W hen seeking to understand what makes reverse logistics one of the most complex components of any supply chain, think of the supply chain as a river flowing in one direction, suggests Frank Dreischarf, senior vice president of LTL operations for R2 Logistics, a Jacksonville-based 3PL. As the river current flows, raw materials run downriver to become finished goods that make their way to a customer.
on that return, it means it will have to add two or three more sales just to cover the cost of that one return.”
Overall, reverse logistics is “an expensive and resource-intensive
process,” notes Kristen Kelly, senior vice president of product at Loop Returns, a Columbus, Ohio-based business that provides returns management software. “Contributing factors include the costs of postage and warehousing, and the refurbishment of items before they can be resold.” These challenges are amplified during peak shopping periods, when retailers and brands are already dealing with additional shipping, labor, and storage expenses, which can further impact profits. INCORPORATING AUTOMATION Retailers that frequently revamp their operations for efficiency and automation can address multiple supply chain challenges in the process, including reverse logistics concerns. “This ultimately starts with investing in automation technology, which allows brands to deliver a strong customer experience without expanding support, which is a significant expense,” Kelly says. “Automated returns, for example, make it easier to track inventory in real time for both brands and consumers,” she adds. “A solution that automates processing events when items are scanned by the carrier eliminates the need for manual entry.” Companies must also balance a frictionless, automated experience with the need to prevent returns fraud and abuse. Technology can help limit those occurrences. Merchants are aiming to create the best experience for customers while still maximizing the yield from returned items. “Retailers want to ensure they receive the actual item being returned in a condition that allows it to be resold,” Kelly explains.
“Assume an ecommerce brand nets a 10% margin when it sells a product. When a customer returns that product, the cost of shipping and processing the return is often 20% to 30% of the original sale price,” adds Peter Davis, vice president of fulfillment and chemical at WSI, a 3PL based in Appleton, Wisconsin. “If the brand picks up the tab
“Reverse logistics requires movement against the ‘current,’” Dreischarf says. Recent years have made reverse logistics even more complex as the volume of returns grows in step with the popularity of ecommerce. “More customers moving to online shopping and home delivery dramatically increases the chance that a product will be returned,” Dreischarf says. Retailers and others in the supply chain sector are exploring and experimenting with a range of options to keep reverse logistics challenges from undermining their profits and overwhelming their processes and resources. THE HIGH COSTS OF RETURNS High costs and operational complexity also add to the challenge. “Unpredictable expenses such as transportation, inspection, and refurbishing make reverse logistics less efficient than forward logistics,” says Katie Hilton, national sales account executive for IronLink Logistics, a 3PL based in Ontario, California. “The rise of ecommerce and lenient return policies have driven a surge in returns, especially after the holiday season, when volumes can spike by 25% to 50%. This increases strain on storage, labor, and processing capacities, leading to higher overhead costs. “The process is intricate, involving condition assessments plus sorting and navigating diverse return policies, all of which require robust systems to handle effectively,” she adds.
Automated returns solutions, like these online and mobile options from Loop Returns, help brands reduce manual errors and cut the cost of reverse logistics.
34 Inbound Logistics • February 2025
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