Home Business Podcast: A Tsunami of Returns and Understanding Reverse Logistics
Podcast: A Tsunami of Returns and Understanding Reverse Logistics

Podcast: A Tsunami of Returns and Understanding Reverse Logistics

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Podcast with Dr. Oliver Hedgepeth, Faculty Member, Transportation and Logistics Management, American Public University and Tony Sciarrotta, Executive Director, Reverse Logistics Association

The COVID-19 pandemic led to a huge surge in online shopping. As a result, more goods were returned to retailers because products bought online are more likely to be returned than when purchased from a store.

Start a reverse logistics management degree at American Public University.

In this podcast, APU business professor Dr. Oliver Hedgepeth talks to Tony Sciarrotta, Executive Director of the Reverse Logistics Association (RLA) about the impacts of this major shift to e-commerce and the high costs associated with returns. Learn more about reverse logistics – all the activity after a product is purchased – and the innovative ways retailers are recovering financial losses from returns, including repairing, refurbishing, repackaging, reselling, and/or recycling items.

Read the Transcript

Dr. Oliver Hedgepeth: Welcome to this podcast, Innovations in the Workplace. I am your host, Oliver Hedgepeth. Today, we’re going to be chatting about reverse logistics. This topic is especially important due to the impact of the 2020 pandemic, and the economic stresses have to do with all matter of retail and wholesale business and supply chains.

Today, my guest is Tony Sciarrotta, who heads the Reverse Logistics Association. It’s called RLA. And it’s an organization dedicated to helping large and small retail businesses succeed, especially in this timeframe. Welcome, Tony, to Innovations in the Workplace. And thank you for joining me.

Tony Sciarrotta: Thank you, Oliver. It’s an honor to be here. Feel very fortunate to get a chance to talk about an important subject.

Dr. Oliver Hedgepeth: What I’d like to do is I have some questions I’d like to ask you that I think our audience would really love to hear. Many of our audience don’t know what reverse logistics is. They’re probably not really sure what logistics is other than picking a box of cereal off the shelf at the grocery store. So can you tell the audience, what is reverse logistics, from your perspective? Your expert perspective?

Tony Sciarrotta: Well, there’s a little history lesson here, Oliver. The history lesson is that in 1998 when I was working at Philips Consumer Electronics, the global manufacturer, producer of many goods, reverse logistics as a term had just barely come into existence.

And it was actually Dr. James Stock of Central Florida University, now, who invented the term; used it the first time in a book in like 1994 that he wrote about [the] supply chain. And then in 1998, when I was pulled out of sales and marketing and told to fix the returns problem at the company, I went looking on the internet.

And if you do a search on reverse logistics, not as much was coming up back then. And it’s because reverse logistics had not been very well defined.

The book that I downloaded for free off the internet was called “Going Backwards,” by a couple of other academics, as you know, Oliver. Dr. Dale Rogers and Dr. Ron Lempke, University of Nevada, had written this great book, “Going Backwards: What is Reverse Logistics?”

So I will try to summarize the book by saying in our view at the association, everything that happens after the point of sale is part of the reverse logistics space. Literally. Walking out the door with a product—out of a Walmart store or a Macy’s store or any other store, retailer or delivery and so on— after you get that product, within corporations the PNL stops there. They made money on you when they sold that product.

Everything that happens after that — when you open the box, when you dispose of the box, when you try to get into that packaging, when you try to understand what this thing is and how it works and what you’re going to do with it. And does it fit? And does it look good on you? And everything that goes through that customer experience, is part of the reverse logistics world, because it belongs to a different PNL in every corporation.

You’re now in the call center PNL if you’re calling in for help. You’re now in the service PNL if you’re calling for help and so on. Everything that happens after the sale would be part of the reverse logistics world.

Dr. Oliver Hedgepeth: It is an interesting topic. I’ve looked into it, myself, about things being returned. And some of them are routinely returned. There are other things like paint and other things that are hard to return.

Some things you can’t return. Tell me, how do you see reverse logistics impacting people’s lives today?

Tony Sciarrotta: You’re correct, Oliver, that reverse logistics today is impacting people a lot more in ways that they don’t even completely understand. Not going back too far, but let’s point out the fact that, let’s use numbers for a moment.

And let’s say that the U.S. economy, the retail aspect of the economy, is a six-trillion-dollar industry. And of that six trillion, through last year maybe about 8% to 9% of those products sold went back as a return.

And something had to be done with those products. Now, what was known last year, and certainly more so today, is people who buy products at stores return them less than people who buy things online.

And we have seen the shift this year, of course, to the higher e-commerce industries world, right? A lot more things are being sold online and, via e-commerce, shipping to your door, whether it’s your home office, a building [you] work in, a locker, etc.

