Report on Building for Reverse Logistics Examines Flow Back from the Consumer to Supplier

The pandemic brought into sharp focus the importance of having a healthy and functioning supply chain, that critical system by which goods are delivered from factories to doorsteps. But how does the process work in reverse, when items are returned and sent back? And what happens to the returned items?

The NAIOP Research Foundation released a new report on reverse logistics (RL), “Reverse Logistics Strategies for the Post-pandemic Supply Chain: Spaces and Places to Recapture Value,” which examines the process by which goods flow back from the consumer to the supplier. The report identifies best practices in the design of RL networks, including the design and location of RL facilities. Its findings are useful to supply chain managers, real estate developers and other commercial real estate professionals.

“Consumer and industrial product companies are turning to reverse logistics  as a ’final frontier‘ where logistical competencies can generate financial success,” according to the report, with the goal of maximizing the remaining value of returned items and minimizing related costs.

Some of the key findings:

• Real estate professionals can play a pivotal role in identifying suitable RL facility locations that meet supply chain managers’ strategic criteria.
• Third parties that provide outsourced RL services generally need to be centrally located relative to the industry they serve, close to industry-preferred modes of transportation, close to the source of product returns, near a sufficiently large labor market, and have access to waste management infrastructure.
• For firms that insource RL, multiple smaller, regional facilities may in many cases be more efficient than a single, centralized facility.
• The decision to locate insourced RL processes in a dedicated facility or within a facility that also handles forward logistics depends on the firm’s industry and the scale of RL the facility must manage.
• A firm’s industry will also shape whether an RL facility should be built-to-suit or if a speculative project or existing facility can meet its needs. Either way, RL facilities require dedicated spaces for specialized tasks such as returns management, refurbishing, recycling, and waste management, and benefit from flexible interior design.
• Converting an existing warehouse or distribution center for RL usually does not require major changes to the building’s structure. However, RL facilities often require more power than traditional warehouses, and some need specialized docks, ramps and secure loading areas.

“With the explosive growth of online purchasing, consumers have come to expect the ability to return items,” said Marc Selvitelli, CAE, president and CEO of NAIOP.  “Companies are still in the early stages of developing networks that can effectively recapture the value of returned items to minimize waste. Commercial real estate developers and other real estate professionals will play an important role in helping supply chain managers build out these networks.”

Download the report here.