INTERVIEW
Taking advantage of the reverse logistics opportunities: unlocking the power of innovation
Mike Richmond, Vice President, Blue Yonder
Returns are increasingly becoming a major focus for major carriers, 3PLs and retailers, and in turn that is also bringing in new market entrants and major tech players. How do you see the current state of play for returns and what are the implications for reverse logistics more broadly?
As you say, it’s becoming more of a focus, driven by retailers wanting to invest in an area where historically there has not been much attention. Higher return rates in ecommerce, slowing overall growth and growing problems of returns fraud are pressuring retailers to sort out this area, and in turn they are looking to logistics partners for support in joining up the dots.
For logistics providers, it’s a growth area and a problem that many of their customers have, so it’s almost a no-brainer to improve or build out propositions to address it. I think the fact that more people are spending more time applying better solutions to reverse logistics can only be good for the industry, and I think it shows maturation in ecommerce overall, and particularly in the returns space. There’s still a long way to go before any sizable share of the market reaches the highest level of sophistication that is currently technologically possible though – I think as an industry we’re still early in the journey of maturing in returns and reverse logistics.
What are the key challenges currently in reverse logistics, and where are the major opportunities?
From a retailer’s perspective (or the customer’s perspective, if you’re a logistics service provider) the challenges are things like balancing cost management with customer experience, maximizing the resale value of returned items, and making sure that the returns policy is being properly and consistently applied, so you can eliminate fraud.
It comes down to the need to have visibility and control over returns. You want to know: who is returning what, what condition do they say it’s in, what options should you offer that customer and at what price? Then once it’s dropped off, what’s the best route and shipping method, how urgently do you want to process this return compared to others, what condition is it actually in, how much can you resell it for and through which channel? If you can answer all those questions for every return at scale, and give the customer a convenient, branded experience that makes them more likely to shop again, you’re going to save a lot of money and encourage a lot more customer loyalty. But that’s literally a lot to ask (as you can tell by the long list of ‘if’s), hence we do need a step change in technology adoption and investment in returns.
The opportunity therefore in the short term is digitizing and connecting up data, so that you can answer more of those questions more of the time, and that’s true for both retailers and logistics providers. The closer the partnership, the more efficient the reverse logistics process will be.
In the longer term, we should be aiming for most of the decision making around returns policies, processes, and prices to be handled autonomously, with people there to set strategic direction and manage exceptions.
Where does new technology, including AI, offer opportunities for innovation in the reverse logistics process? In particular, how might inventory management be optimised?
To put it bluntly, today almost no retailer is using accurate returns data to inform how much inventory they buy, or where they put it. It’s easy to understand how you might change your planning, purchasing, and replenishment decisions if you have a reliable forecast of returns in the same way that you do for demand. Let’s say you’ve got a denim jacket that’s selling amazingly. You’re going to get more jackets to meet the demand. But you’d rebuy 10% fewer new denim jackets if you can reliably expect a 15% return rate, of which you expect two-thirds are able to be resold immediately.
That’s an immediate saving. And if your forecast is good enough to give you location-by-location estimates of where those returns are likely to show up in your stores or your network, you can tweak your replenishment plan accordingly and avoid being overstocked in some stores and out of stock in others.
That’s all easy enough to say, but it’s hard to do at scale without AI to model your returns in the same way that AI can power planning and forecasting. That’s just one example. Another is the fact that we have huge amounts of returns data available as more of the process becomes digitized. Giving agentic AI access to that data will allow it to start optimizing at a scale and to a degree that is impossible with manually configured rules, so that you give every customer the right set of options, at the right price, and treat each return in a way that maximizes the value of your total inventory.
Data underpins so many of these potential innovations. How can data be better integrated across silos and data intelligence be used to make more effective use of this data to cut costs and improve customer satisfaction?
This is something that has been spoken about for many years — having a single source of truth, a high standard of data quality, keeping data in a format that is accessible and usable by multiple tools. Now that we have unified data platforms like Snowflake that are geared towards specific business use cases, that vision is becoming much more realistic for both logistics providers and retailers.
One thing that we as Blue Yonder see with our customers is that having a unified data platform allows them to start today, where they are, rather than setting a hypothetical start date for using AI and advanced tech tools, once they sort their data out completely. Then you end up in a chain of dependencies—an ERP changing, an ecommerce platform migration, whatever it is, before you can begin. But with the unified data platform, you can bring in what’s ready, you can switch out systems and data sources and reconnect them. And then when you bring in the tools that can actually use that data, you’re ready to see value quickly.
The other key about sharing data and joining up the dots is that it should go beyond a single business, whether logistics provider or the retailer. Co-ordinating reverse logistics requires both of those businesses to be on the same page. Having them on the same network, sharing data on the same platform, in real-time, makes it possible to co-operate far more effectively and react much faster.
So if retailers and logistics service providers need to co-operate more closely, what’s the role for solution providers in the reverse logistics space, and how is that changing?
I think technology vendors should aim to be the glue connecting those businesses and enabling that fully networked real-time data sharing, as well as providing the unified data platforms that enable logistics providers and retailers to start really benefitting from things like AI and Machine Learning (ML).
The biggest change is that until recently this degree of ambition wasn’t really seen in the market, partly because reverse logistics and returns were the purview of specialist tech vendors. But now the best-resourced and biggest technology providers are in the space, we’re able to go beyond treating returns as an isolated function. We can address the issues that are happening in returns, yes, but we can also identify and improve how reverse logistics affects other areas of businesses, whether it’s transport or warehousing or replenishment.
It also means that innovation and new ideas are being matched with significant investment to make them real, and I think we can expect to see a step change in the sophistication of technology that is offered. That will translate into more efficient logistics businesses being able to better address the retail market with reverse logistics solutions, and ultimately as consumers we’ll start to notice more personalized and convenient returns experiences.
There are sustainability gains from improved reverse logistics as well. Where can repair and refurbishment, as well as re-routing to local fulfilment centers, be used to drive more efficient reselling and increased sustainability?
Most of the time in logistics, sustainability and efficiency are one and the same. You want to drive fewer miles with empty trucks, so coordinating your outbound and reverse logistics makes pure financial sense as well as ecological sense.
You actually want to drive as few miles as possible to fulfil your obligations, full stop. So, routing returns to the right place, whether that’s a local store where they can be quickly processed and used to replenish store shelves, or to the nearest DC for online resale, or to your nearest processing center—these are all more sustainable and economical than shipping all your returns to one or two hubs to be processed and shipped back out.
Of course, to make that assessment of each return about where it should go and where it will be most valuable, and how quickly you should transport it, all of that requires intelligence. And to do it at scale requires automation. This is the purpose of sophisticated returns orchestration.
You can hear more on this topic from Mike Richmond, Vice President, Blue Yonder at 15.15 on day 1 of the Leaders in Logistics Summit on 12th March. For more information before the event reach out to Blue Yonder to discuss how they can support you at lucy.griffiths@blueyonder.com.
Mike Richmond, Vice President, Blue Yonder
For the past 10 years, Mike has been responsible for Doddle’s relationships with retailers and parcel carriers globally. Following Doddle’s acquisition by Blue Yonder in November 2023, Mike is now part of the team growing the last mile and returns business at Blue Yonder.
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