4 ms·

Logistics are efficient in only one direction. It's about 20x more expensive for packages to flow in the reverse direction. That bin of 'just throw it away' pa

by bunnie 5y ago

Logistics are efficient in only one direction. It's about 20x more expensive for packages to flow in the reverse direction. That bin of 'just throw it away' packages is a pretty good visualization of the cost asymmetry of reverse logistics. That, and how the delivered cost of an item is often 4-5x over the 'ex factory' cost, so altogether it's cost effective on average to abandon mis delivered products as long as your error rate is low enough. I'd wager that the cost to handle the support ticket that reported the delivery issue alone may start to approach the ex-factory replacement value of the cheapest goods in the pile...

omegalulw 5y ago
> Logistics are efficient in only one direction. It's about 20x more expensive for packages to flow in the reverse direction. Source needed. I would expect Amazon to have shipping between major hubs well figured out. The only cost that they may be unwilling to pay is the last mile pickup cost of packages like this (if the expected used value of the item(s) in the package is lower than this cost). But that's not 20x expensive, should be comparable to shipping costs.
- hef19898 5y ago
  Reverse logistics suck. Sure, once stuff is in the network of, say, FedEx, per-mile costs are comparable. Thing start to become more expensive from the point the returns arrive at an (Amazon) warehouse: - stuff isn't packed as good as from the supplier - stuff has to be unpacked, checked, graded, re-packed, re-labelled and re-stored - stuff isn't delivered in bulk, it is delivered in small, more often tan not, single-unit quantities making goods receipt and in-bound ops more expensive No idea if it is 20x, but it is considerably more expensive.
  - rightbyte 5y ago
    20x sounds way too high. Imagine if pickup at factories is free due to scale, and the only cost is drop-off, then a return should be about two times as expensive, since sending a package to the factory is no different then someone's home.
    - hef19898 5y ago
      Cost =/= price. Maybe pick up will be free of charge, it will absolutely have a cost so. Big cost drivers are also the warehouse processes, it's a big difference of getting properly packed pallets of badly packed single parcels. And a full truck load is orders magnitude cheaper, per unit, than parcel deliveries. What that price difference is exactly is impossible to tell without exact numbers. And those will never be publicly available.
      - hef19898 5y ago
        -> OR badly packed single parcels.
    - bunnie 5y ago
      Factories ship in bulk. Returns ship, typically, as singletons. The cost to put one extra box into a shipping container containing thousands of identical units, the pick up of which is scheduled months in advance (so utilization of the overall cargo ship is near ideal), is negligible. Similarly, the cost to break down the incoming shipment, warehouse it and check it in is small, because the factory ensures the correct bar codes are on the outside of the boxes. The worker checking them in is completely stateless - scan a barcode, stick the box in the rack with a light, move on, thus the worker is not specialized and cheaper. From there individual orders are scheduled and collated overnight into trucks that carry hundreds of boxes to individual cities, which are then broken down into the last mile courier. Now, to arrange the reverse logistics within a bounded amount of time (less than two weeks, say), you are likely to have to send an empty truck to the end address; if you're lucky the route has other packages, but you can't count on it. The reverse logistics sender may not be there when the pick up arrives, so you either have to arrange multiple pickup or risk leaving the item unguarded. Then the box arrives at the local warehouse, with no specific routing information to where the rest of the inventory is, so you have a specialist inspect the box and also make sure there isn't fraud going on - eg people ordering phones and returning similarly weighted bricks. Then if you want that box to make it all the way back to the overseas factory where it was produced, you're probably booking it on an airplane, and not a cargo ship. 20x is actually on the low end. A wall wart power supply might run an incremental cost of about $1 to ship from Shenzhen to your door. Sending that same thing back to the factory by FedEx - a process that takes about a week with customs and pick up delays - probably north of $50 for the 'rack rate' retail shipper.
  - gibba999 5y ago
    My experience is that one-off human costs tend to be extreme for exceptions at big organizations. Handling exceptions might require a business day or two of admin time just to handle the baseline exception. Multiply 16 hours by salary, and you're at big bucks. Plus, you need processes for oversight. That costs /a lot/ more. Ownership sounds great on paper -- where any support rep can grant an exception -- but in practice, that gradually leads to a culture of abuse. It starts little, and once that's part of the culture, increases over time.
- motogpjimbo 5y ago
  Based on my experience, I think you may be underestimating the problems with arranging returns for unwanted items. I don't work at Amazon but I did used to work for an online retailer that shipped luxury items (think several hundred UK pounds) direct to the customer. Getting misdelivered items back to our warehouse and sorted back into stock was a nightmare, and generally we tried not to if at all possible. Whenever a member of the public called us to report they had received a package intended for one of our customers, we would generally ask the caller if they wanted to buy it from us for a large discount. If they declined, we would either let them keep it for free, or if we felt the value of the item justified it we would make an attempt to get it brought back to us. However, between couriers not turning up to collect it on multiple occasions (presumably because there was no real incentive for them to turn up), the homeowner not being at home when the courier arrived, the item being stolen from the homeowner's driveway before the courier getting to it and the courier "losing" the item in transit, the percentage of items that actually came back to us was quite low. In addition, it was then all but impossible to put the item back into stock, since the product line may have come to an end, the package may not be complete, etc. Generally the item would be sold off at a massive discount to staff members. The admin costs through this process would be considerable.
- bunnie 5y ago
  Personal experience. I've built out numerous supply chains. One of my favorite anecdotes is that Best Buy used to pay for 1000 units, but require us to ship them 1020 units. And the factories always agreed to it because the alternative was paying for reverse logistics on any return. Basically it was always cheaper to send 2% extra, free of charge, in the forward direction than any risk of handling a return in the other direction. Everybody wins - the factory pays less in the end for warranty service, and Best Buy gets a 'no questions asked' return policy without paying for it. That's also why you'd see the 'as is' racks at best buy... those were the returned units. Wasn't worth it to send them back to the factory, just sold at half the price with no returns allowed. If you still don't believe me, go to Fedex.com and quote the price to ship a large screen TV from your home to Shenzhen.

