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."
Robots are revolutionizing factories, warehouses, and distribution centers (DCs) around the world, thanks largely to heavy investments in the technology between 2019 and 2021. And although investment has slowed since then, the long-term outlook calls for steady growth over the next four years. According to data from research and consulting firm Interact Analysis, revenues from shipments of industrial robots are forecast to grow nearly 4% per year, on average, between 2024 and 2028 (see Exhibit 1).
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
Material handling is among the top applications for all those robots, accounting for one-third of overall robot market revenues in 2023, according to the research. That puts warehouses and DCs on the cutting edge of robotic innovation, with projects that are helping companies reduce costs, optimize labor, and improve productivity throughout their facilities. Here’s a look at two recent projects that demonstrate the kinds of gains companies have achieved by investing in robotic equipment.
FASTER, MORE ACCURATE CYCLE COUNTS
When leaders at MSI Surfaces wanted to get a better handle on their vast inventory of flooring, countertops, tile, and hardscape materials, they turned to warehouse inventory drone provider Corvus Robotics. The seven-year-old company offers a warehouse drone system, called Corvus One, that can be installed and deployed quickly—in what MSI leaders describe as a “plug and play” process. Corvus Robotics’ drones are fully autonomous—they require no external infrastructure, such as beacons or stickers for positioning and navigation, and no human operators. Essentially, all you need is the drone and a landing pad, and you’re in business.
The drones use computer vision and generative AI (artificial intelligence) to “understand” their environment, flying autonomously in both very narrow aisles—passageways as narrow as 50 inches—and in very wide aisles. The Corvus One system relies on obstacle detection to operate safely in warehouses and uses barcode scanning technology to count inventory; the advanced system can read any barcode symbol in any orientation placed anywhere on the front of a carton or pallet.
The system was the perfect answer to the inventory challenges MSI was facing. Its annual physical inventory counts required two to four dedicated warehouse associates, who would manually scan inventory to determine the amount of stock on hand. The process was both time-consuming and error-prone, and often led to inaccuracies. And it created a chain reaction of issues and problems. Fulfillment speed is one example: Lost or misplaced inventory would delay customer deliveries, resulting in dissatisfaction, returns, and unmet expectations. Productivity was also an issue: Workers were often pulled from fulfillment tasks to locate material, slowing overall operations.
MSI Surfaces began using the Corvus One system in 2021, deploying a small number of drones for daily inventory counts at its 300,000-square-foot distribution center (DC) in Orange, California. It quickly scaled up, adding more drones in Orange and expanding the system to three other DCs: in Houston; Savannah, Georgia; and Edison, New Jersey. The company plans to add more drones to the existing sites and expand the system to some of its smaller DCs as well, according to Corvus Robotics spokesperson Andrew Burer.
Those expansion plans are based on solid results: MSI’s inventory accuracy was about 80% prior to the drone implementation, but it quickly jumped to the high 90s—ultimately reaching 99%—after the company initiated the daily drone counts, according to Burer.
“We actually had an incident early on where one of the forklift drivers ran into the landing pad, rendering it inoperable for about a week while the Corvus team fixed it,” Burer recalls. “When we restarted the system, we noticed MSI’s inventory accuracy had dropped down to the 80s. But after flights resumed, accuracy quickly improved back to near perfect.” He adds that such collisions are rare as Corvus mounts landing pads high off the floor to avoid impacts but that accidents can still happen.
Overall, the system has helped speed warehouse operations in two key ways: First, the accuracy improvement means that associates no longer waste time searching for missing material in the warehouse. And second, the associates who used to conduct the physical inventory counts have been reallocated to picking and replenishment—creating a more efficient, and optimized, workforce.
A SAFER, MORE EFFICIENT WAREHOUSE
Robot maker Boston Dynamics is well-known for its Stretch and Spot industrial robots, both of which are at work in warehouses and DCs around the world. Earlier this year, Stretch made its debut in Europe, teaming up with Spot at a fulfillment center run by German retail company Otto Group. The deployment marks the first time Stretch and Spot are being used together—in a partnership designed to improve Otto Group’s warehousing operations by increasing efficiency and making warehouse work safer and more attractive to workers.
The partnership is part of a two-year project in which Boston Dynamics will deploy dozens of its warehouse robots in Otto Group’s European DCs. The first location is a fulfillment site operated by Hermes, the company’s parcel delivery subsidiary, in Haldensleben, Germany—a facility that handles as many as 40,000 cartons of goods on peak days.
At the site, Stretch—which is a mobile case-handling robot—autonomously unloads ocean containers and trailers, using its advanced perception system to pick and place boxes onto a telescoping conveyor inside the container or trailer. Spot—a quadruped robot—helps with predictive maintenance by collecting thermal data and performing acoustic and visual detection tasks throughout the facility to reduce unplanned downtime and energy costs. One of Spot’s jobs is to detect air leaks in the facility’s warehouse automation systems; future duties may include conveyor vibration detection, according to leaders at Otto Group.