So, reverse logistics, the impact there is that returns are higher for e-commerce for a number of reasons, which means that there’s a lot more product that is being returned. Now, that being returned part either means you’re shipping it back, you have it picked up, you drop it off in a store, you drop it off in another store, a UPS or a FedEx drop station or the post office.

Reverse logistics is impacting your life a lot more because you’re buying more online, you’re getting more and there are things going on in e-commerce that drive that higher rate of returns.

And Oliver, I’ll give a couple of examples here. If you’re buying online, the best example, of course, would be clothing or shoes. And you are buying from a company. You’re buying brand names you used to buy in a store, but in a store, you tried things on.

When you buy online, you don’t have that luxury. You guesstimate at the size and, unfortunately, unlike the electronics business where a 50-inch TV is always 50 inches diagonal, a small, medium, large can vary from company to company.

So, something called bracketing is happening where people buy the size above what they think they need, a size below. And automatically they’re sending two-thirds back. That’s one example.

You buy more things because the companies make it easier for reverse logistics for you. They make pick-up cards, they make drop-off cards, they make it easy for you to buy extra and send the rest back, which adds to overall cost in the industry that’s not always visible.

The other part about reverse logistics impacting people’s lives that we’re learning more and more is what is the customer experience? That’s something that doesn’t happen as much in forward logistics but it does in reverse.

Because ultimately it’s about what happens, Oliver, when you open up that package. Are you happy with what happens? Are you unhappy? Generally speaking, people don’t return things for fun. They return things because something went wrong with that experience. And so the consumer experience is becoming more and more important, and it’s more of a challenge to manage.

You, as a consumer, sitting at home, you’re quarantined; you’re buying things; you’re sending them back. There’s major impacts to everyone’s life these days. There’s a little other aspect, Oliver, of the porch pirates and how many boxes are being stolen off front porches these days. So, there’s a lot of impact in that reverse logistics to people’s lives, some of which you don’t see every time but some of which is affecting all of us, right?

Dr. Oliver Hedgepeth:  Yeah, especially like the porch pirates. I just made a phone call to my local library when they called me today, sent me an email saying, “You haven’t returned the book that we got for you several weeks ago.” And I made a nice phone call saying, “I placed it in the tray out front of the library last Monday and it was returned.”

And now I’m thinking, “Oh my golly. There were a dozen books out there sitting in front of the library.” I have a feeling it disappeared by a porch pirate.

This e-commerce activity, this online activity, it’s happening more so, again, because of this pandemic. E-commerce is still kind of cracked, and we’re still finding our way around in retail business.

How long do you expect this e-commerce, this online and bracketing under stuff, to continue? Something like this is temporary? Or do you think it’s going to last for a year or so? Or it’ll be gone by Christmas?

Tony Sciarrotta: Oliver, there’s two aspects of that. One is certainly above all of our pay grades, in terms of when will there be a vaccine. When will enough people get it that we feel comfortable doing things in person again, more so?

But the new normal means that many, many more people are buying things online today, right? Stores have reopened, but if you’ve bought things online and you had a good experience, you’re going to keep buying things online.

Now, once upon a time —again, last year, not that long ago —e-commerce only represented about 12 to 14% of that total six-trillion- dollar number of the retail economy. Now it’s going more towards 20%.

It will not all change to e-commerce. Amazon’s not going to run the whole world, nor did Walmart run the whole world with 4,000 stores in our country.

The new normal means that if you’ve had good experiences buying on e-commerce, you’re going to keep doing it. But we don’t believe, again, it will not go to 50% of things being sold will be via e-commerce, groceries, things like that, tend to not go that way.

But certainly, the new normal means today that everyone that’s trying it gets to make a decision. “Oh, I like this. I’m going to stay home and shop from now on.”

And they do that. And again, the impact of that means we’re going to have more returns out there that have to be dealt with.

We’re a global association, and we get to see interesting information from other countries and other parts of the world. For example, in Europe, where e-commerce has been ahead of the United States in terms of the percentage. The UK and France and Germany were [a] much higher percentage a year ago, so their e-commerce numbers have grown even higher, but so have their return rates.

I think I mentioned the U.S. rate of return overall was about 8% or 9%. We see that going to 10 and 11%. Still huge numbers, but in the UK, for example, return rates are somewhere near 15%.

So, there’s variances caused by the e-commerce, the pandemic. But certainly, we see the impact of e-commerce and the new normal there will continue into next year and beyond.

Dr. Oliver Hedgepeth: Well, this is very interesting. And I’m sure our audience is really figuring out how they’re reacting to it and going to be reacting to the future, too, and returning things. I’m continuing now to get boxes on my front porch more so the last six months than before, so my trash can is getting loaded down with cardboard.

