(00:00):

Hey everybody. Good morning, good afternoon, good evening, wherever you may be. Folks, this is Scott Luton with Supply Chain Now, and lemme tell you, we’ve got quite a show for you here today. In fact, it’s a supply chain now special feature where Deborah Dole shares a valuable story that takes place in the blind spot. For many consumers out there, every single year, Americans return nearly a trillion dollars worth of products, but most of us have no idea where they all go or who handles them. In this special episode, Deborah and Friends journey into the Hidden World, a reverse logistics to discover a fragmented industry, a missing $200 billion in value and critical materials that we’re absolutely letting slip away what we find may very well suggest that Made in America might be the wrong goal. There just might be a different opportunity here altogether. I invite you to listen in to Remade in America right here on supply chain now featuring the talented industry, dynamo, Deborah Dole.

(01:19):

Deborah, we are here in New York City at the Sheraton Times Square Center of the Universe at the NRF Rev Show.

(01:30):

It’s January 20, 26. I’m at a conference for an industry most Americans don’t know exist. This industry handles nearly a trillion dollars a year. There’s no college degrees for it, no textbooks, no household names, and yet it quietly touches almost everything we buy. I came here with a simple question, what happens to all the products that we send back?

(02:07):

The challenge, of course, is to imagine a truckload of new goods on 26 pallets, neatly packed, wrapped and is shoved in the truck, and then think about a truckload of returns, 26 gaylords that look like garbage. What do you do with that stuff?

(02:25):

That question, what do you do with that? Turns out to hide a much bigger mystery. We hear a lot about bringing manufacturing back to America, but even when a product says made in America, it usually isn’t, at least not all the way the supply chains behind Modern products are global, fragile, and deeply specialized. Think about it this way. Your smartphone contains over a thousand components sourced from dozens of countries. The rare earth elements might come from China, the glass from Japan, the chips from Taiwan or South Korea. Even something as simple as the cardboard box that ships in involves a supply chain that spans continents. When politicians talk about bringing manufacturing back, they’re talking about reassembling an ecosystem that took 50 years to build everywhere else and was dismantled here piece by piece, skill by skill, and sent overseas. Last week I sat down with Steven Beard, what got you into the reverse space?

(03:31):

Well, it’s interesting. John Lennon said that life is what happens to you when you’re busy making other plans.

(03:38):

Steven Beard runs sales for the services arm of Flex, one of the largest supply chain companies in the world. When you want to understand how products actually get made, not just how politicians say they get made, Steven is the one that you call.

(03:56):

But yeah, I started my career at UPS and spent 15 years there both in the parcel and the supply chain side, and really that’s where I cut my teeth and learned the supply chain industry. And I think it’s true for most of us. You gravitate towards the fun and interesting challenges when you have those opportunities, and the reverse side has always been a little messy and B, less rigid. I think there aren’t just ready made out of the box solutions in this space. And to me that’s fascinating. That’s where the interesting stuff is happening and with the focus on greening the supply chain and just more sustainability, it has become the epicenter of where the interesting things are happening in supply chain. And so

(04:41):

I asked Steven about this idea that we can just bring manufacturing back.

(04:46):

Well, of course when I’m talking about clients, they get it because running supply chains, but for the general public, there’s a lack of understanding about how supply chains actually work and how distributed supply chains are. That’s just not well understood. The thing that I think is easy for people to understand and what they’re thinking is that it’s cost of labor play and that it’s certainly part of the answer. It’s not wrong, but it’s not near a complete answer. The reality is there’s specialization that’s happened, but one of the biggest challenges in nearshoring or certainly bringing something to the US is the supply base isn’t here, right? I mean something as simple as retail packaging, it is brutal. It is almost impossible to get the same quality out of a retail pack that comes out of China today. You could get five vendors to show you something of a caliber that you’re going to struggle to find one in Mexico that can replicate, right?

