Inbound Logistics | January 2024

Currently, many merchants—both smaller brands and retail giants—employ third-party technology systems to help manage returns. In addition, more than three-fths of retailers responding to a recent Zebra survey say they plan to deploy reverse logistics technology by 2026. A primary goal is more effectively managing fulllment pressures. To accomplish this, reverse logistics technology needs to provide three functions: visibility, transparency, and traceability, says Douglas Kent, executive vice president of corporate and strategic alliances with the Association for Supply Chain Management. “These three pieces need to come together to give retailers a control-tower view and keep players informed of where things are,” Kent says. One obstacle that can thwart these efforts is the level of trust between parties, Kent says, noting that not all business partners may want to share information. Varying levels of investment in different systems between parties in the ecosystem is another challenge. Two technologies gaining favor for reverse logistics management are AI and tracking technology. AI and intelligent decision making can reduce returns fraud by helping shippers develop policies based on customers’ behavior. For instance, advanced machine learning may help retailers distinguish

honest customers from those who abuse return policies, Ramachandran says. Eventually, AI should help retailers target honest customers with benets like early credit and fast exchanges, while discouraging fraudsters with return fees and deferred refunds. Articial intelligence can also streamline returns processing. For instance, AI-based returns applications can help companies determine how to use a single truck to execute both delivery and returns. Among other benets, this boosts asset utilization and cuts carbon emissions. Tracking solutions can help organizations prioritize returns, adds Second Marathon’s Hertz. For example, if a retailer is running low on holiday blazers in early December, management may decide to move these items to the front of the returns processing queue. Similarly, shippers can leverage technology to implement parameters to identify items that are worth refurbishing. This may shift some returned products from “B” to “A” stock and boost recovery, says Saran. Distilling the Right Strategies While technology gets a lot of the buzz, companies can employ a variety of other strategies to make reverse logistics more effective. Here’s a sampling of what experts recommend: • Price products to include return costs . In an ideal world, online consumers prefer both free shipping and low prices. Most ecommerce companies, however, need to choose one or the other, says Caleb Nelson, co-founder and chief growth ofcer with Sifted, a provider of logistics optimization software. . In consumers and low companies, one or For brands to deliver both, they may want to consider boosting prices on products that are returned more frequently. • Staff strategically . Until recently, few companies placed recently, their star supply chain talent in the returns function, guring it was mostly a cost center, says Dan Guide, professor of operations and supply chain management at Penn State. their Price co-founder with Sifted, optimization

GIVING RETURNS A SECOND LIFE THROUGH RESALE AND DONATION One innovative way that e-tailers can boost recovery from returns is by leveraging the resale market. By 2027, the global second-hand market will almost double, hitting $350 billion, and in 2022, 52% of U.S. consumers shopped second-hand, according to ThredUp, an online second-hand retailer. Reselling returns is also better for the environment. Some sustainability- focused brands, like Patagonia, feature sections of “gently used” merchandise on their websites—and this approach is gaining popularity. Making it easier for consumers to donate items instead of returning is another smart choice gaining traction. Donation can both lower costs and help those in need, says Vijay Ramachandran, vice president of go-to- market enablement and experience for Pitney Bowes. An e‹ective process for donating returns requires aligning both consumers’ and retailers’ incentives, he notes. Consumer incentives may include credits for their purchases, and the satisfaction of ensuring their items do not end up in a landfill. Retailers’ incentives would be lowering returns costs, as well as minimizing their environmental footprint, Ramachandran notes.

Vegan skincare line Soapwalla takes a proactive approach to minimizing returns. Extensive online product descriptions and trial sizes help ensure consumers purchase items they will want to keep.

140 Inbound Logistics • January 2024

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