Reverse Logistics Revolution?

Reverse logistics could be on the brink of something big.

At least that’s what we started thinking after attending the Reverse Logistics Association (RLA) conference this year.

Compared to other events we’ve attended since the pandemic, RLA had an amazing turnout. And the idea generating the most buzz was the circular economy: a model in which, as the United Nations Conference on Trade and Development describes it, “all forms of waste, such as clothes, scrap metal and obsolete electronics, are returned to the economy or used more efficiently.” So that “the goods of today are the resources of tomorrow at yesterday’s resource prices.”

Does RLA have its focus on circular economy to thank for attracting more attendees? Maybe, maybe not. There were plenty of other variables at play.

Still, the energy surrounding the idea at RLA was palpable.

Perhaps this shouldn’t come as a surprise. Between inflation, shortages and other supply chain disruptions, it makes sense the promises of a circular economy business model are turning more heads.

‘Used’ going mainstream

For example, Patagonia and Eileen Fisher used to be the lonely outliers reselling their own used clothes. Now brands like Levi’s, lululemon, Madewell, Timberland and many more are following suit. In fact, the apparel resale market is expected to grow to $47 billion by 2025––triple its size in 2021.

Of course, other industries are more familiar with circular economy practices.

Used electronics like phones, tablets and other devices have been sent back, retested, repaired and resold for years. And the mountain of returns Amazon receives every day has spawned huge businesses focused solely on processing and reselling the used goods.

Whether for the planet, the pocketbook or both, used products are becoming more acceptable (even preferred) to consumers. It’s a shift that could realistically create new sectors, jobs and capabilities. And businesses are taking notice.

Backwards at the forefront

Which brings us to the capability that makes circular economies work: reverse logistics.

It turns out most companies aren’t that good at it, and they know it. Which is why they are happy to outsource to those who are. Hence the explosion in third party reverse logistics providers.

In fact, prowess in the art of returns is proving to be a hot differentiator.

Consider the role of our partnership with Optoro, a reverse logistics technology company that helps retailers and manufacturers manage and resell returns and excess products.

Recently, in the largest deal in our industry’s history, our close relationship to Optoro and our skill in operating their platform set our team apart. And we suspect it played a decisive role in winning the business.

Miles to go in reverse

Still, compared to its more mature counterpart, reverse logistics is still in its infancy.

Forward logistics has enjoyed centuries of innovation and refinement. As a result, best practices are practically standardized, which creates fertile ground for automation.

Reverse logistics enjoy no such benefits.

The vast majority of its processes are very labor intensive. Sorting, testing, repairing, refurbishing and redistribution must all be done by a human because the quality of returns can vary so widely.

This is a reality across all skill levels, as work with our partner Optoro has made clear. The main impediment to reverse logistics technology implementations has not been a lack of sound strategy or a solid business case. It’s been the lack of people with the skills to execute it.

How reverse logistics can move forward

In other words, the engine that will drive the circular economy needs innovation. A lot of it.

We’ll offer two suggestions for where it can start:

1. Develop & standardize best practices – Reverse logistics can learn a lot from the discipline of manufacturing. In fact, battle-worn practices like Six Sigma and Lean could be adapted and applied to this up-and-coming capability.
   
   
2. Solve the labor equation – Until those best practices materialize, we can’t teach them to robots. Which means reverse logistics providers can expect to rely on human labor for some time to come.

A tough challenge at a time when even forward logistics is struggling to fill its ranks. In fact, we don’t think it’s a stretch to say that, if they want to reach full maturity, reverse logistics providers will have to lead a revolution in labor. For example:

• Hourly positions with no upward mobility will have to be reconditioned into roles that people with ambition would want.
• The failed retention incentive of “loyalty” will have to be replaced by wages that stay slightly ahead of expectations.
• The standard “costs of employment” like gas burned driving long miles to and from an hourly job will need to give way to standard perks like gas cards.

Fortunately, if our experience at those conferences and with our partners at Optoro is any indication, reverse logistics companies are brimming with innovative, entrepreneurial thinkers.

If any community could start a revolution that leads to something big for all of us, it’s them.