(05:46):

It’s not there. I’m talking about the high end stuff like the Apple products. When you want a certain level of look and feel, it’s very difficult, if not impossible to replicate. And what that says is it doesn’t mean we can’t nearshore it doesn’t mean that at all. What it means is that’s not something you do on a dime because for every product you want to move the manufacturing base, you have dozens of vendors, and if something as simple as retail packaging can be a barrier to that move, think about more complex things like chips and glass and rubber, and I mean all the things that are necessary to procure at a certain grade that you trust so that you don’t create quality problems downstream, plus all the human capital. It’s not just that you can procure labor lower in other markets, it’s that there’s been generations of people building that skillset that has been hollowed out in North America largely, and it’s hard to bring back, right? So

(06:50):

Generations of skill hollowed out. So what if we can’t really make products here at scale? And what happens to the ones that we already have each year? Americans handle returns of billions of dollars worth of merchandise, clothes that don’t fit, electronics that didn’t work, furniture that looked different in the photo, all of it flows backward through a system that was never designed to handle it.

(07:19):

The numbers that the NRF shared last year,

(07:21):

Here’s Rich Bulger,

(07:23):

The retail economy in the US was $5.2 trillion. Unwanted returns cost $890 billion. So think of giving back 890 billion in revenue to people and taking their equipment back and then having to figure out what to do with it.

(07:36):

Rich is the founder and CEO of all things circular, a thought leadership platform that helps companies figure out their circular economy strategies.

(07:45):

The size of the secondary market is north of $800 billion right now. So you have those two things together. Almost 30% of the retail economy flows through reverse and there’s no education on how to do it.

(08:00):

30% of the retail economy flowing backward. That’s not a rounding error, that’s an economy. Moving in reverse to understand this backward economy, I wanted to follow a returned product step-by-step. Let’s say you bought a vacuum cleaner online, it arrived, you tried it and something wasn’t right. Maybe it was too heavy, maybe it didn’t pick up pet hair like the reviews promised you, print the return label, stick it back in the box and drop it off at the nearest shipping location for you. The transaction is over. But for the vacuum cleaner, a long uncertain journey is just beginning. What happens after you click send back? I talked to Dan Main from Bid Path, a UK based company that provides auction platforms for surplus assets.

(08:56):

Suppose broadly speaking, anyone who’s going to be running an auction and running something with us has an asset. Let’s say that they need to get the optimum price within a timescale, and that’s pretty much it. But yeah, effectively what they’re getting is a flow of assets coming to them that quite often they can’t control. These are just coming up and they have to be able to deal with them and yet still get that optimum price. So the auction method is great and that it allows you to take lots and lots and lots of volume, transact it pretty quickly, and to get by its very nature, the best price on the day for that asset.

(09:32):

They help companies figure out what to do with everything from retail returns to industrial equipment, sheep and goats. Yes, I’m serious. Classic cars, you name it, they sell it. Dan has seen how products cycle through the system. Sometimes multiple times

(09:48):

Companies are going to be, let’s say they’ve sold a volume of goods and they’re getting returns of those goods, and that’s going to vary depending on who’s the manufacturer, who’s the retailer, how well that particular item is fitting with its market, but potentially they could be seeing pallets and pallets or truckloads, multiple truckloads of assets coming back somewhere. So a lot of it is kind of that triage process initially to say, what have we got? What’s coming back and what are we going to do with it next?

(10:16):

That moment, what do we have and what do we do next is where most of the value is either created or destroyed,

(10:23):

Then they’re going to want to be able to optimize the price they’re getting. So ideally back on the shelf with everything. But if you can’t do that, what’s the next best way of getting the best price and for the least cost? So I guess best profit margin on what you’re doing here, and then you’re going to look to the other avenues. So are we going to resell it on a certain marketplace? Do we know that this marketplace is better for selling these kind of things and others, can we even sell it at all in our country?

(10:50):

I also spoke with Yame Niri, the COO of Trove.

(10:54):

Okay, so Trove is a commerce company. So for over 12 years we’ve been enabling brand to launch their own secondhand channel. And so we work with bands like Patagonia, Brooks, running Canada, goose, and we basically enable them to build this sub site where people can go and find secondhand inventory. In the last year, we have also shifted our technology and we decided to move our software more upstream where we can actually touch mainline returns in order to streamline reverse operations, reverse logistic operations for a lot of the brands that we work with.

(11:36):

Yame came into this space from traditional fulfillment and what she saw in the returns corner of warehouses changed her perspective forever.

