Trends in the Changing Landscape of Retail Supply Chain Visibility: The Reverse Logistics Strain

This is part two in a series of two blog posts about retail supply chain visibility. Read the previous post on The Diversification of SKUs.

In our last post on retail supply chain challenges, we discussed the diversification of SKUs and how it has led to an increase in track and trace activities. In this post, we’ll explore another emerging trend in the retail industry: reverse logistics.

With people around the world buying a larger variety of products online, what happens if they are unhappy with or change their mind about a purchase? This is one of the primary areas of concern for retailers, especially since e-commerce return rates are much higher than traditional retail sales.

Historically, retail returns have compromised just 8 percent of a company’s total sales. However, e-commerce return rates have seen much higher rates of return, from 15 to 30 percent, depending on the type of product.

This rise in returns from customers all over the world is placing a massive strain on retail supply chains. Returns are costing retailers up to 4.4 percent of total revenue each year, especially since consumer demand has made a flexible and free return policy the standard for retailers in order to stay competitive in an increasingly crowded online marketplace.

Overall, retail supply chains that are not optimized for this reverse flow of inventory could see dramatic rises in operations costs as online shopping and returns continue being the norm.

A lack of visibility

The reverse logistics strain typically has the largest impact in the first quarter of the year, when a massive amount of holiday packages is returned, but there’s no track and trace effort on the reverse side. This ultimately hits the P&L of the shipper and is something they just don’t seem to have visibility on these days.

When the shipper goes to report those Q1 numbers, they’re a bit ambiguous because they don’t truly have visibility on the products being sent back, as well as where they’re being sent back to. In some cases when items are being sent to multiple distribution facilities, or even just one warehouse, it may be difficult to ascertain where in the actual facility it is at any point in time.

The entire reverse logistics process is a massive blind spot for the industry right now, especially for supply chains that don’t have effective track and trace programs in place. In order to effectively solve the problem, visibility technology must be applied to the C2B (customer to business), or reverse B2B, journey.

So, what can be done to combat the changing retail supply chain environment and address these trends head on?

Implementing proven supply chain visibility technology helps keep operation costs low and provide peace of mind with track and trace capabilities. As new trends continue to emerge in the supply chain, successful providers will continue to adapt their technology to anticipate these challenges and prepare their customers for change.

Discover how Trimble’s Visibility solution can help you improve the connectivity of your supply chain and position you for success in this evolving world of e-Commerce.