Both Stretch and Spot will help the Haldensleben facility run more efficiently, especially during fall peak season when volume increases and work intensifies. The addition of Stretch addresses safety and comfort issues as well: Trailer unloading—a process that entails repeatedly lifting and moving heavy boxes inside a trailer, which can be dark, dirty, cold, and/or hot, depending on the weather—tends to be unappealing to workers. Along with reducing the amount of labor required, automating these tasks will have the added benefit for European facilities of helping them comply with EU (European Union) regulations limiting the amount of time workers can spend in those conditions.
Essentially, the robots are making life easier on the warehouse floor and for the company at large.
“Stretch is going to have a ton of benefits for customers here in the EU,” Andrew Brueckner, of Boston Dynamics, said in a recent case study on the project.
The trucking industry faces a range of challenges these days, particularly when it comes to load planning—a resource-intensive task that often results in suboptimal decisions, unnecessary empty miles, late deliveries, and inefficient asset utilization. What’s more, delays in decision-making due to a lack of real-time insights can hinder operational efficiency, making cost management a constant struggle.
Truckload carrier Paper Transport Inc. (PTI) experienced this firsthand when the company sought to expand its over the-road (OTR), intermodal, and brokerage offerings to include dedicated fleet services for high-volume shippers—adding a layer of complexity to the business. The additional personnel required for such a move would be extremely costly, leading PTI to investigate technology solutions that could help close the gap.
Enter Freight Science and its intelligent decision-recommendation and automation platform.
PTI implemented Freight Science’s artificial intelligence (AI)-driven load planning optimization solution earlier this year, giving the carrier a high-tech advantage as it launched the new service.
“As PTI tried to diversify … we found that we needed a technological solution that would allow us to process [information] faster,” explains Jared Stedl, chief commercial officer for PTI, emphasizing the high volume of outbound shipments and unique freight characteristics of its targeted dedicated-fleet customers.
The Freight Science platform allowed PTI to apply its signature high-quality service to those needs, all while handling the daily challenges of managing drivers and navigating route disruptions.
STREAMLINING PROCESSES
Dedicated fleets face challenges that evolve from day to day and minute to minute, including truck breakdowns, drivers calling in sick, and rescheduled appointment times. PTI needed a tool that allowed for a real-time view of the fleet, ultimately enabling its team to adjust truck and driver allocation to meet those challenges.
The Freight Science solution filled the bill. The platform uses advanced analytics and algorithms to give carriers better visibility into operations while automating the decision-making process. By combining streaming data, a carrier’s transportation management system (TMS), machine learning, and decision science, the solution allows carriers to deploy their fleets more efficiently while accurately forecasting future needs, according to Freight Science.
In PTI’s case, Freight Science’s software integrates with the carrier’s TMS, real-time electronic logging device (ELD) data, and other external data, feeding an AI model that generates an optimized load plan for the planner.
“We’re an integrated data analytics company for trucking companies,” explains Matt Foster, Freight Science’s president and CEO. “We’re talking about AI.”
The benefits of the real-time data are difficult to overstate.
“We’ve been able to execute in the toughest of situations because we’ve got real, live data on how long each event is actually going to take and a system to aid and even automate the decision-making process,” says Chad Borley, PTI’s operations manager. “From what traffic patterns we are battling in the morning and evening with rush hour and things like that, to the impact of additional miles to a route, or even location-specific dwell times, it’s been a huge differentiator for us.”
REALIZING RESULTS
A case in point: the collapse of Baltimore’s Francis Scott Key Bridge in March. PTI was scheduled to go live with a new dedicated account in the area just days after the collapse, which would mean rerouting and the potential for longer transit times. Instead of recalculating based on assumptions or latent data, PTI was able to reroute freight based on real-time information and analytics to give the customer timely updates.
“With the bridge going out, that changed our ability to make as many turns a day as the customer would expect,” Stedl explains. “But one of the things Freight Science could do [was to] quickly [assess] how much of an impact that traffic would have [and] what the turns [would] be based on what’s happening on the ground.
“So we were able to go back to the customer and readjust expectations in a real way that made sense, using data. Now expectations can be reset¾we’re not asking for forgiveness when there’s no reason for it.”
The system’s advanced algorithms make load planning more cost-effective and scalable as well. The platform allows PTI to monitor trucks, trailers, and driver hours in real time, recommending additional loads with remaining driver hours that would otherwise be wasted.
And they’re doing it all with much less. Stedl says tasks that used to require five people and hours of work can now be accomplished by one person in mere minutes, improving productivity and profitability while reducing labor and operational costs.
Terms of the deal were not disclosed, but Aptean said the move will add new capabilities to its warehouse management and supply chain management offerings for manufacturers, wholesalers, distributors, retailers, and 3PLs. Aptean currently provides enterprise resource planning (ERP), transportation management systems (TMS), and product lifecycle management (PLM) platforms.
Founded in 1980 and headquartered in Durham, U.K., Indigo Software provides software designed for mid-market organizations, giving users real-time visibility and management from the initial receipt of stock all the way through to final dispatch of the finished product. That enables organizations to optimize an array of warehouse operations including receiving, storage, picking, packing, and shipping, the firm says.
Specific sectors served by Indigo Software include the food and beverage, fashion and apparel, fast moving consumer goods, automotive, manufacturing, 3PL, chemicals, and wholesale / distribution verticals.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”