(11:46):

Some of my retail clients in my previous warehouses, and we were all about forward fulfillment, but every time that we had to step into the return corner, we were just trying to get away very quickly because you didn’t want to show them what was going on, right? The inspection process was always very binary. It’s either good or bad, but in the bad stuff you have really high quality inventory and really bad stuff, and everybody was just wrapping everything up within the same pallet, send it to liquidators for cents on the dollars, and it was honestly a pity. It was really heartbreaking to see that that was happening.

(12:25):

Heartbreaking, perfectly usable products and damaged ones, some with missing parts, they’re all treated the same, and that is where the mystery deepens. Tony Sch Rodda has been in this industry since 1998. If anyone knows where the money goes, it should be Tony.

(12:46):

The 850 billion estimated returns doesn’t all go away. A lot of it goes back on the shelf and we have a fragmented industry and nobody is that big. If you try to find the multi-billion dollar players, they’re not in our industry. So where is this? Let’s call it two or $300 million worth of returns going. It has to be touched, refurbished, repaired, recycled. We can’t find it. The government data doesn’t exist. Nobody’s going to be honest enough to tell the truth about how much they’re really doing with it, so it’s invisible. We don’t have power players. We need consolidation. We need more companies engaging in it. And then we can see exponential growth,

(13:33):

Invisible money, invisible labor, invisible infrastructure, which raises a bigger question. If this industry already exists, why does it feel like it doesn’t? When I asked people what it would actually take to rebuild this system to make reuse and repair work at scale, everyone pointed out to the same four elements. First talent, no formal training programs, no degrees, no clear career path. Here’s Rich Bulger.

(14:15):

So what I found getting pulled into reverse logistics is there is no training on it. You’re thrown in and if you’re lucky, you’re shadowing with someone. And if you’re really lucky, you’re shadowing with someone. It was really good.

(14:25):

Think about any other industry this size. Finance has MBA programs, CFA certifications, clear ladders from analyst to managing director, even logistics. The forward kind has supply chain management degrees, six sigma certifications and established career tracks, but reverse logistics, circularity, there’s almost nothing people running this trillion dollar industry learned on the job, made it up as they went along, passed knowledge from person to person, like some kind of oral tradition.

(15:02):

I was very lucky shadowing with Erica Pollock, who’s one of the best reverse minds I’ve ever met in my life. But I learned operations and repair, how to move product through a facility, maximizing value and velocity. And then I served on the advisory board of the Reverse Logistics Association where we’re at right now. I learned that everyone had the same problem. It’s very complicated. There’s no training on this. And when I took a master’s degree program from the only college that was teaching this, the textbook that they used was written in 1999. I’m finishing my degree in 2020

(15:34):

3, 19 99, the textbook being used to train the next generation of circularity professionals was written before the iPhone existed, before e-commerce returns became a flood. Before anyone was talking about material sovereignty or urban mining, I talked to David Watson, managing director of RL people, a search firm dedicated to finding reverse logistics and circularity talent globally.

(16:04):

So I’ve been doing this since early 2017. The organization was founded in early 2017. We’ve seen a huge amount of evolution over the years. The professionalization and ultimately the establishment of operational reverse logistics and circularity as a function is happening slowly but surely. It’s not there yet, but organizations are starting to appreciate the need for a dedicated functional lead and subsequent commercial support, specifically relating to circularity and reverse logistics. When we started doing this in 2017, it was the after four. It was the cost center. It was the necessary evil. Now it’s very much being viewed as a strategic differentiator for certain organizations, which is really cool. Kids coming out of high school, college, whatever, they don’t know that circularity exists and no one does unless they’re involved in this space. So how do we make it genuinely mainstream outside of these conferences and make it appreciated? And we need to educate. We need to educate. We need to shout as loudly as possible that you can pursue a career in circularity that can pay you a lot of money, allow for you to genuine. And this isn’t hyperbole. You can change the world that we’re living on and enjoy an abundance of variety. No two days of the same in circularity. It’s as simple as that. People just gravitate towards finance, accountancy, consultancy. Why not circularity? Why is circularity not in that equation?

(17:42):

How did you get into the reverse space? Here’s Tony Schroer.