Let me turn a question a little bit around. Reverse logistics, you had a real good explanation, but what it is, but you return to something called the Reverse Logistics Association. What is the Reverse Logistics Association, and how does that relate to all these retail businesses? Walmart, Target, or any store? I assume you’re related somehow to that.

Can you explain what [the] Reverse Logistics Association is, and what’s going on and maybe how it impacts us as normal people or students or whoever? Tell me what it is.

Tony Sciarrotta: I appreciate the chance to blow my horn a little bit, Oliver. The Reverse Logistics Association came into existence in 2002 and consists of the world. But the world’s divided into the retailers and manufacturers who have products they make, products they sell, and products that come back. That’s one side of the world of Reverse Logistics Association.

And we do have member companies that you mentioned, such as Walmart, Amazon, Home Depot. And they’re not just members. Those companies happen to be on the RLA Advisory Board.

And all of this information that I’m about to give about RLA is on our website. And we are RLA.org. We are a .org association. And I’ve given one example of the membership.

The other side of the membership are companies with solutions for returns. And those solutions range from how does it get returned? Is it parcel post? Is it picked up? Is it dropped off? So there are solutions providers on the process of the reverse flow.

There are companies who get these products, go through them, disposition them, possibly refurbish them and possibly repair them. There’s that step in between, so there’s some touchpoints.

When I worked at Philips for 25 years, we had our products coming back to — at one point — seven different locations around the country, because we looked for the cheapest bidder. Nowadays, the more efficient way is to bring these products back into one location.

And those are members of the Reverse Logistics Association who say, “We’ll take it all in, we’ll help you sort it, we’ll refurbish it, we’ll repackage it, we will repair it if it needs to be repaired, and we can even help you resell it.” And that’s part of the RLA universe.

The last part of the RLA universe — and an important aspect of what we believe in — is the circular economy so that these products always have an ongoing home. And that last part of it, besides reselling it in that secondary market so that you and I, Oliver, can maybe buy a Dell computer that’s been gently preowned and cleaned up and reworked, you and I can buy it at a value. But if that computer is no longer worth anything in the marketplace then it needs to be recycled, and ultimately those components get reused somehow.

So we no longer talk about a cradle-to-grave lifecycle of products; we talk about cradle to cradle. And that’s what the RLA is all about. Our focus is the circular economy. We consider our members to be the cornerstone of that circular economy because things come back.

That will always happen. What you do with those things makes a difference to the planet, to all companies’ economic and financial pictures, and to all of us as consumers. It makes a difference what happens with those products.

Dr. Oliver Hedgepeth:  My view of reverse logistics when I first started was cradle to grave. You get a product; I’ll put it in the recycle can or I’ll put it in the trash can. It goes to a trash pile, a big trash pile down from my house. Cradle to grave seemed to be it. You’re using a term that I don’t think a lot of people are familiar with: cradle to cradle.

We do have products, I believe, that are being recycled. Because of what’s going on, again, pandemic or just the business of reverse logistics, are new products being created from some of these returned things? I’ve got a can in front of me. It’s made out of aluminum. It says Pepsi on it. And I can throw it in my recycle can. I assume it might come back as something else. It’s not going to come back as a can from Pepsi.

Tony Sciarrotta: That’s a great question; a great analogy. There’s some cautionary notes to throw out here. When I was at Philips and we were taking TVs back as a return and we would fix them and resell them, we had to sell them as refurbished. They could not be sold as new. That’s true of a lot of consumer electronics.

Now, in these other spaces, in the clothing, in the apparel industry and the shoe industry, those products are brought back and they’re generally inspected to some degree. They can be resold as new. Or the other interesting growth in the industries is companies like Patagonia, North Face, Columbia clothing, Adidas in the shoes, they are creating marketplaces for these used products to be resold. And again, there’s implications. How clean are they? The quarantine aspects. Have they been sanitized? All that’s being addressed, of course.

But now you go one step further and that’s cradle to reuse. It’s being reused over and over. At some point, though, clothing and any other product, to your point, Oliver, it does degrade to a point where something has to be done with it.

And I’m proud to say there’s members in the Reverse Logistics Association that take, for example, clothing that’s no longer able to be used as clothing for anyone. And it goes to a factory that separates the fibers and gives you new fibers and new fabric that can be created from that, so it can be reborn as new clothing. And that’s amazing that we can do that now with clothing, with factories that can do this.

Aluminum, plastic, gets recycled and can become many other products. I wouldn’t begin to know where to start with that. There’s so many interesting products. The example of plastic milk jugs can be recycled and turned into plastic material for decks. Home Depot sells this material. You can make decks, your back deck out of it. It lasts forever.

So, there’s really amazing uses for products. And that’s part of that cradle to cradle. It doesn’t just die. It has an opportunity to be reborn.

