52 DC VELOCITY DECEMBER 2015 www.dcvelocity.com
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has grown exponentially in the last two
years,” said Vehec, without providing
data to quantify the growth.
The more sophisticated organizations,
perhaps unsurprisingly, have led the charge
up to now. Yet virtually all companies can
benefit from the availability of digital tools that
experts said would provide the needed visibility to identify and ultimately reposition the
goods that could fetch the most money in the
secondary market. For example, order management systems commonplace across the supply
chain contain “distributed order management”
(DOM) modules that determine when a return—“eaches,”
“onesies,” or “twosies” that, in aggregate, account for most
of the e-commerce avalanche—should stay within a retailer’s network for resale, or if the resale’s value is so low as
to not justify the costs of shipping, according to Victoria
Brown, senior research analyst at consultancy IDC Retail
Insights. “The DOM does the thinking for you,” Brown
said. However, many retailers have yet to leverage the
module, she said.
HIGH-TECH CHALLENGES
In the high-tech world, the dynamics for returns redeploy-
ment are somewhat different. Today’s
high-value product can become
low-value three to six months out, as
more powerful technologies quickly push
out the old standbys. Linda Li, Li Tong’s chief
strategy officer, said the company uses sophisticated algorithms to determine what aging
inventory could fetch in the appropriate aftermarket and whether the return is best suited for
refurbishing to close to its original form, or if its
components should be harvested for incorporation into another product. Parts harvesting and
remanufacturing account for about 70 percent
of Li Tong’s business, while refurbishment and repairs of
damaged products account for the balance, according to
the company. A component that Li Tong harvests from, say,
a laptop, could end up being used in an air traffic control
system, she said. The company handles the manufacturing
and fulfillment from 21 global warehouses and factories,
doing everything save for the transportation.
Li Tong primarily focuses on the information and physical security of redeployed returns, said Li. Data from
the returned device must be purged “at the first point
of contact” to ensure that personal information doesn’t
remain if the product is returned to the aftermarket in
near-original condition, she said. Physical security is also
critical, especially when it comes to shipping components
like lithium-ion batteries, which are embedded in millions
of computers, mobile devices, and even cars; concern
about bulk shipments of batteries overheating in the cargo
hold of a passenger aircraft has led the Federal Aviation
Administration to push for a global ban on shipments moving in the planes’ bellies. Loose batteries must be properly
packaged and are subject to stringent controls, and Li Tong
ensures that employees are properly trained in handling
procedures before the goods leave its hands, Li said.
The volume and complexity of returns will only intensify as e-commerce becomes a more dominant force in all
supply chains. Companies that make stuff that could be
returned may have to think further outside the box than
they ever have before. This could lead to the enlistment
of customers in the effort. For example, there’s talk of
companies’ providing discount vouchers to consumers if
they return products to central receiving points rather than
through other channels.
Then there’s high-end clothier Lilly Pulitzer, whose stores
annually store returns of merchandise that is damaged,
returned after the season, or not carried at that location
in the first place, and ship them en masse to the company’s headquarters and main distribution center in King of
Prussia, Pa. There, every June, the goods go on sale at a huge
mall adjacent to the DC at fire-sale prices. Shoppers come
from as far away as Canada to buy quality merchandise and,
at the same time, help Lilly clear out its inventory. That, it
seems, would be a popular way to reposition returns.