(17:46):

Wow, that’s a story that doesn’t come up much. I was a happy go lucky sales guy. Very damn successful, happy go lucky sales guy, winning awards at companies like Sony and Phillips. One day I was called into the senior offices at Phillips and HR wasn’t there, so I wasn’t worried about being fired as much as what’s this all about? And at the time, I didn’t know how bad returns were at Phillips and I was told, we have a returns problem. We need somebody to fix it. You’ve been picked prior to me. It was the little lady who said, we take anything back from anybody anytime. And this is Philip’s, $2 billion company with a 12% returns rate. So I was told to set up a returns management department. I didn’t know shit about returns, except it was a number on my p and l every month. So I started to go out and found that there were no real good places to find out anything about returns. This is 1998, been a while. And then I met Dr. Dale Rogers, who’s probably one of the grandfathers of the reverse logistics supply chain world. And I learned from him and I learned from Dr. James Stock, who’s the first person who ever used the term reverse logistics from the University of South Florida,

(19:09):

An entire sector built by accident. Think about what that means, that people solving one of the most important resource challenges of our time didn’t go to school for it. They often didn’t choose it. They usually got handed a problem because nobody else wanted to solve it. They built expertise through trial and error, through solving problems nobody had solved before through figuring it out on the fly. And now when we desperately need to scale these capabilities, we have no systematic way to train the next generation. No pipeline, no curriculum, just a handful of accidental experts trying to pass on what they know before they retire. Second technology, the knowledge exists, but it lives in people’s heads. When a veteran inspector leaves a return facility, they take decades of knowledge with them. A question is, can we capture that in software?

(20:14):

The moment that I shifted from just managing a three P into the e-commerce space, I remember one of the few things that I’ve noticed walking the floor,

(20:23):

Here’s YA Niri.

(20:25):

Because I saw a software that was given the operator step by step processes that they didn’t need to, inspection processes that needed to do on item with actually images. And the cool thing was you have features that are representing some flaws that you can find of that specific skew and the of that specific flaw. And so for the first time, I had found a software that was able to fill this gap between, okay, what is the desire of the retail industry in the fashion space if they really care about the quality of the products coming back. And this tool was actually given an answer to that that was very clear. It was also very simple to use for the operators and for me, helping the brands, but also helping the operators in the warehouse to follow a process that is actually not complicated was a key element that I was like, okay, this is going to be successful, but not just for e-commerce, an entire industry out there. And one of the issues for returns processors is that if I lose a member of my team that has been inspecting this item for this brand for so many years, I am actually losing all the knowledge that I have. And so a software like that that enables the operator through image driven inspections and prompts that are very clear, helps with that attrition. Like an operator can be up and running and be very productive in a couple of weeks rather than three months.

(21:59):

Are you able to process that in the US or is it going to a lower cost market?

(22:04):

No, no, no. It’s in the us.

(22:06):

Wow.

(22:07):

Yeah, yeah, yeah.

(22:08):

That’s incredible.

(22:10):

What we do is we build the AI pipelines on how to identify products and how to assess their value and how to get them back onto the market.

(22:19):

Toby Connick is a director at Pentatonic, a company that builds AI infrastructure for circular commerce

(22:27):

And that works for new products. So understanding all the products in a catalog so that store associates can be trained on that information because you have that intelligence and you can plug into that intelligence of AI agents. You can assess products for their condition right there and then because you can look at a product, look at it against digital twin and say, it’s at this value because we know that, but that’s the pipeline. That’s not the actual products. But I think that ultimately the biggest opportunity is, it’s not that it’s not possible, it’s that people think that it only costs money. And when you actually reframe it to say it’s not just a cost drain, it’s a way of getting new commerce again and again and again and again. The customer lifetime value goes through the roof without you having to produce new products and you have far greater loyalty. You have an in mill marketing tool. So once that reframe happens, and I think that’s starting to happen, there’s no limit to what is possible there.

(23:20):

And Marcus, she, the CEO of B stock told me what brands really want.

