing down the largely manual process the 3PL had been using. Workers at the DC were sorting the returns by hand and then walking them to their ultimate destination. Today, workers still remove the returned phones from a gaylord by hand, but they scan them into a returns management system and then place them on an AMR, which automatically delivers the items to the next stop on their journey. The robotic system knows to deliver the phone to a repair center, back to inventory, or to the vendor, among other possibilities, thanks to the information in the customer’s IT system.
Another Tompkins customer is applying the technology to sort and move returned apparel it buys in bulk from other retailers and then sells through its own inventory network. The customer needed a faster way to move items arriving in gaylords off the loading dock and into inventory for immediate sale. AGVs move the gaylords to an induction station, where workers remove and scan the items and, as with the cellphone example, place them on an AMR, which delivers them to the next destination.
In both examples, the customer has reduced the number of “touches” required for a return while also reducing the time required to process the material from receipt to disposition.
Such projects are likely to increase. ReverseLogix is working on partnerships with some of the industry’s major robotics companies to integrate its returns management software with existing robotics on the warehouse and DC floor, for example. Saran says the work stems from the company’s relationships with some of the industry’s largest 3PLs, who are using ReverseLogix to improve visibility into returns but need to take the next step to apply that insight to moving returns within the DC. Making that connection will be vital to handling accelerating returns volumes in the years ahead.
“More companies are realizing that returns need to be processed intelligently,” Saran says. “Then robotics can manage it the rest of the way.”
Consumer demands drive change in reverse logistics
A recent survey by last-mile logistics technology developer FarEye underscores the exponential growth in returns volumes worldwide and the resulting pressure on retailers and logistics service companies to find solutions that will ease the handling process.
The survey polled 1,000 U.S. and U.K. consumers about their expectations for the returns process this past holiday season and found that high return rates are here to stay, driven by recent changes in consumer buying behavior that have become permanent. FarEye found that roughly 61% of U.S. consumers and 51% of U.K. consumers made returns during the 2021 holiday season, and that 42% of U.S. consumers and 53% of U.K. consumers expected to make returns in the 2022 post-holiday season. Bracketing—the practice of buying multiple items online with the intention of returning some—is a driving factor, according to the report, which found that nearly 30% of U.S. consumers and almost half of U.K. consumers planned to do so during the recent peak season.
Flexibility and convenience also reign supreme in the returns process. FarEye found that 84% of U.S. consumers and 82% of U.K. consumers expect to be able to make a return anywhere from 30 to 90 days from the date of purchase, for example. In addition, both U.S. and U.K. consumers say they would like to be able to return items in store as well as at a post office or dropoff point.
“Consumer expectations will no doubt remain high throughout the holiday shopping season—one of the most profitable and critical revenue time periods for retailers,” said FarEye co-founder and CEO Kushal Nahata in a November press release. “As retailers continue to simplify the last-mile delivery experience, they cannot forget about the returns experience. This … should be just as simple as the delivery experience.”
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.