Turnaround for reverse logistics: interview with Tony Sciarrotta
With e-commerce expected to continue its growth trajectory, retailers have to get serious about how they handle returns. Tony Sciarrotta has some ideas.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
The supply chain world has witnessed an explosion in e-commerce orders during the past year, largely driven by the Covid-19 pandemic. That, in turn, has led to a spike in product returns. The activity is unlikely to die down anytime soon. Most experts predict that online sales—and thus, returns—will continue to grow, even after the pandemic subsides. Among them is Tony Sciarrotta, the executive director of the
The association Sciarrotta heads up is a global trade organization dedicated to providing information and resources to companies managing the ever-more-difficult task of processing returned goods. Its members include retailers, manufacturers, and companies that offer solutions. Sciarrotta spoke recently with DC Velocity Senior News Editor Ben Ames about the challenges and opportunities of reverse logistics.
Q: Reverse logistics is a subject we don’t normally hear much about. But it’s made the headlines recently as companies struggled with a flood of post-holiday e-commerce returns. Was that a surprise to retailers and parcel carriers, or could they see this one coming?
A: That’s a great question, because it’s related to a lack of forecasting software in the industry. You hear about SAP and Oracle and all the great systems like that. You don’t hear anything about reverse logistics software—forecasting, processing, etc.
The reason it was a bit of a surprise—though not a complete surprise—is online returns are two to three to four times higher than in-store returns for simple reasons. If you’re going to buy a shirt, an L.L.Bean size 15/34 is different than another brand’s. And so, people do bracketing: They buy a size bigger, a size smaller, and maybe two colors. And so suddenly, you may have 10 items go out, two items kept, and the rest sent back. That’s a simple example of the surprise that some retailers did not understand was in store for them.
You also have issues of interoperability. The electronics product that you bought: You take it home or it comes to your house, you put it into your system, and it doesn’t connect or doesn’t “talk” to the other components. So, those issues drive returns higher as well.
In the old days, all we had was the famous Super Bowl returns period. People would buy a big-screen TV, use it for the Super Bowl, and take it back to the store. That was an expensive period. But nowadays, there is this trend of high e-commerce sales with proportionately higher returns.
Q: Aside from sheer volume, were there other factors this year that made this returns peak different from other years?
A: Absolutely. There were financial issues, and there were quarantine issues. First off, returns are supposed to be limited to maybe 30 days after the purchase, and you run a financial book based on that. And now suddenly because of the pandemic, you’ve given them 90 or 120 days to return items, so you’ve got that liability on your books for a much longer term. That’s driving the financial people, the CFO world, crazy.
And then part two: If you took things back to a Walmart or Best Buy store, or shipped it back, you had quarantine issues in the early days. Nobody knew where the virus would live. Could it live on clothing inside a box for two days? It just wasn’t known. And retailers in the brick-and-mortar world were taking things back and putting them in a separate area and leaving them there for a while.
And then there was the issue of returns that were simply being credited to the consumer—they were being told to keep it. And again, imagine the financial implications of that. So, it was a very different returns peak this year because nobody really took all of those factors into account, especially the quarantining of the products.
Q: How did those constraints affect returns operations?
A: Imagine a truck backing up to a warehouse where there are long lines of conveyor belts. Products are loaded onto these belts and have to be opened and inspected. Do they work? Does the clothing have stains? If so, what are the stains from? Can the items be resold? Can they go back to stock as new? You have to physically touch this stuff, and you have to make a decision on each item.
Products also do not come back packaged the same way and in the same box they were originally shipped in. Imagine a ceiling fan that you buy at your local hardware store only to find that you can’t get it to work once you get it home. Do you ever put it back in the box with the blades in the right spot? No, it sticks out of the box. And that’s exactly how it gets processed all the way down the line.
And then, just imagine the flow where you used to have people literally standing next to each other so they could process hundreds of units per hour. Now, you’ve had to cut out people to space them out [for social distancing]. Instead of 10 people in a 12-foot space, you’ve got three people. That’s a disaster in a reverse logistics operation. It’s just impossible to keep up. There are so many challenges.
