Edition 84
The Global Trend of Reverse Logistics
by Longji Tang, VP Strategy & CIO, Guangzhou JST Logistics

Return to Menu

A Review of the 2017 North America Annual Conference of the Reverse Logistics Association.

As the representative of Guangzhou JST logistics, I attended the 2017 North Amercia Annual Conference of the Reverse Logistics Association (hereinafter referred to as RLA) held in Las Vegas from February 21st to 23rd. The conference was chaired by the newly selected Executive Director of the RLA, Tony Sciarrotta. There were 400+ delegates from North America, South America, Europe, Asia and Oceania. They came from the retail industry (such as Amazon, Walmart, Home Depot,...), high tech OEM (HP, Dell, Intel, Philips, LG,...), as well as the supply chain and reverse logistics service providers (FedEx, Genco, Opotoro, USPS,...), and other enterprises and organizations. Several well-known university professors (for example: Prof James Stock, one of the pioneers in the field of reverse logistics research.) also attended the conference. The conference lasted three days, including the four main keynotes, nine panel discussion, and other exchange activities. This year’s conference is mainly related to the following four major elements of the plate:
1. The trends of reverse logistics development (Trend)
2. The challenges and development strategyof reverse logistics (Strategy)
3. The best practices of reverse logistics (Best practices)
4. The technology standard of reverse logistics (Standards)

This article presents the essentials of the above four main contents, for the reverse logistics and supply chain industry and relevant enterprises who are referring and learning about the industry.

Development trend of reverse logistics
The four keynote speeches focused on discussing the development trends of reverse logistics. The main argument about the development trends of reverse logistics are:

1. The 2017 world has begun to enter the Internet of Things (IoT) era. Reverse logistics should prepare to users’ returns in the IoT era. Intel product quality strategy director Scott Lofgren’s first keynote speech entitled “2017 Reverse Logistics Global Overview – Examining consumer returns in the age of IoT (Internet of Things) – How scared should you be and how prepared are you?”. Scott first pointed out that we have entered the IoT era from the Internet era. He reviewed the history of the Internet era, the reverse logistics of the main connecting equipment PC’s, pointing out that PC manufacturers costs in return and after-sales services are staggering. According to the annual sales of 40 million 100 thousand units of PC calculation, the cost of $1 billion 480 million, on average, each sold PC spent $95 in reverse logistics. Early Consumer Electronics Association (CEA) estimates that the cost of returns for consumer electronics can be as high as $10 billion a year. The United States and many countries in the world are developing reverse logistics technologies and standards to try to reduce the cost of return and after-sales service. Scott lists the following key standards and techniques:

(a) UPnP (Started to allow for all devices on the home network to be able to automatically discover and control each other)
(b) DLNA (To ensure content could be moved from device to device within the home network)
(c) WFA (Transport interoperability)
(d) EoU/PC Quality Roundtable (Logistics tracking, data collection, best known methods, color coding, set up maps, consulting, measurement tools)

Many other standards efforts for interoperability and new technologies (ex. USB, PCI, etc…)
These standards and technologies help to improve the reverse logistics of consumer electronics and reduce the cost of after-sales service:
1. It takes time to define and implement standards to assist with market growth
2. Early identification of needs and efficient execution are vital

Then Scott’s speech provides a forecast of the development of reverse logistics in the era of Internet of Things:
The author adds an interesting picture of CISCO’s Internet of Things forecast as follows:

According to forecasts (Figure 2 and 3), by the end of 2025, there will be more than 95 billion IoT devices. The annual shipments will reach up to 14 billion 500 million devices. Such a huge IoT equipment supply chain needs a strong forward logistics support, at the same time, the IoT equipment after-sales service, return and recycling has brought unprecedented challenges to reverse logistics. However, it also brings new business opportunities to reverse logistics. Scott finally pointed out how the reverse logistics industry should deal with this challenge to understand the impact of the IoT environment on reverse logistics, and provide data, tools and solutions to improve the ecological environment of the Internet of Things.