(23:25):

B Stock is a technology platform that helps organizations control and optimize the flow of their inventory, whether it’s returns, overstock, aged inventory, whatever it may be. We do this by providing them with configurable tools and systems and a very dynamic access to demand buyers and folks like that. And we give them the control and the ability to balance the needs, whether it’s price or speed, throughput or control, brand equity, it gives them, gives retailers and brands kind of the ability to make sure that things are consistent and they can have total confidence about what’s happening from an inventory perspective as well as again, that idea of control. Those are the three things that they always want, right?

(24:14):

Without data, every decision is a guess. Third, physical infrastructure. The work itself can’t be fully automated. Here’s what people don’t understand about repair and refurbishment. You can’t just throw AI at it and solve the problem. Someone has to physically open the device, diagnose the issue, replace the broken component, test the repair, repackage it. These are skilled manual jobs, the type of jobs that we want to bring back to America. But where do these jobs happen? Where are the facilities? The answer right now is scattered everywhere and nowhere.

(25:04):

There are a lot of external providers, but they’re all like mom and pop stores and everybody specialize on a very specific repair type. And so when you have to scale programs like that, it becomes really difficult to actually increase the volume for that specific repair channel, but then keep the cost low and more touches are added, right? You have to ship the product to some place, it has to come back. You have to retouch and reins inspect it. If everything was in one place instead, like you would cut additional costs and inefficiencies. We are trying with some of the three pls that we work with for which we have a lot of volume to actually create more of a little workshop where we can start training people on how to recondition leather pads or our shoes and so on. And I think it’s a huge opportunity because these are the jobs that AI cannot replace and I think in this economy are going to be extremely meaningful to brands.

(26:04):

Here’s Rich Bulger.

(26:06):

Well, I want to educate the listeners to an epiphany that you gave me. One of my old roles that ran Cisco’s a hundred percent take back pledge, we’re a CEO at the World Economic Forum and Davos pontificated that Cisco would take back a hundred percent of customers use product from anyone anywhere in the world at no charge. And I was the guy that got to run that program. So I thought, hey, that’s easy to say, but very tough to do. And I can say that there was never a customer that had a product that they wanted picked up that we didn’t pick up. One of my challenges was I had a complicated onboarding and sourcing program. There’s over 400 different recyclers here in the us. A couple hundred of ’em have good accreditations, ISO and R two, but I couldn’t onboard and source or talk to all of those entities through our traditional sourcing program. So I would truck things from Maine to Laverne, Tennessee or from Washington to Tempe, Arizona, bypassing a lot of local qualified people. And then I pound my chest saying, what a great job I did recycling. And when you’re like Rich, you kind of caused more harm than good. You introduced a thought in my mind of how can we go through and enable local statewide recyclers that can specialize in maximizing the value and velocity and keep things in reuse if possible, recycling if you have to.

(27:36):

And Corey Demi, CEO of Siri, the Sustainable Electronics Recycling International, laid out what an ecosystem actually needs.

(27:44):

And then how do we create the conditions where we have the capabilities and the capacity to do it. So creating the infrastructure for collection, the infrastructure for testing refurbishment, repair infrastructure for recovering materials in the incentives that go along with that. So not that it’s everyone expects recycling to be free and we recover what has value in the residual market, the precious metals, the copper, the aluminum and so forth. But how do we recover all 69 elements that are going into electronics that we’re losing in the process, and then how do we scale it to the US and globally? How do we get that infrastructure?

(28:35):

Fourth, the economics have to work. This is where idealism meets math. It’s not enough to say repair is good for the environment. It’s not enough to point out that reuse creates jobs. At the end of the day, businesses need to make money. Here’s Steven Beard.

(28:55):

The number one thing that we have to worry about greening the supply chain is make sure there’s money in it because you can say what you want, but we’re not going to make bad business decisions. You got to find a way. And the most green solutions are actually high ROI and good for the environment. So we got to find a way to get the unit economics of battery recovery of rare earth materials to a point where it’s self-sustaining. Requires no subsidies, requires nobody to say, I’m doing this just because I feel good about it. It’s got to be like that’s a good business decision and that promise you all the batteries will get recycled, right? That’s the way we got to go. But if the, let’s say the beyond economic repair, tipping point is 20 minutes in US and is an hour in Mexico and I can get five times the product out of my return, that gets back into the market with a high ROI. That’s a huge win. And I’ve moved it way less. So we can’t break the laws of economics and make things that aren’t viable, viable, but we can get real creative to increase the pool a lot. And then that’s just that much more opportunity to monetize that product, right? And that’s really where the cutting edge is and it is a linked to the forward supply chain. It’s the same issues but with a different twist.