Q: That would be difficult. And for a lot of the reasons you mentioned, returns are known for being one of the most expensive parts of the e-commerce cycle. What steps are companies taking to control those costs?
A: Not enough. And the problems are worse because of the silos that exist. Not every organization understands the holistic end-to-end costs of reverse logistics. Shipping costs are allocated to one area. Repair costs go to another area. The cost of reselling at a loss goes to another area. So, nobody really puts all of the costs together.
Some companies are saying it’s costing more to take it back than the product is worth. So, they just give a credit. But that’s a nightmare too, because they’re destroying brand equity by telling people to just keep the item. The consumer has to throw it away or give it away. Or they may auction it off on eBay or sell it at a flea market.
Q: Where should companies focus their attention?
A: More than anything else, they should focus on improving the customer experience. Basically, you have to make sure that people actually get what you tell them they’re going to get, and then try to exceed their expectations. Amazon and some other online retailers are very good at that. They deliver exactly when they say they’re going to deliver. The product is packaged safely in the box. And it does what it says it’s supposed to do.
When I worked at [healthcare technology company] Philips and we did a survey of consumers, we found that 75% of the returns were being generated because people said, “It didn’t do what I expected it to do.” That’s a customer-experience issue discussion. On the returns side, I, as returns director, was being blamed for taking too many things back from retailers whose liberal returns policies were making it too easy. But I was able to use actual customer feedback to fight back a little and tell them, “But you need the customer experience to be better. You need to give them an instruction book that they can read in English, not in 12 languages. You need pictures. You need to make it easier. You need the clothing to be the size it’s supposed to be. And showing it on a model on the website is a bad idea, period. Because when I get it at home, it never looks that good.”
These are all customer-experience issues, right? It’s got nothing to do with whether it fits or not. It’s more, “You showed it in green on the website, and when I got it, it was more chartreuse than green.” So, these are customer-experience steps that companies can take, but unfortunately, most of them are not doing it yet.
Q: That’s so interesting. Also, I’ve noticed some trends, like extending the returns window, as you mentioned earlier. Another is partnering with storefronts, such as a UPS Store or a FedEx Office outlet, to make it easier for consumers to ship products back. As we start to emerge from pandemic conditions, are any of those changes here to stay?
A: Absolutely. Some of those changes are definitely here to stay—certainly, those partnerships are. For instance, the Amazon partnership with Kohl’s is brilliant. You go to the back of the store to drop the package off, they give you a coupon, and you look at it and say “Wow, I get a discount off something today. Maybe I’ll shop a little bit.” That’s a brilliant partnership. That’s definitely here to stay.
The longer windows—that’s a huge risk, and it’s because items like clothing or electronics become outdated really fast. In the apparel industry, a consumer may have until June to return winter clothing and get their money back. It’s a huge loss then. And electronics—it seems like those things change capacity and versions every three weeks. That was a joke in the early 2000s with digital cameras. You could buy one—let’s call it a two-megapixel camera—at retail. Then, within three months, 12-megapixel cameras would come out and you could take your old one back and exchange it. So those long windows are actually very dangerous for retailers to use—except that they’re forced to, to be accommodating to customers during the pandemic. So, I hope the long windows go away, but I hope the “convenience factor” for consumers stays.
If you’re an online retailer or a brick-and-mortar retailer and you live by a policy of “satisfaction guaranteed,” it means you could take anything back anytime from anybody. The last company that had “Satisfaction Guaranteed” as their slogan on the front door was called Sears. And so, I hope that explains why some of the steps that have been taken really need to be followed closely.
Autonomous forklift maker Cyngn is deploying its DriveMod Tugger model at COATS Company, the largest full-line wheel service equipment manufacturer in North America, the companies said today.
By delivering the self-driving tuggers to COATS’ 150,000+ square foot manufacturing facility in La Vergne, Tennessee, Cyngn said it would enable COATS to enhance efficiency by automating the delivery of wheel service components from its production lines.
