As omnichannel sales increase, the number of returns will grow. Indeed, e-commerce retail sales have increased 8.3% year-to-date through November, while retail sales have risen two percent for the same period, according to the US Census Bureau. In 2024, US e-commerce sales are expected to increase 10.5%, representing 16.6% of total retail sales compared to 15.6% in 2023.
While returns occur throughout the year, a spike in returns occurs typically during the end of the year holiday season. In 2022, global returns grew to 13% of total orders in the holiday period, an increase of 63% year over year, according to Salesforce data. Meanwhile, UPS handled an estimated 70 million returns from November 20, 2023, to January 21, 2024, up from an estimated 65 million return packages during the previous holiday season.
In 2024, returns management will be among the top supply chain issues that retailers will tackle in terms of costs and as part of retailers’ environmental, social, and governance (ESG) mandates.
Returns costs vary from one retailer to the next, with some estimates of $642 billion a year from parcel delivery management software provider nShift to logistics technology company Optoro’s cost estimate is 39% of the original price to process a return.
Technology Usage Grows
In 2024, technology and data analytics will be embraced more to help lower returns costs and mitigate the number of returns. According to a Provoke Insight and the US Postal Service survey, two-thirds of companies use technology to improve their reverse logistics process. But perhaps either more is needed, or some companies need to rethink the technology they are currently using.
Manual labor tasks, such as reworking, repacking, and relabeling, are among the biggest costs in returns management. Also, understanding why an item is returned can help mitigate and reduce costs, but for many companies, the “why” remains a mystery. One of our RLA startup pitch contest winners in 2023, Newmine, focuses on the “why” using artificial intelligence. Newmine offers a service-based (SaaS-based) returns intelligence platform that uses predictive and prescriptive analytics and corrective action workflows to lower future returns and improve retailers’ financial performance and customer satisfaction.
The use of AI is growing throughout supply chains, including reverse supply chains. “AI can do in minutes what usually takes days for inspections, verifications, and certification of products. It can help track and trace the reuse, refurbishment, and recycling of materials,” wrote the Program Director for the Reverse Logistics Department for the American Public University System, Dr. William Oliver Hedgepeth, in the Reverse Logistics Association’s quarterly periodical, RL Magazine. But “you must have someone to check the accuracy of the data and information coming from such AI applications,” according to Dr. Hedgepeth.
Understanding the data from such technologies as AI is important. Georgia Tech professor Valerie M. Thomas writes that reverse logistics can become easier and cheaper by combining computer vision, data from sensors, machine learning techniques, and robotics.
RL Technology M&A
Reverse logistics technology firms are also being acquired by larger supply chain technology firms to create end-to-end solutions. This will likely continue into 2024. In 2023, for example, Blue Yonder acquired Doddle, noting in its announcement that “with Doddle, Blue Yonder will be the only company with a comprehensive suite from planning and execution to fulfillment and returns to build more sustainable and profitable, end-to-end supply chains.”
Consulting firm Accenture also acquired a reverse logistics technology firm, OnProcess. In the announcement, Accenture noted the addition of OnProcess will “allow it to offer clients supply chain delivery capabilities with integrated after-sales operations. The combined solution will improve operational efficiency and enhance the customer experience while supporting a more sustainable supply chain.”
Technology will help build circular supply chains and raise awareness of reverse logistics earlier in supply chain processes better to manage returned products from a cost and environmental perspective. 2024 will be the year that retailers and manufacturers embrace reverse logistics technology as part of their technology investments.
Tony Sciarrotta is the Executive Director of the Reverse Logistics Association.
This article originally appeared in the January/February, 2024 issue of PARCEL.