(30:14):

At some point. This stopped being a conversation about efficiency or even sustainability.

(30:20):

So this is probably one of the biggest challenges in the supply chain. Something’s got to happen.

(30:26):

Something’s got to happen because this isn’t just about products, it’s about materials and who controls them.

(30:35):

When people talk about like, oh, we’ve only got picking the number that they’re saying today, 50 years of oil left, whatever it is, right? By the way, I think that was the same number in the Carter administration. So we certainly, that’s a moving target, I’ll just say. But let’s say it was true. Let’s say we have a 50 year runway of oil left, and that might be a reason for us to think about getting off of fossil fuels, right? Everybody accepts that. Do you have any idea how much rare earth we have left? Way less than that. It’s like five years,

(31:04):

Five years. I’m not talking about oil. I’m talking about rare earth metals. The elements that go into everything from smartphones to fighter jets and toasters and refrigerators and our smart watches,

(31:19):

Known reserves of rare earth minerals is so much rarer and so much less known. And already you have western societies that have either banned or highly restricted access to those minerals. So to the extent we know where they are, we can’t get them out of the ground in a lot of instances, right? There is not enough rare minerals on the planet to replace the cars in the United States. One country. We can’t do it today, it’s dead end. And we’re not just going to dig holes and find enough rare earth to build the next generation’s lithium ion products. It’s not possible as far as we know from science today, right?

(31:56):

The materials that are already in circulation, sitting in our landfills, flowing through our liquidation lots and piling up in our returns facilities, we’ve

(32:06):

Got to find a way to harvest as much as we can, and it has to be part of the solution. We’re not just going to dig holes and find enough rare Earth.

(32:13):

Corey. Demi,

(32:14):

There’s about 650,000 metric tons of electronics going through R two certified facilities. You compare that to the 62 million metric tons of ewas being generated every year. It’s a small fraction. When we broke down that 650,000, we found out that 75% of that was being recycled by weight, right? Only 25% being reused. That doesn’t seem like a lot, but actually that 25% was actually 92 million devices that went back into a second use. But there is a lot of reuse occurring. And the interesting thing was when you put it through a different lent that 75% by weight how much we’re recycling was only 15,000 metric tons of carbon avoided. In contrast, that 25%, 92 million devices was 4.5 million metric tons of carbon avoided from reuse. And the moral of the story is we’ve got to extend the life of the products that we’ve already made.

(33:20):

Rich Bulger,

(33:21):

The material that we’re going to use to build tomorrow’s products are going to come from the things that we’re using today or we used yesterday. I can rapidly envision a world where a digital passport can say, this thing came in with these materials. We’re not going to let it leave because we need those materials.

(33:41):

This is urban mining. The resources are already here. We’re just not very good at finding them. Think about what we’re sitting on in American landfills right now. Millions of smartphones with cobalt, lithium and rare earth elements. Millions of computers with gold and copper, millions of appliances with steel, aluminum and precious metals. We threw away more resources than some countries will ever mine, and we keep throwing away more every day. The question isn’t whether we have the materials. The question is whether we have the will and the infrastructure to recover them. We can’t make products in America at scale anymore, but we can remake them. $850 billion flows backward every year. The materials are already here. The industry already exists. It’s just invisible. What if made in America isn’t the answer? What if remade in America is?

(34:51):

So, I think the economy is going to force recirculation because it’s going to make more and more financial sense.

(34:58):

We need backing from somewhere, and it can’t constantly be PE or VC or institutional investors. There has to be government subsidies. There has to be tax breaks. There has to be a flow of cash from our government counterparts into circularity in order to enable it to scale up.

(35:15):

Deborah, I’m really inspired by your Remade in America mantra. I love the fact that you’re thinking in terms of not what’s been done before, but what should we do? And you’re fearless in going through and pursuing the message and finding solutions to hard problems.

(35:33):

The question is, will we be ready? Over the next episodes, we’re going to find out. I’m Deborah Dole. This is Remade in America.