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A consistent growth of eCommerce has caused an increase in shipments to consumers—and shipments returned from consumers. With a growth in package returns comes a need for simplified and streamlined reverse last mile logistics.
According to Forrester, today’s eCommerce market is worth around $370 billion, and it’s expected by 2022 to be worth $1 trillion, 16% of the U.S. retail landscape. Amidst this expanding eCommerce market is a change in the way retailers are doing business with consumers. Online purchasing is creating an influx in the number of packages sent and the speed at which these packages are delivered. Today’s consumer expects fast, low-cost shipping, which has, in turn, changed the supply chain and logistics models.
Beyond a shift in the traditional supply chain, eCommerce is also ushering in a boom in returns. In order to remain competitive, online businesses offer free and easy return shipping. In fact, nearly 49% of retailers offer free return shipping, and 79% of consumers report wanting free return shipping. Returns have become crucial for online business success; a BizRate survey, shared by Harris Williams & Co, found that 89% of online shoppers said a return policy sways their decision on whether or not to even buy from the company.
Thus, businesses want to make returning goods purchased online simple and convenient. However, the logistics of returning these packages from the consumer back to the warehouse or distributor can often be complicated and costly.
There are two parts to “reverse last mile logistics.”
“Reverse logistics” is when you have to reverse the shipping process. Instead of going from the manufacturer to distribution center to warehouses to customer, the package goes from the customer to the warehouses to the distribution to the manufacturer. The process is turned around and reversed.
“Last mile logistics” is the last leg of the shipping process. This is when a package goes from its final warehouse to the consumer’s door. This “last mile” itself has changed thanks to eCommerce. Logistics companies are trying to figure out new ways to consistently, quickly, conveniently, and cost-effectively deliver packages directly to the consumer’s doorstep.
“Reverse last mile logistics” is the reverse of the last mile portion of shipping. This is the specific sector of operations that go from the customer back one step in the logistics process, usually to a warehouse or distribution center. This happens when a customer decides that they are going to return a product. The customer then has to re-package the item, label it for return, and get it in the hands of a shipping company.
The entire process then goes in reverse. But it’s not as easy as turning around the truck and bringing it back. Companies have to balance logistics with consumer demand. This has created an intimate relationship between companies and their shipping partners in an attempt to discover the easiest, most efficient, and most inexpensive ways to handle the reverse logistics of returns.
Reverse logistics includes all of the processes that happen when goods move in reverse. This includes customer support, shipping, warehousing, triage, repair, and after-sales support. All of these have to align perfectly to maintain customer satisfaction and the business’ bottom line. This presents a number of challenges that shipping companies and businesses must partner towards in order to overcome.
Businesses offer return shipping as a way to appeal to the customer. If this process of returns isn’t simple, the customer will instead be frustrated and angry—often leading to poor reviews and a loss of loyalty. If the process of returns is seamless, though, the customer will likely become a loyal customer that promotes the brand.
In this way, customer support needs to be at the foundation of reverse last mile logistics.
At what point should companies triage and sort packages? A defective product may need to go back to the distribution center to be refurbished and resold. Or that defective product could be damaged out before wasting shipping money altogether. An unused product may only reverse back one or two steps in the logistics process to stay in the area to be shipped to another customer nearby.
Companies are working to figure out how to triage products in a way that won’t waste time, money, or resources transporting packages further back into the logistics process than need be. The challenge here is creating a consistent system of triage and finding the correct point on the reverse logistics line at which to do the sorting. If a shipment is happening nationally or internationally, how can a company create a unified triage system?
The goods going through reverse logistics is often much greater than people think. How do you find room on the truck and in warehouses for this “unexpected’ volume of returns?
The logistics of reverse logistics are challenging. How do you schedule trucks going backward if you don’t know the time or quantity of returns? How do you plan to fill an entire truck based on location and timing when the returns process is, by nature, flexible and unstable?
Shipping costs money. Not only do consumers want free shipping, they also want free return shipping. This puts a significant cost burden on the company; the seller has to absorb two-way costs of shipping without even selling a product.
In tandem with their new prepaid returns policy, Amazon has started “returnless refunds.” For items under a certain cost, consumers can make a claim for a return and the seller can refund their money without accepting the item back. This is because it often costs more to ship the item back than it would be to just damage it out. These returnless refunds are a concern for a number of sellers, who feel they might be giving their products away to customers who know how to work the system. This could potentially result in a significant cut to the bottom line if not properly managed.
Nevertheless, it says something about the cost and inefficiency of the reverse logistics process.
Returns create two-way shipping that ends in no profits for the company and no goods for the consumer (or fewer goods). This means that the shipping is ultimately “for naught.”
Shipping companies have been working to minimize the carbon footprint that comes along with eCommerce—from better fuel tracking with ELDs to reusable boxes. But this reverse logistics process doubles the carbon footprint with seemingly no profitable outcome. How do we make this process as streamlined and efficient as possible?
The primary way to overcome these concerns is to reduce the number of returns altogether. Minimizing the volume of packages going through reverse logistics will reduce cost and operational concerns. Reducing returns means reducing the challenges of reverse logistics.
65% of all returns are a result of retailer mistake, either because the product is damaged, the wrong item, or doesn’t appear as it does on the site. Fixing these problems before shipment would improve customer service and minimize returns.
Companies, like Amazon, have also started providing pre-paid return labels to customers. This streamlines the process for the customer while also ensuring the goods go to the right address through the right shipping avenues. 47% of consumers want a printable label for easy returns.
Another concern is the customer’s ability to send back the goods. Some people can’t make it to the transport store during operating hours, and they end up missing the cutoff for the return. To make shipping easier for consumers, some transport companies have started picking up packages at-home. Though this is more convenient, it may prove to be more costly and operationally disruptive.
Some companies have also implemented reusable packaging, like bulk boxes and reusable bottles. This reduces the carbon footprint and cost of materials. However, this comes with its own concerns of closed-loop logistics that can be a challenge to coordinate for returns and non-returns. In this way, shipping companies are still working out ways to lower the footprint and cost while streamlining the process for all parties.
Reverse last mile logistics isn’t going away. It’s only going to continue to grow as eCommerce companies thrive in the coming years. Overcoming the challenges of reverse logistics is at the forefront of transportation strategy in order to provide highest customer satisfaction at the lowest cost.
LTX Solutions is proud to be spearheading the reverse last mile logistics movement.
Contact LTX now to streamline your supply chain, optimize reverse logistics, and strengthen your customer service.