LTL’s growing role in reverse logistics and e-commerce returns
Authored by SMC³ on May 30, 2018
Ryan Kelly, Senior Vice President at FedEx Supply Chain, recently spoke with SMC³ about the reverse logistics supply chain and how less-than-truckload carriers are trying to capitalize on the growing trend – a direct result of the booming e-commerce landscape. Brad Parrish, Vice President, Customer Operations at FedEx Supply Chain will discuss the topic in more detail during Connections 2018 in June.
What are some current trends in the reverse logistics arena you’re seeing at FedEx Supply Chain?
Returns have traditionally been cast as a necessary but costly part of doing business, but I contend that we can reshape the way we think about reverse logistics, ultimately using returns as a way to build brand loyalty. By viewing returns as a customer service cost designed to contribute to the long-term success of a business through the customer experience, we can examine ways to offset those marketing costs with supply chain optimization.
Many of the trends we are seeing in reverse logistics are tied to consumer expectations. While fast shipping used to be the top customer request and a high predictor of repeat purchases, both free shipping and free returns are now critical for consumers. According to one study, 83 percent of consumers said free shipping would make them more likely to shop online, while 65 percent said free returns would make them more likely to shop online.
However, providing those free services ultimately drives costs in the e-commerce operation, forcing companies to subsidize returns and shipping to provide a great customer experience.
The returns experience is directly correlated with future purchases, as 95 percent of online shoppers are likely to shop again if returns are convenient. Based on these findings, merchants should prioritize returns so they can drive repeat purchases and foster customer loyalty.
Where does LTL fit into the retail-returns equation?
An increasing number of consumers are choosing to return their online purchases in-store, rather than ship them back to the retailer. Items that are returned in the store are often consolidated with other returned goods before they are shipped out from the store to a distribution or returns center. Retailers are currently taking advantage of opportunities to unite the physical and digital worlds, providing customers with numerous online and in-store return options. Due to efforts to consolidate parcel shipments and as e-commerce and in-store returns continue to grow, so too will the role of LTL and truckload carriers in moving the returned goods.
How can truckload and LTL carriers better use technology to help them optimize these e-commerce shipments?
When we discuss reverse logistics, the goal is always to maximize recovery value. It is impossible to receive the full market value that a new good can garner when dealing with returns. Thus, there is ultimately a greater cost to offset with return shipments than with forward shipments. Any time a logistics provider can consolidate return goods, and minimize the number of returns or distribution centers that those products are coming back to, they can make a win for their business. Emerging, innovative technology plays a huge role in optimizing reverse logistics.
One example of this technology is blockchain. Recently, FedEx Chairman and CEO Frederick W. Smith implored the urgency of understanding blockchain technology and the implications it has on the transportation industry. Being able to locate and provide tracking information to customers on return shipments is critical to building the trust and transparency today’s consumers desire.
How do you see the reverse logistics market growing in the next year?
Supply chain stakeholders must be ready to pivot and innovate with rapidly evolving consumer expectations. Consumers want options for returns: They want the ability to mail in returns through drop sites or the ability to return at other convenient locations, all while receiving quick credit. These expectations will continue to change, and supply chains must be nimble enough to address these changes in an efficient and cost-effective way.
I believe we’ll begin to see more options to return in store — much like the option FedEx offers to return to FedEx Retail Access locations in Walgreens and FedEx Office locations. Recently, FedEx announced plans to expand its FedEx Office footprint in more than 500 Walmart locations across the country. FedEx strives to make the returns experience as convenient, routine and painless as possible for the end consumer. Consumers want convenience, and FedEx keeps consumer expectations at the forefront of continuing innovations in e-commerce.
In addition, I anticipate traditional brick-and-mortar retailers will begin adopting emerging business models, including subscription services and rental services, creating a surge in returns that supply chain professionals must be prepared to handle. In line with subscription services, consumers order more items than what they will actually purchase. These “intentional returns” are contributing to the increased volume of returns — with 15 percent of all purchases being made for the purpose of testing and then returning. That number is up to 23 percent for all fashion purchases. This behavior will only become more prevalent, so supply chains must be optimized to handle this influx of returns.
To hear more from other industry experts, sign up today for the three-day supply chain conference Connections 2018 held June 25-27 at the Greenbrier Resort in West Virginia to learn about emerging trends, current challenges and new innovations in the supply chain.