Posts that don’t take in the requirements of an ecommerce supply and distribution network that is increasingly becoming a circular economy could find themselves facing several unwanted challenges.
In recent years, the requirements of the connected society have seen numerous industry sectors adapt to an always-on consumer attitude to goods, services and, increasingly, post or parcel delivery schedules. And while the presence of the ubiquitous computer in the pocket and increased internet access has allowed people to not only purchase what they want when they want it, there is an increase in the number of unwanted purchases entering the distribution network almost as soon as they have been delivered.
According to a recent article published on TechSpot, the reverse supply chain is a significant part of established distribution networks. Thanks to ecommerce giants like Amazon, there is a defined market for returned goods, with consumers seemingly happy to blind buy products and then ship them back to the selling company or distribution center. Around 20 percent of all products sold by Amazon are returned, with the company’s 30-day return policy – which includes free shipping labels and a full refund – extremely attractive to people who either bought something without thinking or, more likely, received it as an unwanted gift.
When you factor in that these items are likely to be both be shipped back to a warehouse and then set aside for reselling, then the challenge facing posts is that they are – in numerous cases – responsible for the entire lifecycle of a distributed item.
A postal office, for example, will have received the item from the seller, sorted it, tagged it and then dispatched it for delivery. Less than 30 days later, the same package could be back in that same distribution center and the process starts again … the only difference is that the package may not be in the same condition as originally received and the ultimate destination is not a home address.
With that in mind, the logistics of the circular economy take on a different perspective. A contributed article on Transport Topics said that the question of reverse logistics was a puzzle that was not only difficult to solve but also one in which the receiving distribution hub or carrier had to allocate more time to returns than to original shipments. Packaged items leave a physical location in a manner that is designed to provide efficient and effective delivery to the end receiver, a scenario that is rarely replicated when the goods come back.
An inbound truckload of products or packages can take anywhere between two to eight hours of sorting, the article said, while it can take as much as 48 hours to process a vehicle filled with returns. In addition, the author of the article noted, his logistics company has discovered that returns take up 20 percent more space and require twice the amount of labor needed to send something out.
Reverse logistics may require a whole new set of digital technologies to manage inventory and workflow. And while ecommerce is a major contributor to this so-called circular economy, the scale of returns logistics is often hard to comprehend.
Supply and Demand Chain Executive reported that more than $550 billion worth of returns occur every year and the prevalence of free shipping on returned goods is having the expected impact on the distribution and logistics sector –according to the Reverse Logistics Association, returns cost supply chains $50 billion every year!
Citing a recent industry report, SDC said that around 34 percent of consumers admit to regular impulse purchases, with social media platforms seen as the perfect vehicle for selling on a 24/7 basis. A full 63 percent of these impulse shoppers will send the purchases back to the retailers, the news source said. When you consider the number of non-return packages that currently flow through distribution networks, then it becomes clear that there is a significant amount of pressure being applied to the existing ecosystem.
Gartner’s recent Future of Supply Chain survey found that 70 percent of supply chain leaders were planning to invest in the circular economy in the next 12 months, citing delivery and customer engagement as reasons to improve their reverse logistics operations.
Digital solutions such as advanced analytics and effective inventory management are the preferred options, Gartner said, with 35 percent of companies stating that digital technology would be a key enabler. The caveat to this proactive attitude is that only 12 percent of the 1,374 respondents surveyed said that they had put digital and circular economy strategies in place.
The question that needs to be asked is how the distribution and logistics sector – which includes postal operators, naturally – can cope with the increased pressure on their networks. It is worth noting that the concept of a reverse supply chain is not a new one – the Harvard Business Review highlighted the importance of the circular economy in a published article in 2002, for example – and the digitalization of society has merely made this business practice more mainstream.
As a result, the effectiveness of a reverse supply chain will depend on both the available technology and digital solutions. Postal operators, for example, may find value in increasing the points of engagement for customer returns with PUDO networks an essential part of the logistics ecosystem. In addition, advanced analytics can track where returns are being generated and, in some cases, alleviate the pressure on physical locations by providing customers with the means to return goods without the need for counter service.
Ultimately, the distribution and logistics sector will have to evolve to cope with the new normal of a reverse supply chain. Ecommerce may still only account for less than 20 percent of all retail purchases, but there is an expectation that this will increase exponentially as more people choose to shop online. And while not every person will send a product back, the simplicity (in their minds, at least) of the returns process will increase the pressure on the entire distribution network.