“Cyngn’s self-driving tugger was the perfect solution to support our strategy of advancing automation and incorporating scalable technology seamlessly into our operations,” Steve Bergmeyer, Continuous Improvement and Quality Manager at COATS, said in a release. “With its high load capacity, we can concentrate on increasing our ability to manage heavier components and bulk orders, driving greater efficiency, reducing costs, and accelerating delivery timelines.”
Terms of the deal were not disclosed, but it follows another deployment of DriveMod Tuggers with electric automaker Rivian earlier this year.
Manufacturing and logistics workers are raising a red flag over workplace quality issues according to industry research released this week.
A comparative study of more than 4,000 workers from the United States, the United Kingdom, and Australia found that manufacturing and logistics workers say they have seen colleagues reduce the quality of their work and not follow processes in the workplace over the past year, with rates exceeding the overall average by 11% and 8%, respectively.
The study—the Resilience Nation report—was commissioned by UK-based regulatory and compliance software company Ideagen, and it polled workers in industries such as energy, aviation, healthcare, and financial services. The results “explore the major threats and macroeconomic factors affecting people today, providing perspectives on resilience across global landscapes,” according to the authors.
According to the study, 41% of manufacturing and logistics workers said they’d witnessed their peers hiding mistakes, and 45% said they’ve observed coworkers cutting corners due to apathy—9% above the average. The results also showed that workers are seeing colleagues take safety risks: More than a third of respondents said they’ve seen people putting themselves in physical danger at work.
The authors said growing pressure inside and outside of the workplace are to blame for the lack of diligence and resiliency on the job. Internally, workers say they are under pressure to deliver more despite reduced capacity. Among the external pressures, respondents cited the rising cost of living as the biggest problem (39%), closely followed by inflation rates, supply chain challenges, and energy prices.
“People are being asked to deliver more at work when their resilience is being challenged by economic and political headwinds,” Ideagen’s CEO Ben Dorks said in a statement announcing the findings. “Ultimately, this is having a determinantal impact on business productivity, workplace health and safety, and the quality of work produced, as well as further reducing the resilience of the nation at large.”
Respondents said they believe technology will eventually alleviate some of the stress occurring in manufacturing and logistics, however.
“People are optimistic that emerging tech and AI will ultimately lighten the load, but they’re not yet feeling the benefits,” Dorks added. “It’s a gap that now, more than ever, business leaders must look to close and support their workforce to ensure their staff remain safe and compliance needs are met across the business.”
The “2024 Year in Review” report lists the various transportation delays, freight volume restrictions, and infrastructure repair costs of a long string of events. Those disruptions include labor strikes at Canadian ports and postal sites, the U.S. East and Gulf coast port strike; hurricanes Helene, Francine, and Milton; the Francis Scott key Bridge collapse in Baltimore Harbor; the CrowdStrike cyber attack; and Red Sea missile attacks on passing cargo ships.
“While 2024 was characterized by frequent and overlapping disruptions that exposed many supply chain vulnerabilities, it was also a year of resilience,” the Project44 report said. “From labor strikes and natural disasters to geopolitical tensions, each event served as a critical learning opportunity, underscoring the necessity for robust contingency planning, effective labor relations, and durable infrastructure. As supply chains continue to evolve, the lessons learned this past year highlight the increased importance of proactive measures and collaborative efforts. These strategies are essential to fostering stability and adaptability in a world where unpredictability is becoming the norm.”
In addition to tallying the supply chain impact of those events, the report also made four broad predictions for trends in 2025 that may affect logistics operations. In Project44’s analysis, they include:
More technology and automation will be introduced into supply chains, particularly ports. This will help make operations more efficient but also increase the risk of cybersecurity attacks and service interruptions due to glitches and bugs. This could also add tensions among the labor pool and unions, who do not want jobs to be replaced with automation.
The new administration in the United States introduces a lot of uncertainty, with talks of major tariffs for numerous countries as well as talks of US freight getting preferential treatment through the Panama Canal. If these things do come to fruition, expect to see shifts in global trade patterns and sourcing.
Natural disasters will continue to become more frequent and more severe, as exhibited by the wildfires in Los Angeles and the winter storms throughout the southern states in the U.S. As a result, expect companies to invest more heavily in sustainability to mitigate climate change.