• Continue work on Bar coding for enhanced tracking and information gathering
• Support standards efforts for increased interoperability
• Gather and analyze IoT return and call data to drive speak with data to drive improvements
• Identify or develop one best known method (or standard) to allow for ease on implementation and lowers consumer confusion - Sample areas rework, refurb, upgrades, return flows, etc…

2. In addition to the development of the Internet of Things in promoting the development of reverse logistics, many other new technologies, such as Digital Assistance, 5G, AI, etc., are also promoting the development of reverse logistics. Customer Technology Association (CTA: Client Technology Association) Steve Koenig in his keynote speech, “CES 2017 Trends Implications for Return”, introduced the CES 2017’s top four technology trends forecast:

• (Digital) Assistance is Everywhere
• 5G – the Future of Connectivity
• Artificial Intelligence – Getting Acquainted
• Biometrics Break Through
• And More!

Digital assistants have brought challenges and new opportunities to reverse logistics.

5G so fast, it will bring the revolution of the connection, so that real-time operations, such as real-time intelligent reverse logistics management will become possible. Steve finally pointed out:

(I) The integration of digital management and physical and digital experience is the direction of reverse logistics
(II) Artificial intelligence technology can help improve the efficiency and precision management of reverse logistics
(III) Biometrics can help improve the security of reverse logistics
(IV) A wide range of connectivity and customization will help reverse logistics to achieve real-time management and rapid response.

In short, the use of modern technology to improve the ability and efficiency of reverse logistics, reduce costs, reduce returns is a trend of reverse logistics.

3. Another trend of reverse logistics is the application of AR technology. Barton L Guthrie famous brain surgeon in his keynote speech “Examining the role of Augmented Reality in the future of Reverse Logistics” introduces the concept of reverse logistics into the medical industry, he takes the patient visits (surgery or medical service) as “return” or “customer service”, and applies AR technology for medicine after-service, reducing patient visits. This technology can save a lot of physician services spending (which include the patient expenses, $17 billion in social spending, hospital expenses), and improve the hospital and doctor credit score.

4. Reverse logistics will play a key role in circular economy. This is an important trend in the development of reverse logistics. RLA conference hosted a panel on circular economy. Firstly, circular economy adviser Carrie Snyder presented a speech about circular economy and reverse logistics, she pointed out that the circular economy is the foundation of a smart city. Smart logistics, especially the smart reverse logistics plays a key role in the realization of a smart city. The delegates are well educated. HP, Acer and Home Depot reverse logistics managers exchanged their company’s experience in the use of reverse logistics in the circular economy.

5. In today’s retail environment, understanding the trend of the secondary market is critical for reverse logistics. B-STOCK Solution’s vice president Eric Moriaty in the secondary market panel gives the trend analysis of the retail market:

Figure 6 points to retail trends – Consumer behavior continues to shift:
• E-commerce growing 15% annually
• E-commerce sales ~ $5000B by 2018
• 20-30% customer return rate
• Brick and mortar stores shifting to omni-channel
• Buyers expect no-hassle, cross-channel return policies

Note: we should also focus on China’s retail, especially the new retail trends and customer returns and data.

From Figure 7, we can see the increasingly serious problem of customer returns, customer returns in 2017 will reach $450 billion.

What impact is this having on warehouse space? Human resources? 3rd parties? Technology developments? Tracking & data analysis? Policies? and so on. It is worth pondering. Figure 8 below shows the old and new types of secondary market sales channels, where new channels, such as B2B and SaaS platforms will be the future direction of development.