by bunnie 5y ago

omegalulw 5y ago

> Logistics are efficient in only one direction. It's about 20x more expensive for packages to flow in the reverse direction. Source needed. I would expect Amazon to have shipping between major hubs well figured out. The only cost that they may be unwilling to pay is the last mile pickup cost of packages like this (if the expected used value of the item(s) in the package is lower than this cost). But that's not 20x expensive, should be comparable to shipping costs.

hef19898 5y ago
Reverse logistics suck. Sure, once stuff is in the network of, say, FedEx, per-mile costs are comparable. Thing start to become more expensive from the point the returns arrive at an (Amazon) warehouse: - stuff isn't packed as good as from the supplier - stuff has to be unpacked, checked, graded, re-packed, re-labelled and re-stored - stuff isn't delivered in bulk, it is delivered in small, more often tan not, single-unit quantities making goods receipt and in-bound ops more expensive No idea if it is 20x, but it is considerably more expensive.
- rightbyte 5y ago
  20x sounds way too high. Imagine if pickup at factories is free due to scale, and the only cost is drop-off, then a return should be about two times as expensive, since sending a package to the factory is no different then someone's home.
  - hef19898 5y ago
    Cost =/= price. Maybe pick up will be free of charge, it will absolutely have a cost so. Big cost drivers are also the warehouse processes, it's a big difference of getting properly packed pallets of badly packed single parcels. And a full truck load is orders magnitude cheaper, per unit, than parcel deliveries. What that price difference is exactly is impossible to tell without exact numbers. And those will never be publicly available.
    - hef19898 5y ago
      -> OR badly packed single parcels.
  - bunnie 5y ago
    Factories ship in bulk. Returns ship, typically, as singletons. The cost to put one extra box into a shipping container containing thousands of identical units, the pick up of which is scheduled months in advance (so utilization of the overall cargo ship is near ideal), is negligible. Similarly, the cost to break down the incoming shipment, warehouse it and check it in is small, because the factory ensures the correct bar codes are on the outside of the boxes. The worker checking them in is completely stateless - scan a barcode, stick the box in the rack with a light, move on, thus the worker is not specialized and cheaper. From there individual orders are scheduled and collated overnight into trucks that carry hundreds of boxes to individual cities, which are then broken down into the last mile courier. Now, to arrange the reverse logistics within a bounded amount of time (less than two weeks, say), you are likely to have to send an empty truck to the end address; if you're lucky the route has other packages, but you can't count on it. The reverse logistics sender may not be there when the pick up arrives, so you either have to arrange multiple pickup or risk leaving the item unguarded. Then the box arrives at the local warehouse, with no specific routing information to where the rest of the inventory is, so you have a specialist inspect the box and also make sure there isn't fraud going on - eg people ordering phones and returning similarly weighted bricks. Then if you want that box to make it all the way back to the overseas factory where it was produced, you're probably booking it on an airplane, and not a cargo ship. 20x is actually on the low end. A wall wart power supply might run an incremental cost of about $1 to ship from Shenzhen to your door. Sending that same thing back to the factory by FedEx - a process that takes about a week with customs and pick up delays - probably north of $50 for the 'rack rate' retail shipper.
- gibba999 5y ago
  My experience is that one-off human costs tend to be extreme for exceptions at big organizations. Handling exceptions might require a business day or two of admin time just to handle the baseline exception. Multiply 16 hours by salary, and you're at big bucks. Plus, you need processes for oversight. That costs /a lot/ more. Ownership sounds great on paper -- where any support rep can grant an exception -- but in practice, that gradually leads to a culture of abuse. It starts little, and once that's part of the culture, increases over time.
motogpjimbo 5y ago
Based on my experience, I think you may be underestimating the problems with arranging returns for unwanted items. I don't work at Amazon but I did used to work for an online retailer that shipped luxury items (think several hundred UK pounds) direct to the customer. Getting misdelivered items back to our warehouse and sorted back into stock was a nightmare, and generally we tried not to if at all possible. Whenever a member of the public called us to report they had received a package intended for one of our customers, we would generally ask the caller if they wanted to buy it from us for a large discount. If they declined, we would either let them keep it for free, or if we felt the value of the item justified it we would make an attempt to get it brought back to us. However, between couriers not turning up to collect it on multiple occasions (presumably because there was no real incentive for them to turn up), the homeowner not being at home when the courier arrived, the item being stolen from the homeowner's driveway before the courier getting to it and the courier "losing" the item in transit, the percentage of items that actually came back to us was quite low. In addition, it was then all but impossible to put the item back into stock, since the product line may have come to an end, the package may not be complete, etc. Generally the item would be sold off at a massive discount to staff members. The admin costs through this process would be considerable.
bunnie 5y ago
Personal experience. I've built out numerous supply chains. One of my favorite anecdotes is that Best Buy used to pay for 1000 units, but require us to ship them 1020 units. And the factories always agreed to it because the alternative was paying for reverse logistics on any return. Basically it was always cheaper to send 2% extra, free of charge, in the forward direction than any risk of handling a return in the other direction. Everybody wins - the factory pays less in the end for warranty service, and Best Buy gets a 'no questions asked' return policy without paying for it. That's also why you'd see the 'as is' racks at best buy... those were the returned units. Wasn't worth it to send them back to the factory, just sold at half the price with no returns allowed. If you still don't believe me, go to Fedex.com and quote the price to ship a large screen TV from your home to Shenzhen.