And that, of course, is the reverse logistics world, the universe, and that circular economy concept that was created a few years ago by the Ellen MacArthur Foundation and other global organizations focused on it. It’s an amazing universe, Oliver, and we are the only association around the world that focuses in this area.

But like I said, we consider ourselves the cornerstone between the manufacturers and the retailers and the solutions providers and that circular economy that allows these products to have some other use in the future. It’s important to all of us. We go away from that use and go to waste to use, return, recover and reborn.

Dr. Oliver Hedgepeth: I want to ask a few questions more about reverse logistics in general and retail, but also about your organization, Reverse Logistics Association. Reverse Logistics Association is not just America. It’s in Europe and Asia. You said something about Europe.

Is Reverse Logistics Association related to what’s going on in the business in Europe? So you get information? And I’m a college professor, that I can maybe get from something going on in Europe or Asia? Are involved in those different parts of the world?

Tony Sciarrotta: We are. And RLA.org, our website, has a lot of information on it now, generally for businesses. But a student, [an] educator, a consumer could go on there and learn a little bit about what is going on with these products.

We publish a magazine regularly and we’ve had articles from you in it, Oliver. We publish a SmartBrief Newsletter on a regular basis. We put out email campaigns with updates of what’s going on around the world.

Granted, most of our focus is North America-based, but many of our companies are global. When you talk about Dell and HP and Cisco and Amazon and so on, and Home Depot. They’re also operating outside of the U.S.

What we’ve done in the past, Oliver, is we’ve had events around the world: seminars, summits and so on. We’ve had them in Amsterdam for — out of our 18 years of existence — I think we’ve done 14 years in Amsterdam, maybe a dozen years in Brazil, maybe 10 years in Singapore representing Asia.

And we will be doing events — all virtual events, of course, right now. So, when we do the event in Europe, our RLA European Summit at the end of September, our members can join online. And we’ll have European colleagues talking about what is being done in Europe in specific areas, such as the customer experience, such as refurbishment, such as recycling. Those are, right now, virtual events. And our member companies are global.

But we also look in Europe, of course, for European-focused organizations. Carrefour is a massive retailer out there. The Media Markt, Tesco. Some of those European-only retailers participate in that summit.

And then when we go to Asia, we look for Asian retailers and manufacturers to participate. It is a problem that’s around the world. Everywhere were products are being sold, products are coming back. What is done with them is the focus of what the RLA is all about.

Dr. Oliver Hedgepeth: Is America kind of leading the way in reverse logistics, returning products and recycling products, compared to countries in Europe or Asia? Are we the leaders in it, or are we just the same? Are we doing the same?

Tony Sciarrotta: Well, that’s a good question, Oliver. And that’s a matter of perspective in some ways. North America, especially United States, we honestly have a culture of entitlement. With companies like, over the years, Sears and Kmart and Walmart, the entitlement in our country was you could take anything back any time that you bought somewhere if you didn’t like it. So we have a higher returns rate than most of the rest of the world. Not all, but most of.

The culture in Asia is to tend to keep things and get them fixed, rather than taking it back as a return. That’s similar culture in Europe, maybe not as much as Asia. There are some cultural differences by country, by continent, and so on. So when you say, “Are we leading the world in reverse logistics?” in a way, yes, because we have more of them than anyone else. So the countries that had lower returns didn’t need to focus as much on reverse logistics.

Now, we’ve exported our problems. We’ve exported the high return rates, because this e-commerce aspect is higher return rates anywhere in the world. So the U.S. being the leader in reverse logistics to some degree is true; that we’ve learned to be more efficient at it because we’ve had more of it. That’s a dubious turn to call us the leader in reverse logistics, but there is some aspect of truth to it, yes.

Dr. Oliver Hedgepeth: I guess the word I should have thought about is cultural. It’s a cultural thing. We Americans are different than those in Britain.

When I first went to London, I realized that I was an American who was loud and talkative. And those Britons having their tea and crumpets or whatever at two in the afternoon were looking at me because my voice sounded like I was using a megaphone.

And I realized, “Oh my gosh. I’ve got to be quiet.” So it could be a cultural thing of how we buy and return things here in America. We do tend to do things like that. It is a cultural thing.

Tony Sciarrotta: It is, to a large degree. And as I said, our culture has grown that — I think the words that used to be on the doors at Sears tells the story — satisfaction guaranteed. And that’s what we’ve come to expect as consumers.

It’s so much of those costs that are accumulated with the high returns. Those are less visible, Oliver, to the consumer because it’s spread. It’s a peanut butter spread.

Rather than making a customer who buys something online pay for it to go back, everyone has free returns. If you had to pay for the return, you might be a little more careful about what you buy and think twice about returning it. But we’ve enabled it.

