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UPS preps to launch new reverse logistics service for high-end items

By Jeff Berman, Group News Editor
June 14, 2011

UPS said it will be rolling out a new reverse logistics service geared towards high-end products for shippers in the high-tech, healthcare, and retail sectors in the United States, Canada, Europe, Mexico, and Puerto Rico, effective this October.

Entitled UPS Returns Exchange, company officials explained that the way it works is that a UPS driver delivers a replacement item while also picking up the item marked for return in the same visit to a place of business or a home. The UPS driver also provides assistance in packing the return item in the replacement box at which point it is shipped back to the original company. Customers are notified that a UPS driver is en route through an SMS message, e-mail, or voice alert.

UPS claims this service is an “industry first” in North America.

One of the main drivers for this service had to do with the myriad challenges of reverse logistics, said Sumeet Shroff, UPS Director of New Product Development, citing a statistic from Greve-Davis which stated that in 2010 U.S. consumers returned $200 billion worth of good and that manufacturers, including those in high-tech, spend 9-to-14 percent of their sales on returns even though only 20 percent of the goods actually returned are actually defective.

“When you look at these numbers, it is clear businesses spend a lot of money on returns and lose a lot of money on returns,” said Shroff. “There is an urgent need to turn that cash outflow into something that is positive.”

When it comes to managing returns, Shroff said a “one size fits all” returns solution does not make sense, explaining the way a return for a $20 item is handled compared to the return of a $2,000 item for many businesses are the same, which does not make sense.

UPS, he said, approaches this with a suite of returns services for customers to address their needs for differentiating ways of addressing returns services and processes for products of different values.

“This is focused on anything that is considered high value or high priority, and that is where we have a need to deliver the most value to our customers,” said Shroff.

A major shipper benefit of this service is speed of recovery, according to UPS.

In the medical device industry, for example, the average time to get returns back runs between 12-to-14 days, which stalls the process in which medical device manufacturers get compensated, as they only get compensation when a device is deployed with a customer or patient. And for every additional day it takes for a return to come back, revenues are lost. This is also key for consumer electronics, where speed is vital for refurbishing and re-selling things like smart phones.

Customer services as it relates to reverse logistics is also a major driver, said Shroff, noting that Forrester Research shows that 81 percent of consumers are more loyal to companies with a generous returns policy—an example of how businesses are missing opportunities to control costs while also improving their customer’s post-sales experience.

“It is far more efficient to re-pay the customer than the customer acquisition costs of going out and getting new customers,” he said. “That is another aspect that is driving the shift in demand for this service.”

Another benefit of this service is the sustainability angle, with the same box being used for the item shipped out and the item returned, as well as eliminating one delivery and saving fuel and reducing emissions, too.

While UPS Returns Exchange is focused on reverse logistics processes for high-end products, some shippers told LM that they are concerned about how this may impact overall shipping costs, explaining that unless UPS is charging upwards of
$10.00 for this service they will lose money on it.

“The extra time is going to expand costs on everything else the drivers do,” said a retail shipper.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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