Too Many Happy Returns: The struggle to predict reverse logistics

Not just for Christmas anymore

Throughout the year, in and out of peak season, Iaria said C.H. Robinson builds customized reverse logistics programs that employ a balanced approach of “operational execution, optimized disposition and reason analysis” to produce an accurate forecast of the company’s needs for reverse logistics capacity year-round.

“One hurdle, in particular, that we have seen come up specific to reverse logistics and ecommerce is centered on finding cost-effective ways to retrieve goods from the consumer,” Iaria said. “This will vary – for small parcel returns, this challenge might include getting labels and packaging to clients in a swift and inexpensive way.”

For larger-format, in-home products, challenges include scheduling retrievals from consumers’ homes and in a timely manner. At U.S.-based Returns Management, Inc. (RMI), which handles returns for items such as furniture and appliances, the key is to simplify the process. “They want it faster, they want it cheaper, and the only way that’s going to happen is you need to take as many steps out of that chain as possible,” said Kirk Kimbel, a partner with RMI.

For some customers, just providing a return label isn’t enough. “In some instances, it’s not clear to the consumer what they’re supposed to do,” Kimbel said. “Are they supposed to take it someplace and mail it? Or is somebody coming to pick it up?”

RMI processes returns from its 15 or so major retailers customers. “We typically contract with the manufacturer of the product,” Kimbel said. “Their retailers, or whatever it is that is selling their products – it might be an e-commerce site, or it might be a bricks-and-mortar store – will then have their returns directed back to us. For almost every one of our clients, we are their returns center.”

Because several of RMI’s client manufacturers have the same retailer, the companuy often gets mixed loads coming in from a particular retailer. “They’ll put returns from a couple of different companies on the same pallets,” Kimbel said. “It requires an actual human being on the other end to make sense out of it.”

As soon as RMI is notified of a return, it immediatley notifies the sales team to determine whether or nor it’s an authorized return, Kimbel explained. “We’re an integral part of our clients’ receiveing and crediting,” he said. “When we get the product back we send the receiving notice to the financial teams, so that they can issue credit directly.”

Return inventory is also a challenge, said Iaria of C.H. Robinson. “For us, it is more about how we can prepare for the entire year and how we work with customers to prepare for any disruptions to the supply chain.”

Based on the growth projections for e-commerce traffic, and the increased rate of returns for e-commerce compared to brick-and-mortar retailers, Iaria said he anticipates an “increase volume for reverse logistics, specifically in the returns service” this year.

Last year, RMI handled returns for about 800,000 items. “This year, we’re expecting to do, with the same number of clients, over a million units. That’s about a 20 to 25 percent increase,” Kimbel said. “That’s driven primarily by the fact that the economy’s up, people are buying more stuff and everybody’s made it easier to end stuff back.”

“Overall, the expectation of free and easy returns is causing dramatic increases in return volume,” Iaria agreed. “Dealing with disposition closer to real time and being able to provide service providers with accurate forecasts remains a challenge in this space.”