And, by the way, that challenge also applies to how to make reverse logistics simple, smooth, fast and easy and cheaper. Because as an e-commerce company, if you’re seeing 30 to 40% of the clothing you sell come back, you better find ways to put it in maybe a U.S. Postal Service envelope, rather than a UPS or FedEx box, because that’s going to cost you more both ways.

There’s an example of how we, in the United States, have learned to make reverse logistics simpler and more efficient and more economical on both directions.

Dr. Oliver Hedgepeth: Let me ask a question. Tell me about the current issues or big challenges you see from, let’s say, the Reverse Logistics Association. You got all these members: Walmart and Target and all these people who are, I guess, advising you or being part of a team to explain where things are going in the future.

What are their current issues or what are your current issues in this reverse logistics world? Current issues or challenges?

Tony Sciarrotta: Sure. What those board member companies and other members is a focus on sharing best practices. And companies are willing to do that, because there’s not secret sauce in there. It’s really a matter of “Let’s do something that is more friendly to the environment, that costs less to do.”

So, when you look at the challenges and the bumps in the road, right now, for example, the last few months retailers have actually stopped taking back clothing in some cases because of the risk of the virus being on the clothing. That was in the first few months.

Now there’s a little more safety understanding that, generally, clothing doesn’t keep the virus. But you can also quarantine it, and many of the biggest retailers in our country, Best Buy and Amazon and Walmart and Target, they put the product somewhere safe. It sits there a day before they start to move it.

So there’s safety functions [that] have been built into the returns process. That was a bump in the road. We had to figure out how to do it.

The other bump, though, as a result of that, is we believe there may be as much as $250 to $300 billion in returns sitting in people’s homes that they haven’t brought back yet because they’re not going to the stores or they’re not going as frequently and so on. And that’s a wave of returns that’s out there that’s going to come back. That is a challenge. It’s not here today, but it’s coming soon. That’s a challenge that the retailers and manufacturers are going to have to deal with.

And that’s a frustration because what do you do with spring clothing if you get it back in October? There’s an example. What do you do with a computer that is now outdated; it’s been replaced? There are avenues, but it is the challenge of what do you do with this other wave of returns that’s coming at us. That’s a big challenge.

Another challenge is how do you get the highest recovery from that? Many, many products that are returned have no fault found. There’s nothing wrong with them. Again, it could be an example of the bracketing; that they bought bigger and smaller and that’s all. It just didn’t fit.

Or it could be that the computer or the other electronics product was so complicated the buyer couldn’t figure out how to use it. There’s nothing wrong with most of the products that are returned, so then the challenge is how do you avoid losing too much money on those?

You can’t always sell them as new. But they’re like new so that secondary marketplace, Oliver, that you’ve been aware of for a while, that secondary marketplace is an opportunity to try to recover some of your loss on those products. Because, again, none of us want to throw it away. We want to see it reused, so finding new marketplaces is a challenge, an important one.

Those are some of the things. And by the way, the biggest challenge—and this one doesn’t have an answer yet: How do you process returns efficiently? In other words, think of a Home Depot store, Lowe’s store where you buy a ceiling fan. You walk down that aisle, and all those ceiling fans are in nice white or brown boxes.

You take it home, you open it up, you put it together. You put the blades on, you put it up on the ceiling, and it doesn’t work. How do you take it back? Ninety percent of the time, you don’t take the blades off and put it back in the box. So, now you’ve given these retailers a return that’s not in the box. You could have fan blades sticking out. They have to put it on the truck, send it to a return center. And they have to process it, but it’s a mess.

So efficient processing of these boxes, of these individual items, is a challenge. And it has not been completely solved. So there’s another example of a big challenge, one that still needs some help. Those are some of the challenges, Oliver.

Dr. Oliver Hedgepeth: What about hazardous materials? I guess electronics does have something hazardous in it. There’s batteries, there’s other parts. I remember seeing a TV program about TVs being taken apart in some third-world country and people getting exposed to—they’re melting metals down or something. They’re bad for you to breathe.

What about hazardous materials, say, here in America, if you’re returning something? Are the hazardous materials an issue there? And how to handle it?

Tony Sciarrotta: The good news on that one, Oliver, is you’re right. Years ago, companies were embarrassed by some of their products ending up in third-world countries in massive piles of junk. And they could be toxic and affecting the land, the water, and everything else.

I wouldn’t say it’s gone away completely, but most of the global companies, the retailers and the manufacturers, take it seriously. Most of them operate an entire hazardous materials department that would be attached to, generally, the sustainability group within a company so that they’re very careful about what they do with returns. There’s instructions; there’s clear guidelines on what to do with these products that have hazardous materials.

Another aspect of it is that the computer and the electronics manufacturers have far less hazardous materials. They’ve created ways to disposition lithium ion batteries, certainly can be a hazardous material. But the guidelines are there. Instructions for how to do this are there.

