Circular Thought and Growth

A Q&A on the power of the circular economy.

We talked recently about the UPS-Optoro campaign to enable sustainable e-commerce. But you can’t have a forward-looking conversation about sustainability without discussing the circular economy.

By circular economy, we mean an economic model based on a “continuous positive development cycle that preserves and enhances natural capital, optimizes resource yields and minimizes system risks by managing finite stocks and renewable flows.”

Last month, Patrick Browne, Director of Global Sustainability at UPS, and Jon So, Director of Product Marketing at Optoro, spoke at the 2017 Circular Economy Summit about reverse logistics and innovative partnerships.

The Summit, held in Washington, D.C., brought together sustainability business leaders from around the U.S. to discuss opportunities related to the circular economy.

Longitudes recently caught up with Patrick and Jon to ask them about the state of reverse logistics and where the practice is heading.

Q: What is reverse logistics, and how is it transforming supply chains?

Jon: Broadly defined, we like to use a definition from the Ellen MacArthur Foundation: “the processes of moving goods from their point of consumption to a consolidation point for the purpose of capturing value or proper disposal.”

For Optoro, our definition is a little narrower. We define it as the processing, management and reselling of returned, excess and distressed inventory.

Patrick: Good reverse logistics is an essential part of achieving circularity and more sustainable business practices. What many people don’t consider is that many of our supply chains are optimized for forward movement but are often ill-equipped to accommodate goods that come back into them.

As one attendee at our Summit session put it, reverse logistics involves thinking no longer solely in terms of hub and spoke, but spoke and hub, too. We need good processes and systems in place to capture excess value and prevent waste.

Q: What are some important trends in the reverse-logistics space, and what does the future look like?

Patrick: Everyone knows that e-commerce is booming, and UPS expects about half of our U.S. package volume to be e-commerce and B2C by 2019. Many customers already expect free shipping, and they expect free and convenient returns as well.

Because of these consumer demands, retailers and brands certainly face unique challenges related to returns and reverse logistics, and without good systems in place, the potential for waste is enormous.

Jon: For many retailers and brands, traditional reverse-logistics processes have historically been very wasteful and inefficient. Most reverse supply chains involve too many touches and manual processes, and waste is generated at every touchpoint.

Many retailers only see about 10-20 percent in recovery on cost of goods sold, and the entire returns industry generates 4 billion pounds of waste annually.

Attendees at our workshop were surprised to learn how low recovery rates were from traditional liquidation. Optoro saw tremendous opportunity to innovate and disrupt this space with software.

Q. How does the UPS-Optoro strategic alliance help retailers with sustainability, and what lessons does it offer for other organizations?

Jon: Our strategic alliance delivers wins on multiple fronts: operationally, financially and environmentally.

Optoro benefits from the relationship because they get to leverage the backing and expertise of the world’s biggest logistics company, while UPS provides their clients with Optoro’s cutting-edge solution alongside other services in their world-class portfolio of enterprise customer offerings.

For clients and the environment, it’s a win-win since we’re able to help them cut costs and environmental waste. As a whole, the alliance enables us to power a better end-to-end customer experience.

Patrick: Organizations can often realize business and sustainability innovation by capturing efficiencies not just within, but between their organizations.

We were honored to present our partnership as a case study to Summit attendees and hope that we inspired them to think about the potential and viability of innovative partnerships.

Patrick Browne is UPS Director of Global Sustainability. He is responsible for managing sustainability initiatives and strategies, working with cross-functional teams from various UPS business units around the world.

Jon So leads product marketing for Optoro, a reverse logistics software company that is helping leading retailers and consumer brands maximize the value of their returned and excess inventory.