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.
Retailers have enjoyed a huge boost in e-commerce sales to consumers sheltering at home during the pandemic. But that success has come with strings attached. Like a boomerang, a large portion of the goods they ship to buyers’ homes come hurtling back in the form of returns.
Although it varies by the type of goods sold, an estimated one out of every three items bought online is returned, a rate that is three to five times higher than with brick-and-mortar sales. And traditionally, sorting returns has been an expensive, laborious process, relying on workers to manually inspect, repair, and repackage items before they can be shipped back to stores or returned to inventory. That time-intensive handling can seriously erode profit margins, leading many retailers to let returns pile up in a corner of the DC or even send them to a landfill.
But in recent months, companies have been cutting their losses through automation and digitalization. If that sounds familiar, it’s because those are some of the same strategies they’ve deployed to streamline their forward fulfillment operations in an effort to keep pace with industry leaderAmazon.com.
Those tactics have allowed many retailers to survive the pandemic-fueled surge in e-commerce returns and even begin using their “hassle-free returns” policies as a competitive lever to keep fickle customers coming back. However, while consumers care deeply about the “front end” of the returns process—free shipping and quick refunds—warehouses are still saddled with expensive “back end” procedures like sorting, inspecting, and refurbishing goods.
A DELICATE BALANCE
Striking a balance between those competing demands is key to running a finely tuned returns operation, says Mike Venditti, vice president for the Western region at Port Logistics Group, a California-based third-party logistics service provider (3PL) that offers e-commerce fulfillment as well as wholesale and retail distribution services.
“It used to be that returns were an afterthought, tucked away in a corner of the DC until people could just kind of muscle through it. But now you have to look at workflow, optimization, and headcount; labor is huge,” Venditti says. “If you’re not prepared to handle this, it will eat you up. Not only in inconvenience to the customer, but in profitability. It will hurt you very badly.”
As for what makes the process so costly, it’s largely the tension between granting shoppers a quick credit for returned goods—to encourage them to spend that credit with the same retailer—and the complex process of refurbishing those goods for resale.
“You can’t just package it up and put it back on the shelf; it’s a full-blown quality assurance process,” Venditti says. “[For apparel,] you have to open up [the package], inspect the item, and then clean, steam, lint-roll, and repackage it. No retailer wants to get something shipped back to them that looks like someone wore it mowing the lawn.”
THE COST OF QUICK TURNAROUND
To accelerate the process of handling returns, many facilities are turning to automation. For example, some DCs are employing autonomous mobile robots (AMRs) to ferry returned goods to storage locations in far corners of the DC, eliminating travel time for human workers.
Other companies are looking to digitization, applying technology such as data analytics and machine learning to squeeze inefficiency out of the process and maximize the revenue they capture at resale. The movement has led to the emergence of specialized startups like Optoro,Narvar, FloorFound,ReverseLogix, and Happy Returns that help retailers and 3PLs with returns disposition. All founded since 2010, these tech vendors use various strategies to accelerate the process of getting returned goods back into the marketplace at the lowest cost, building efficient networks to handle the goods and applying algorithms to eliminate unnecessary steps and improve inventory visibility throughout the goods’ journey. Other platforms like the online liquidation sites B-Stock and Overstock.comsupport business-to-business (B2B) auctions or virtual consumer marketplaces where the returns can swiftly be resold.
Some 3PLs are combining both approaches, investing in automated material handling equipment as well as specialized software for use in dedicated returns-processing facilities. That is the approach taken by transportation and logistics giant XPO Logistics Inc., which says its strategy allows retailers and manufacturers to profit from the returns revolution, not just survive it.
“We create dedicated hubs—often with hundreds, or even thousands, of employees—that focus entirely on returns. These hubs optimize value for customers by using advanced automation to sort, repackage, and get goods back into the supply chain 10 to 15 times faster than before, minimizing inventory losses,” says Malcolm Wilson, CEO of XPO Europe, who was recently named to lead XPO’s planned contract logistics spinoff.
“Consumers are purchasing more, and different, items online, which means they’re returning more than ever, too. It’s especially evident in apparel now that home is the new fitting room,” Wilson said in an email. “We’ve developed predictive analytics that can forecast the future rate of return for product and adjust for seasonality to ensure our customers are prepared for the next phase of the e-commerce revolution.”
Handling returns at a dedicated hub or regional DC also saves on transportation costs, says Rob Zomok, president of global operations and client experience at Inmar Intelligence, an information technology and services company in North Carolina. By limiting shipments of returns to nearby geographic zones, a retailer can avoid the unnecessary expense of shipping an item returned by a customer in Massachusetts back to a store or processing site in California, only to discover it’s not in saleable condition.
Retailers can also control costs by using specialized returns software to access an expanded range of options for disposing of those goods, Zomok adds. Such technology can help users decide whether to send returned inventory back into stock, return it to the wholesaler, donate it, recycle it, dispose of it through liquidation sales, or—as a last resort—consign it to a landfill.
MORE, BETTER OPTIONS
Despite all the associated challenges, retailers are likely to keep rolling out new “boutique” returns options—largely because they keep shoppers coming back. A recent survey by voice solutions specialist Voxware found that 97% of consumers “agree or strongly agree” that the way retailers handle returns influences whether they will purchase from that retailer again in the future.
So in an age when the customer experience, or “CX,” is king, returns are a new battlefield for customer loyalty. That’s led many retailers to relax their returns policies, whether it’s by extending their returns windows or by giving buyers more options for returning items purchased online. For example, rather than taking the package to the nearest post office, consumers can now return unwanted items to a store, drop them off curbside at a retail outlet, or use alternative dropoff points like shopping mall service desks or UPS Store and FedEx Office outlets. Some retailers will even dispatch carriers to customers’ homes to pick up the returns.
But services like that are expensive to provide, so retailers in 2021 are watching their competitors closely to see who blinks first. The coming year will reveal which practices endure after the pandemic subsides and shoppers once again venture into physical stores.
Editor's note: This article was revised on April 16 to change the description of Inmar Intelligence from “a retail consulting and technology services company” to "an information technology and services company."
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."