Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Consumers who buy merchandise online oftentimes return all or part of their orders, and when they do, they expect that transaction to be a breeze. Free shipping, preprinted labels, instant return authorizations, and the option to return e-commerce merchandise to brick-and-mortar stores have become mandatory for e-tailers if they expect to stay in the game.
That was abundantly clear in UPS Pulse of the Online Shopper: A Customer Experience Study, a survey of 3,000 consumers conducted by the research firm comScore Inc. earlier this year. Nearly two-thirds (62 percent) of respondents said they have returned products they purchased online, up 11 percent from the previous year. Eighty-two percent said they would be more likely to complete an online purchase if they knew they could return the item to a store or have free shipping for returns; 67 percent said they would buy more from a retailer that offers hassle-free returns. Returns can be a deal-breaker too: 48 percent would drop a retailer with a less-than-easy returns process.
Therein lies the source of a reverse logistics "vicious cycle." In order to attract and retain customers, online retailers must accede to consumers' demands for quick, easy, and no-cost returns. Yet by doing so, they encourage their customers to return purchases. As the consulting firm Tompkins International noted in a recent commentary on its website, consumers knowingly order more products and different sizes than they need because "they understand that the return will not cost them."
That's why the volume of e-commerce returns is growing, and knowing how to manage them is becoming an imperative for an increasing number of warehouses and DCs. There are some differences, though, between reverse logistics for online purchases and goods sold through more traditional retail channels. What follows is a look at those differences and how they can affect operations.
WHAT'S THE DIFFERENCE?
A typical industrial or retail reverse logistics operation handles consolidated pallet loads or full cartons, usually containing the same or similar products. E-commerce returns from consumers, by contrast, are far less predictable. They tend to arrive in very small and variable quantities, often just one or two items. They may be similar—shirts in different sizes or colors, say—or if the e-tailer offers a wide assortment of items for sale, they might be completely different products with wildly diverse handling characteristics.
E-commerce returns generally arrive in better condition than items returned to stores. That's because they very often are unused, and are unopened and still in the original packaging, says David Vehec, senior vice president, retail for Genco, a third-party logistics company (3PL) and reverse logistics pioneer. Store returns are more likely to have been removed from the packaging and to show signs of use.
Historically, e-commerce purchases, especially consumer electronics, have yielded more "no defect" or "no fault found" diagnoses than other types of returns, says Steve Sensing, vice president and general manager of high-tech operations at Ryder Supply Chain Solutions. One reason is that online shoppers don't have the opportunity to physically examine an item until after they have paid for and received it. "You get a higher percentage of buyer's remorse with someone who buys on the Internet than you would with someone who goes to a store and makes a purchase," he observes.
Another reason for the high rate of "no defect found" e-commerce returns is that the consumer typically obtains a returned merchandise authorization (RMA) by filling out an online form. "At a store, associates have the opportunity to challenge the customer and ask questions about why they are returning the item," Vehec says. "When you're dealing with a Web purchase, you don't have that [face-to-face] engagement with the consumer."
SEPARATELY OR TOGETHER?
All that creates some challenges for facilities that accept returns of merchandise ordered online, particularly in a multichannel or omnichannel environment. "How you handle [returned merchandise] depends on whether it is coming back through a storefront or through e-commerce," Vehec says. "When you combine the two, that's where the complexity increases."
Carrie Parris, who as director of corporate strategy at UPS is responsible for the company's reverse logistics strategy, cites the example of "noncongruent" inventory—items a customer buys online or in one store location and returns to a store that does not carry that particular stock-keeping unit (SKU). When that happens, the store staff must accept an SKU that is not in their system, be able to track its whereabouts, and make decisions about its disposition based on the retailer's policies. "Some of our retail customers have a clearance strategy [putting all returned merchandise on the clearance racks] and call it a day, while others pull noncongruent inventory back to the DC," Parris says.
Another challenge involves refunds and credits. Consumers usually receive them on the spot when they return merchandise to a store. But in e-commerce, the seller must verify that the specific items that were authorized for return have actually been received before it can issue a refund or a credit. That can stretch things out and color the online shopper's perception of service quality. Some e-tailers, therefore, rely on certain shipment tracking events to trigger refunds. Others wait until the items have gone through the entire returns handling process, Parris says.
A retailer's crediting, accounting, and inventory tracking policies may even influence physical handling procedures. If those policies differ for e-commerce and brick-and-mortar sales, Vehec says, then those parameters will influence the design of the process flow, including at which point e-commerce items should be separated out and handled differently. To make those decisions, processing facilities must be able to identify whether each arriving item was purchased online or at a store.
When a returned item arrives at a warehouse, it is "checked in" by scanning. This is especially important in e-commerce because, unlike store returns, it will be the first time a returned item is physically entered into the retailer's system, Parris says. In most processing facilities, the item will move on to a workstation where employees identify it, inspect it, and determine the best disposition. However, because most e-commerce returns arrive in their original packaging, warehouses that handle large volumes of such items usually set up "detrashing" and "unpackaging" areas with appropriate equipment. In other respects, facility layouts and material handling equipment are similar to those for other types of reverse logistics activities, according to the experts consulted for this article.
Inside the warehouse or DC, flexibility and the ability to accurately identify each item that arrives are paramount. "You need to have the flexibility to process a full pallet of one product, which you might get from a retailer, and also be able to handle different products individually," Sensing says. For that reason, the companies we spoke with for this story favor work cells where associates can identify, inspect, and make decisions about the disposition of the returned items. Ryder, for instance, organizes its cells along Lean principles that allow workers to modify their workspace to accommodate different types of products and dispositions (repair, repackaging, resale, and so forth). Applying the Lean concept of "standard work" helps operations manage the variability and unpredictability of e-commerce returns because it allows an individual who may never have seen the product being returned to follow a process that applies to every item, and thus be highly productive despite so much variability, Sensing says.
An asset-recognition program that helps associates properly identify each item is a must. Such systems usually are proprietary to the retailer. The best incorporate not just the retailer's product database but also photos and detailed descriptions of each SKU. The systems also include the retailer's business rules regarding the disposition of returned items based on value, condition, and other considerations. Some of the ones Parris has seen include example photos of various conditions, which help associates accurately identify the value that could be recovered from each item. Asset-recognition systems can be pricy, but the rapid increase in e-commerce returns makes them well worth it, she says. "The more volume you see, the more you can justify an improvement in systems that let you make a higher impact on value recovery in returns processing."
CONSTANT CHANGE
Online retailers are trying to master the art and science of handling e-commerce returns—most of them in partnership with third-party logistics companies that have long experience and deep expertise in reverse logistics. But the business of electronic commerce seems to change almost daily, and new challenges are likely to replace the old. Many e-tailers, for instance, are growing their international business, and so must deal with the complex, highly regulated process of managing returns across borders. Here again, 3PLs can lend their expertise.
Sensing expects that in the future, online retailers and providers of reverse logistics services will devote more attention to making it easier for consumers to return unwanted products. Some companies are experimenting with urban drop-off lockers and kiosks, while others are exploring how they might leverage their existing networks to bring returns services closer to consumers. Considering the continued robust growth of e-commerce sales and the concurrent increase in returned goods, it seems likely that helping online retailers improve service to consumers is where the reverse logistics action will be for some time to come.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."