What wasn’t there was the commitment by companies to address them. And that commitment is now there because nobody wants to show up on “60 Minutes” or “Nightly News” as leaking toxic materials into the waste stream because you let your computers get dumped on a palette next to a creek or a landfill. It’s being addressed more seriously. Still important challenges, but hazardous materials are addressed by retailers and manufacturers very aggressively these days.

Dr. Oliver Hedgepeth:  I’m into tracking and data on products. I know that everything on a shelf has got a barcode on it or an RFID tag that’s sending information 24/7 to a computer system. Walmart knows how many hundreds of thousands of things are in all the warehouses and distribution centers and their stores and are moving out the door and where it’s located. We’re tracking that in those retail stores, but when they bring it back, is their data being tracked?

Tony Sciarrotta: That’s still one of the major challenges for members of the Reverse Logistics Association, Oliver. That when it comes back it’s not tracked as well. As you said, when it’s built it has a serial number, when it’s given a barcode.

Unfortunately, those barcodes, Oliver, tend to only reflect what the item is, not when it was born, not when it was returned. Products with serial numbers can and often are tracked. When was it built? When was it sold? When was it returned? Where was it refurbished and resold?

And actually, one of our projects is to create kind of like a CE Facts, like a CARFAX where the VIN number tells you when it was built and where, if it had accidents. We’re in the process of developing that for consumer electronics products that have a serial number. You’re right. It’s an important aspect.

The other new development is that when you do open up a computer, the hard drives, the motherboards, they also have identifications that say when it was built, where, and so on. And if it’s refurbished, it’s also identified.

There’s been major development over the last 10 years in those spaces. But ultimately when goods come back, goods like mixers, toaster ovens and so on, if they don’t have a serial number and they’re dumped into one box and liquidated in a truckload sale of multiple boxes of multiple products, that history is lost. It’s unfortunate that information is lost. And so, another aspect of the association projects is to start to collect some industry data on that information.

And Oliver, you’re alluding to this massive complexity on the back side that doesn’t exist as much on the front because everything’s neat, orderly, tracked—tracked with serial numbers, tracked with barcodes on the palettes. Everything’s tracked very well forward.

Once it goes out the door of a store and comes back, a lot of tracking is lost. And that complexity is — think about and let’s touch base on education here a little bit. There’s a lot of schools that teach people, teach kids, teach professional people about forward logistics supply chain, all the rules and regulations, all the smartest things. But not many places talk about reverse logistics in the education side.

Frankly, American Public University is one of the only ones in the country, if one of the few in the world, that actually offers focus and degrees in reverse logistics, both a bachelor’s and a master’s. We don’t see that offered at other schools. To me, it’s distressing when Penn State, Ohio State, all these top-notch supply chain schools, are not teaching about what can we do on the reverse side?

Start a reverse logistics management degree at American Public University.

And because it’s very important. It may be a small percentage. Eight to nine, 10% doesn’t sound like a large percentage but the cost accumulated with that small percentage could put companies out of business because of those invisible costs.

Let’s put in a plug here for the education side, APU, and the importance of seeing more programs like this and more reverse logistics professionals out there. Very important.

Dr. Oliver Hedgepeth: I appreciate that. And for those listeners, yes, I was the reverse logistics professor who built the bachelor’s and master’s degree program years and years ago, because I saw an issue with a doctoral student. There was a doctoral student who was finishing her dissertation, and I transferred it to reverse logistics because I was learning about that.

And that turned into a lot of courses and things. I saw that, so I appreciate the plug there.

Education is important. And I remember one of my students who worked in a warehouse taking a reverse logistics course. And she went to her boss and said, “All this stuff we’re throwing away, we can make money on it. I learned this from a course.”

And she got promoted to a new title, Reverse Logistics Manager, and they don’t have trash anymore. They have recycled stuff. Thank you. The education is important. Things are happening and this pandemic, again, new jobs are being created all over.

You’ve alluded to new jobs, about people taking care of tracking this new stuff that’s coming in, the volume. Are there any new courses or any new topics?

Tony Sciarrotta: What needs to be looked at is just more reverse logistics courses, period. The leading supply chain certifications organizations, which are the ASCM and the CSCMP, lots of initials, but those are supply chain accreditation certification companies that go to the Walmarts and Dells of the world and say, “We’ll certify your people in supply chain.”

But they don’t offer it in reverse, not realizing there is more money to be saved. You’re not making money in reverse logistics, but you are saving your company so much money.

You gave the example of that woman that moved and became a reverse logistics manager. She’s a hero at her company because if you can cut a 10% return rate like I did at Philips, 11%, and you’re a two- billion-dollar company and you cut it from 11% to 6% to 3%, there’s millions of dollars in savings. And it’s the most impact a company could have is if they look at education, training, get somebody to focus on it and specialize in it.