2. The challenge and development strategy of reverse logistics
The previous section has proposed the challenge of reverse logistics facing new markets {such as IoT (Internet of Things), AI (Artificial Intelligence)}. The conference also discussed the challenges faced by reverse logistics and its development strategy. These challenges include:
1. The challenge of reverse logistics cost: the rise of transportation cost and the increase of human resource cost.
2. The value challenge of reverse logistics: how to get the maximum profit from the reuse, recycle and recovery and achieve the maximum loss recovery.
3. The aging challenge of reverse logistics: how to deal with the return and surplus inventory efficiently. Professor James notes that the timeliness of reverse logistics (deal with returns, residual inventory...) is proportional to the market value of the goods. The following figure 9 shows that the difference in ageing will result in a reduction in the market value of the old goods.
4. The challenge of the accurate of reverse logistics: how to avoid and reduce the return fraud, loss, damage.
5. The challenge of customer loyalty in reverse logistics: how to keep customers loyal to the product and buy back rate.
6. The challenge of international operation of reverse logistics: how to manage international returns.

Faced with these challenges, the conference put forward the following reverse logistics development strategy:
1. Reverse logistics should use best practices to help enterprises reduce returns for businesses. Establish and develop excellent aftermarket service systems, enhance customer confidence in the product, and loyalty.
2. The use of the Internet platform to build an end-to-end system, connecting customers, OEM, retailers, reduce costs and risks.
3. Develop digital reverse logistics, the use of big data and data analysis, for enterprises to find the probability of return and the root causes, thereby reducing future returns and inventory.
4. Establish and utilize reverse logistics technical standards, such as the RLA SQRL two-dimensional code, improve returns, maintenance records traceability, reduce fraud, and loss.
5. Set up aging strategy of reverse logistics, solve the last mile challenge, for example, return the next day, on time, quick repair.
6. Establish an international reverse logistics channel, use the third party logistics in the supplier’s country to help deal with international returns. The following figure shows how Home Depot deals with the United States Home Depot return between China and the United states.
In a word, it stressed that the reverse logistics development strategy is the first data, second data, third also data. Using data drives the improvement and development of reverse logistics.

3. Best practices for reverse logistics
The last section mentions the use of best practices as a strategy for the development of reverse logistics. The best practice of reverse logistics is one of the themes of the conference. Christopher Smith, Vice President of Samsung America Inc. in his keynote speech, “Examining the Service Experience”, describes the best practices of their Samsung Care (after-sales platform) in Samsung.

Samsung Electronics is a brand, there are one million home appliances and television customers every year, 500 thousand customer requirements of mobile phone repair, reverse logistics supplier to deliver 143 million items and 140 thousand customer service requests. Faced with such a large demand for after-sales service of electronic products, Samsung set up a Samsung care platform. The following figure describes the model of its business services and information systems. The model is based on a complex Internet platform (see Figure 11 and Figure 12). Best practice of reverse logistics is Samsung’s use of the Internet platform of the latest technology to establish a high efficiency, customer service system with low cost, thus providing a unified quality service for its customers; thus greatly improving the customer to Samsung product satisfaction and loyalty.

Figure 11 shows us its after-sales service model and infrastructure. The following Figure 12 shows that this platform is built on the complex mobile Internet:

Intricate web
From Figure 12, we can see that reverse logistics service providers (RL Hub, Repair Vendors) GENCO, ENCORE, etc. play an important role.

In addition to Samsung’s best practice experience, HP, Home, Amezon, Depot, Dell, LG, Genco, Opotoro and other companies in charge of reverse logistics also introduced their best practice experience.

To sum up, the main points are as follows:
1. The application of reverse logistics data analysis is to find the distribution of excess inventory and the effectiveness of reverse logistics, to help enterprises make the best reverse logistics decisions.
2. SaaS cloud platform has emerged in reverse logistics (such as Optoro reverse logistics SaaS platform). The construction of reverse logistics management systems based on SaaS software model is one of the best practices.
3. The technical innovation of reverse logistics, such as mobile APP, is an efficient process, data visualization and intelligent operation management.
4. The development of reverse logistics in the last mile technology to achieve efficient processing of returns and surplus inventory, so as to maximize the value of recovery.
5. It is also important to control the process of reverse logistics and control the process of forward logistics. Process information, networking and intelligence is an important way to achieve control. Only strict control can reduce the loss and damage of the reverse logistics, thus reducing the loss of value.
6. Due to the high complexity of reverse logistics and the possible risk (such as battery recycling), using the unified technical standard of reverse logistics and operational standards will make the reverse logistics achieve the best operation and maximum social and economic benefit. For example, the use of two-dimensional code RLA SQRL standard can improve the traceability of the object and prevent return fraud. Using RIOS (Recycling Industry Operating Standard) in the recycling industry in general, R2/RIOS=R2 (Resposible Recycling) +RIOS standard in electronic products recycling industry, as well as the transportation standard of dangerous goods in dangerous goods reverse logistics. This will let reverse logistics be more efficient, accurate, and safe. In addition, the standard of reverse logistics will bring about the innovation of reverse logistics.

