Trends in reverse logistics: which ones will be hot in 2023?

In .Data & applied AI, .Logistics & Transportation, .Software, Blogfest-en by Baufest

Changes in consumer buying habits challenge companies to adapt their business flows to meet the demand, matching new customer expectations and requirements.

Tuesday 28 - March - 2023
Una mujer escanea el código de barras de una caja para confirmar el envío del cliente en la oficina de correos.

Faced with this, the top companies in the market have raised the bar in terms of providing a superior experience for their customers, both in the purchase and in the process of exchanging or returning products. This scenario will strongly drive reverse logistics processes, a topic that has been talked about a lot lately, especially in the retail and mass consumption sectors, which seek to optimize the management of the supply chain.

But what is reverse logistics and why is it gaining prominence? Reverse logistics is the set of activities that take place after the sale of a product to recover value and end the product’s life cycle. It usually involves returning a product to the manufacturer or distributor or sending it for repair or recycling. In other words, it is the process of moving goods from the final destination and receiving returned products/materials for proper disposal or reconversion. And it is comprised of activities, including remanufacturing, redesign, and refurbishment.

Activity in focus

One study valued the size of the global reverse logistics market at $514 billion in 2022 and anticipates expansion at a compound annual growth rate of nearly 5% until 2028, when it will reach $679 billion.

Returns were gaining importance in online retail. Successful e-commerce companies “are increasingly valuing transparent return policies, optimized reverse logistics processes and smart strategies to reduce returns”. They seek to use the latter to increase customer loyalty and to attract new customers.

Statistics show that 56% of shoppers want a hassle-free returns policy; 81% want simple, easy and free returns; and 92% say they would buy something again if they were satisfied with the returns policy, while 67% say they typically check the returns page before making a purchase. In addition, 62% of shoppers are more likely to make an online purchase if they can return an item.

Integration, profitability and transparency

At Baufest we observed seven main trends for 2023 around reverse logistics, focusing on the three axes that companies will seek to maximize: business, users and technologies.

Integration of reverse logistics into the overall logistics flow.
Last-mile operations in both worlds will be integrated with the aim of making costs more efficient by optimizing delivery routes and returns under the same routing order, for example. This will involve companies implementing data unification and systems integration strategies.

Shifting the focus to the profitability of reverse logistics
Historically, reverse logistics was considered a cost. Since last year, companies have been looking to focus the objectives for the area not in terms of reducing the cost of returns operations but in increasing the profitability of the sector (and ultimately, of the companies). This is achieved by objectively measuring the return produced by making operations more efficient and reselling returned products that can be returned to stock. To this end, it is essential to streamline the return flows and that the systems allow the merchandise to be returned to stock as soon as possible.

This additional strategy to maximize the resale of returned products examines those products that will have to be offered as second-hand after their reconditioning and value enhancement. The focus on social and environmental responsibility strongly drives this trend and it is necessary for companies to develop responsible and sustainable practices along the entire sales and after-sales value chain. At this point, the use of new technologies and the optimization of delivery and picking circuitswill become very relevant.

Greater visibility for the consumer
Companies will be pushed to standardize communication channels in both logistics and reverse logistics to offer greater visibility and a more satisfactory experience to consumers. Consumers expect seamless communication with companies and demand fast and accurate shipments and returns, and greater traceability of orders or exchanges.

Automation, predictability, efficiency

Emerging technologies are also putting their stamp on the field of reverse logistics. This gives rise to a set of technology trends such as the following:

Process automation.
This trend will continue through the development of tailor-made solutions to speed up times, reduce efforts and optimize costs. The main retail chains are focusing on improving the digitization of physical warehouses through the use of mobile devices scanning returned packages to reintegrate products as soon as possible; use of augmented reality to obtain details of the product, the return and the destination. They also seek to integrate the returns register with the company’s stock to speed up the resale of products. And they seek to apply robotics and artificial intelligence (AI) to process large volumes of transactions within logistics centers.

Application of artificial intelligence, data analytics, and machine learning.
These technologies will be used to further streamline the area’s processes, reduce human error, and speed up response times. As anticipated in the previous point, companies will seek to implement AI to facilitate warehouse operations, but also to improve product traceability and have predictive models that help them understand how their customer portfolio will behave with respect to returns and exchanges, quantify the volume of transactions to be handled over time, know what the main types of returns/exchanges will be, and this will enable them to make better decisions.

The end of free returns?
This last trend is presented as a dilemma, although at Baufest we believe that it could become a reality by the end of 2023. Many people today tend to make compulsive purchases that they later see they don’t really need, and resort to returns. Some companies are analyzing whether they will end with free returns, or not, or do it partially through new formulas such as free returns for certain products, free returns only for exchanges or the application of customized costs depending on the buyer’s profile.

In conclusion, it should be noted that reverse logistics used to be one of the most neglected flows in companies because it was associated with a cost or a dissatisfied customer. From now on, the objective of companies will be to work to change this perception and improve the customer experience by relying on new technologies to differentiate themselves from the competition.