Oliver, of course, that reverse logistics is not just about that flow. That’s why the terminology can be misleading. The language and the education has to be focused on things like asset recovery, hazardous materials dispositioning, sanitization, and so many aspects that are not at all part of forward logistics.

We’d like to see more education in those areas that I just mentioned. The financial aspect is very important because you have to make a decision about a return. Is it worth bringing it back or not? Or can you do something else with it? There’s financial aspects of reverse logistics that are not being considered or taught at all.

There are extremely small number of reverse logistics directors or vice presidents in industry today. Very small number. And APU has been the only school producing bachelor’s and master’s in there, and you know what your number is for the last 15-20 years that you’ve been offering it. It’s just a drop in the bucket.

We don’t need, necessarily, newer education, advanced education in reverse logistics. We need people to take what’s there now and more of them learn about it. We are actually working, of course, Oliver, with APU — American Public University — to be able to show on our website that these courses exist.

The retailers and manufacturers are asking for more education for their people. They want to train them, so we’re looking forward to the RLA.org page having a section for education to offer a wide range of courses and certifications and advanced courses.

And that’s coming over the next year. That’s part of the mission of the RLA is make it widely available. And with the help of American Public University and your group, we’re going to get there.

Dr. Oliver Hedgepeth:  Okay. Well, you also mentioned a code word nobody understands. You mentioned ASEM; American Society of Engineering Management. I was just shocked when you said that because I am an ASEM member. My Ph.D. is engineering management from Old Dominion University. I’ve been an ASEM member for 20-some years.

And you are absolutely right, they are excellent in supplying supply chain management certificates, degrees. And they know project management up one side and down the other. They can build you a warehouse, okay? They know about logistics. And I’m getting ready to go a conference soon there, and one of the things I did want to talk about was reverse logistics.

And you’re right on. They need to look at more reverse logistics, so thanks for you bringing it up. Now I’m going to be a thorn in their side saying, “Okay, ASEM guys. Let’s look at the cost, the financial aspects,” and all the aspects you brought up today in this podcast. So thank you for bringing up the ASEM.

Tony Sciarrotta: One important aspect of that, Oliver, is in the past I used to fight with the engineers because things like Six Sigma, TQM, were all out there saying, “We make perfect products. Why do you take anything back?”

And then I met, Oliver, for the first time, human factor engineers, usability experts. And they taught us that it’s not whether you make a perfect product or not. Six Sigma is critical, but once you do that, why are you still getting returns?

Because engineers don’t think of the customer experience. That end-consumer experience when they get the product has to go well. They have to be surprised. You have to exceed their expectations or else they’re bringing it back, whether it works or not.

And I’m not an engineer. You are, so you understand. I’d be in these rooms getting pounded by “Look at this: 93% of this digital systems, they all work. There’s nothing wrong with them.”

And I’d be, “But they came back. People didn’t like them. Something went wrong.” It was an endless battle until something called Net Promoter Score took over from Six Sigma.

And if you know a little about that aspect, Oliver, without going too deep it’s about making sure that that consumer experience, that human factor engineer, goes well so that they love your products.

And that’s a big factor of why do we get returns in the first place? That’s another aspect of reverse logistics nobody thinks about. The human factor engineers taught me and I love to learn about them, Oliver. It was a nice counterbalance to those Six Sigma guys who could beat me up so easy.

Dr. Oliver Hedgepeth: Let me add one more little side wrinkle here, since we brought in ASEM and Six Sigma. What about artificial intelligence and robotics? My computer is smarter than I am. I try to type a sentence, and it wants to finish it for me and it does a good job. What about artificial intelligence and robotics? Does that have anything to do with reverse logistics? Any part of reverse logistics that you can see?

Tony Sciarrotta: Yes. Absolutely. Those are future trends. They’re not as applicable today to reverse logistics, but I can give you some scenarios. The robots in a returns warehouse can help the humans there be more efficient because where the fan blades may be sticking out, they still can be driven by a robot to the proper warehouse locations for dispositioning. So, robotics helps on the warehouse side to put those products together and that’s good.

On the AI side, again, not a lot you can do with AI in a returns warehouse except watch the movements of the most efficient processors and use that for training. That’s part of AI.

But the future of AI could be on the front side, Oliver. Let’s pretend you go online to buy something from Amazon or any retailer and it says to you, “You’re looking at shoes.” It says, “You bought shoes from New Balance in the past. You bought size 11 and 12 and you returned the 12. Maybe you want to order the 11s only this time.” So, the artificial intelligence, Oliver, is going to learn about you and it’s going to help you make a purchase decision based on your history that could reduce you having to return anything.

Now, there’s a little bit of a scare factor in there because in a way it’s saying, “You know what? Don’t be an idiot, Oliver. You bought those before, you returned them. Don’t do it again.” That’s basically what it’s going to tell you, but I’m sure AI will find a nice way to say it to you.

