Optoro Facilitates Circular Economy Through Innovation in Neglected Space of Reverse Logistics

June 19, 2017
ann starodaj optoro
Director of Sustainability, Optoro

Optoro is a technology company that is transforming the way retailers process and sell returned and excess inventory.

The retail industry has a problem that we all play a part in. Every year, 15% of inventory is returned by consumers or deemed excess by retailers, and that number climbs even higher for online purchases. In the United States alone, 1 in 10 purchased goods is returned, and each year retailers take back an estimated 3.5 billion products (many of which go straight to landfills). This amounts to 4 billion pounds of waste annually in the United States.

The traditional and extremely inefficient returns process is largely to blame. Returned items are shipped multiple times through a network of middlemen and distribution centers before reaching an end consumer or landfill. The process—part and parcel of the linear economy—is called reverse logistics, and it’s an process that has seen little innovation in decades.

Optoro is tackling this problem with innovative technology, and works with some of the nation’s leading retailers and manufacturers to enable more circular and sustainable reverse supply chains. This case study highlights Optoro’s partnership with Groupon Goods, and the environmental benefits of replacing traditional liquidation with a high-tech reverse logistics platform like Optoro’s.

Key Steps in Implementation

Optoro began working with Groupon in 2014. Before implementing Optoro’s software (called OptiTurn) on site at its Hebron, Kentucky, fulfillment center, Groupon outsourced its reverse operations to third-party liquidators. Now, once a returned or excess product arrives at the center, it is immediately scanned into OptiTurn. Next, data and real-time secondary market information are used to instantly match and/or market each product to its optimal disposition—direct to consumer or business, recycling, return to vendor, or donation. Since the start of the program, over 1.5 million units from the Hebron facility have been processed through OptiTurn.

Results/Impacts

To demonstrate the environmental benefits that Groupon has achieved using a smarter, technology-driven returns management system, Optoro developed an environmental impact model. The model estimates fuel savings and waste reduction for any retailer or manufacturer’s reverse logistics network.

Optoro applied Groupon’s data to the model to evaluate changes in waste, fuel consumption, and related carbon emissions from the baseline (liquidation) scenario. In 2016, the program achieved the following results:

1. Waste decreased by 42%

In 2016 the program diverted 223,750 pounds of retail waste from landfill (Figure 1[SG1] ) Decreasing reliance on liquidators reduced the number of shipments, which in turn reduced the likelihood of shipping damage, product expiration, or obsolescence.                                                                                 

2. Emissions decreased by 16%                                                                                

Optoro cut out the extra touches involved when reselling to wholesalers or resellers. The resultant transportation efficiencies reduced carbon emissions by 16%. In 2016, Optoro decreased fuel use by 32,212 gallons, the equivalent to 686,086 miles driven by passenger vehicles.

3. Over 15% more goods were sold to consumers

Before using OptiTurn, an estimated 23% of inventory in Groupon’s reverse supply chain was disposed of or recycled. Using Optoro’s software, 88% of the returned and excess inventory in the reverse supply chain is resold to secondary consumers. Putting products in the hands of consumers means a longer product lifespan and less landfill waste.

Optoro Chart.png

Figure 1. Total waste produced in supply chain before and after Optoro’s software.
chart
 

Enabling Effective Resource Cycles

For Groupon, these results were a win from both business and sustainability perspectives. “At Groupon, we are always looking for innovative partners that will help us become a more sustainable, profitable, and community-oriented business,” said Andrew Bowerman, vice president of logistics at Groupon Goods. “The Optoro solution enables us to do all three by reducing waste and carbon emissions in the supply chain, increasing recovery, and providing consumers with great deals.”

This initiative quantified one key conclusion: Retailers have the potential to drastically reduce waste and emissions in the reverse supply chain through the use of technology like a reverse logistics platform.

Faced with this increasing but often-overlooked problem of returned and excess inventory, Optoro encourages sustainability and supply chain professionals to examine their processes for managing this inventory and assess whether they are focusing on efficient, streamlined systems that prioritize reuse and landfill avoidance.