The peace treaty announced on Wednesday between Isael and Hamas in the Middle East could support increased freight volumes returning to the Suez Canal as political crisis in the area are resolved.
The French transportation visibility provider Shippeo today said it has raised $30 million in financial backing, saying the money will support its accelerated expansion across North America and APAC, while driving enhancements to its “Real-Time Transportation Visibility Platform” product.
The funding round was led by Woven Capital, Toyota’s growth fund, with participation from existing investors: Battery Ventures, Partech, NGP Capital, Bpifrance Digital Venture, LFX Venture Partners, Shift4Good and Yamaha Motor Ventures. With this round, Shippeo’s total funding exceeds $140 million.
Shippeo says it offers real-time shipment tracking across all transport modes, helping companies create sustainable, resilient supply chains. Its platform enables users to reduce logistics-related carbon emissions by making informed trade-offs between modes and carriers based on carbon footprint data.
"Global supply chains are facing unprecedented complexity, and real-time transport visibility is essential for building resilience” Prashant Bothra, Principal at Woven Capital, who is joining the Shippeo board, said in a release. “Shippeo’s platform empowers businesses to proactively address disruptions by transforming fragmented operations into streamlined, data-driven processes across all transport modes, offering precise tracking and predictive ETAs at scale—capabilities that would be resource-intensive to develop in-house. We are excited to support Shippeo’s journey to accelerate digitization while enhancing cost efficiency, planning accuracy, and customer experience across the supply chain.”
Donald Trump has been clear that he plans to hit the ground running after his inauguration on January 20, launching ambitious plans that could have significant repercussions for global supply chains.
As Mark Baxa, CSCMP president and CEO, says in the executive forward to the white paper, the incoming Trump Administration and a majority Republican congress are “poised to reshape trade policies, regulatory frameworks, and the very fabric of how we approach global commerce.”
The paper is written by import/export expert Thomas Cook, managing director for Blue Tiger International, a U.S.-based supply chain management consulting company that focuses on international trade. Cook is the former CEO of American River International in New York and Apex Global Logistics Supply Chain Operation in Los Angeles and has written 19 books on global trade.
In the paper, Cook, of course, takes a close look at tariff implications and new trade deals, emphasizing that Trump will seek revisions that will favor U.S. businesses and encourage manufacturing to return to the U.S. The paper, however, also looks beyond global trade to addresses topics such as Trump’s tougher stance on immigration and the possibility of mass deportations, greater support of Israel in the Middle East, proposals for increased energy production and mining, and intent to end the war in the Ukraine.
In general, Cook believes that many of the administration’s new policies will be beneficial to the overall economy. He does warn, however, that some policies will be disruptive and add risk and cost to global supply chains.
In light of those risks and possible disruptions, Cook’s paper offers 14 recommendations. Some of which include:
Create a team responsible for studying the changes Trump will introduce when he takes office;
Attend trade shows and make connections with vendors, suppliers, and service providers who can help you navigate those changes;
Consider becoming C-TPAT (Customs-Trade Partnership Against Terrorism) certified to help mitigate potential import/export issues;
Adopt a risk management mindset and shift from focusing on lowest cost to best value for your spend;
Increase collaboration with internal and external partners;
Expect warehousing costs to rise in the short term as companies look to bring in foreign-made goods ahead of tariffs;
Expect greater scrutiny from U.S. Customs and Border Patrol of origin statements for imports in recognition of attempts by some Chinese manufacturers to evade U.S. import policies;
Reduce dependency on China for sourcing; and
Consider manufacturing and/or sourcing in the United States.
Cook advises readers to expect a loosening up of regulations and a reduction in government under Trump. He warns that while some world leaders will look to work with Trump, others will take more of a defiant stance. As a result, companies should expect to see retaliatory tariffs and duties on exports.
Cook concludes by offering advice to the incoming administration, including being sensitive to the effect retaliatory tariffs can have on American exports, working on federal debt reduction, and considering promoting free trade zones. He also proposes an ambitious water works program through the Army Corps of Engineers.