Dr. Oliver Hedgepeth: But that makes a really good point. It could reduce the reverse logistics flow. If all of a sudden you want to buy something online, you go to Amazon, for example, and you want to buy this pair of shoes and it comes back, says, “Yeah, Oliver. Tony. Yeah. You don’t want that one. And you want the red one, too, because remember all the colors you were looking at before? You want the red one, not that blue one. You’ll be happier with that.” I can see them almost kind of like a mother figure saying, “Hey, son. You want this one, instead.” But that’s kind of fun.

I looked on your org site, and you’ve got several committees looking at various issues. Can you briefly tell, what are these committees doing?

Tony Sciarrotta: Well, again, RLA.org, the Reverse Logistics Association, is really focused on businesses and less on consumers but more on companies. We have thousands of people, because it is free to join the community. So we have many thousands of people in the community who simply look to us for information that they can get.

Then there are member companies and the member companies have additional benefits, such as joining a standards committee or the recycling committee. And every month, getting a presentation or a discussion on best practices: what’s the newest, what’s the latest and greatest, what’s not going well in the recycling or the wireless industry.

These are industry committees focused on those five areas, and so the member-only people can join the committees, not the average Joe. Average Joe can look at our site, and we do offer some webinars and seminars that are free to anyone in the community.

For example, the standards committee. We mentioned that idea about a CARFAX for electronics, so the committee’s working on that. We mentioned about a serial number tracking. The standard committee is working on that.

The wireless committee presents information about grading standards of the returned phones. So, if you go buy something as a consumer and it’s a grade A or a grade B, those standards have been worked on by the wireless committee and other associations together.

Those committees are making a difference. They’re fixed on trying to fix problems out there that affect everyone. Not dictating, but coming up with guidelines and suggestions. The committees are focused on that. That’s a major benefit.

There’s job postings on our site. Companies such as Walmart, Target, Bose, Vitamix, offer what we call RFIs/RFQs anonymously, so they can post to the community and get companies to respond that can do things for them. We have education, we have blogs, we have media partnerships, we have podcasts like this. We’re excited to be involved in many podcasts nowadays and those are available on the website. So there’s good stuff for consumers, but there’s better stuff for the members.

Dr. Oliver Hedgepeth: Well, Tony, I’m going to have to end it here and now. Between you and me, I figure we could probably talk about this subject for the next four or five hours, but our listeners need to go get a cup of coffee probably and rest.

Tony, I want to thank you very much for joining me today on this episode of Innovation in the Workplace. It’s something we’re really trying to get a handle on, American Public University, to bring the messages to the public and our students about what’s going on in the world. And reverse logistics really is one of those key things that we all need to understand more about. And I want to thank you very much for joining me today.

Tony Sciarrotta: Well, Oliver, it’s been an honor. As I said, I appreciate being able to bring this topic to the public’s attention. I appreciate the chance to blow the horn not just for the RLA.org but also for APU, because we do not have enough education and there are so many opportunities coming.

I always say I had the opportunity to become a hero at Philips by reducing returns. And anyone who’s listening, that’s something you get to do in the future if you focus in this area. You get to be a hero. You get to make a difference.

And it’s a tremendous opportunity, so thank you for the chance to tell people all about it. And I hope to hear from some of them. I’m on the RLA.org page under the management team. They can see a picture of me, they can write me a note, they can reach out. Oliver, thank you for that opportunity, as well.

Dr. Oliver Hedgepeth: And thank you to our listeners for joining us today. And you can learn more about this topic and similar issues about reverse logistics by looking at APUS blog sites as well. And please, do go to RLA.org as well. Everybody, stay well. Thank you for listening and have a good day.

About the Speakers

Oliver HedgepethDr. Oliver Hedgepeth is a full-time professor at American Public University (APU). He was program director of three academic programs: Reverse Logistics Management, Transportation and Logistics Management and Government Contracting. He was Chair of the Logistics Department at the University of Alaska Anchorage. Dr. Hedgepeth was the founding Director of the Army’s Artificial Intelligence Center for Logistics from 1985 to 1990, Fort Lee, Virginia.

Tony Sciarrotta became the Executive Director and Publisher at the Reverse Logistics Association in 2016 after 12 years of active involvement on the Advisory Board and on Committees. In his 35-plus years in the consumer products industry, Tony has held various positions, including 15 years in returns management at Philips. Tony Sciarrotta

During his Philips years, Tony developed new reverse logistics strategies and implemented many new returns initiatives. He worked with retail partners and industry groups on best practices still being used. Tony then became an evangelist for improving the customer experience to reduce returns and their associated costs. Today, Tony is considered a subject matter expert in reverse logistics and speaks for the industry at conferences all over the world.

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