4. Technical standard of reverse logistics
We have seen that the development and establishment of reverse logistics technical standards is a strategic best practice of reverse logistics. The conference set up a special panel to discuss it. RLA’s new executive director, Tony Sciarrotta hosted the panel, and several guests showed RLA’s reverse logistics SQRL 2D barcode standard and its industrial implementation. The Standards Committee chairman of the RLA Dr. Ron Lembke describes the RLA innovative reverse logistics standard 2D barcode SQRL and a new coding system.

This standard is compatible with the ANSI standard MH10.8.2.12N 15434. It can be used at:

1. Tracking Repair and Refurbishing records
2. Reducing Return Fraud
3. Automating Product Registration and RMA management
4. Providing Pre-sales Support
5. Automating more of the logistics and triage processing in the warehouse

Now there are a number of production coding tools and systems manufacturers are supporting SQRL standards. for example:

1. InforMission: Its application can generate this two-dimensional code label and provide many innovative features
2. Denso: Denso innovation Increased barcode’s security and encryption
3. Eurosoft: its application can produce digital toe tags for refurbishing
4. Andlor: It showed barcode is used in warranty management
5. University of Nevada: URL management and Analytics

Many OEM and reverse logistics providers have adopted this standard. In particular, Eurosoft diagnostic products have been widely used in the world:

This report describes the trends, strategies, best practices and standards of reverse logistics found at the 2017 North American Reverse Logistis Association Conference & Expo held in Las Vegas. I hope this report will contribute to the development of reverse logistics in China. This report also gives a preview of what takes place at events hosted by the Reverse Logistics Association. Look for future monthly committee meetings, Seminars, and their upcoming RLA Conf & Expo in Amsterdam October 18-20, and for their next North American Conf & Expo in Las Vegas, February 6-8, 2018.

I greatly appreciate the contributions from RLA Executive Director, Tony Sciarrotta, Ms. Felecia Przybyla, Prof. James Stock, and Prof. Ron Lembke for their great support.
Tang Longji, 1995 obtained Applied Math and Computer Science Master degrees from Pennsylvania State University; 2011 got PhD degree in software engineering from University of Texas at Dallas computer (PhD Thesis: Modeling and Analyzing Service-Oriented Enterprise Architectural Styles (http://gradworks.umi.com/3494 567.pdf published by ProQuest, Dec., 2012). He is Adjunct Professor of Information and Software Institute, Hunan University, and Master degree advisor. He has worked in the United States IBM, Caterpillar and FedEx (15 years). He has 25+ years of experience in software development and management, industry Internet and cloud computing. 20+ years of experience in applied mathematics, large-scale computing and data analysis, software architecture and style, and software engineering research, published 30+ research papers. 16+ years of experience in supply chain and logistics, especially in post market supply chain and reverse logistics. In October 2015, he was invited to join the JST Logistics in Guangzhou, and served as the vice president of strategic and CIO. In 2016, he got the “green card” of Guangzhou foreign talents. In 2016, led the IT team to design and develop the auto parts reverse logistics cloud service platform, and won the customers’ high praise. He was a member of the Reverse Logistics Association of America and was invited to be a member of the Standards Committee of the Reverse Logistics Association of America in 2017. He is also a distinguished expert and VP at the Logclub Research Institute of Logistics.

Return to Menu