Warehouse management systems are everywhere. It’s a mature software category that has long-since proven battle tested and reliable, with dozens of vendors offering all sorts of permutations. By contrast, their reverse logistics counterparts, known as returns management systems, are much newer and far less common. The field is only a few years old and just a handful of software developers are tackling reverse logistics as their main focus.

Optoro, based in Washington DC, is one of the leaders in this emerging field. It’s a nine-year-old company that initially was an eBay Dropbox store, then moved into processing return goods for retailers. Optoro launched the first version of its software in 2014 after the founders came to the conclusion that retailers were basically abandoning returns for others to not only deal with, but extract value through more adept restocking, resales and marketing.

“The real driver of the business was an understanding of how little was happening in this space based on [the founders’] experience working with returned inventory,” explained Optoro head of product marketing, Jordan Jakubovitz. There’s a need for “supply chain tools that are specifically oriented toward reverse logistics processes, so think of a WMS but much more designed for the unique characteristics of returned inventory.”

Optoro clients now include Target, Best Buy, Staples and Bed Bath & Beyond. The company has proven popular with investors as well, having raised some $200 million in venture capital.

Optoro calls its cloud-based product a “return optimization software platform.” The underlying idea is that by managing returns with the use of intelligent software, a retailer or logistics provider can extract optimal value.

Elements of the process include sorting, restocking, disposal, and transport. Optoro offers software for the retail outlet to assist in its returns process at the store level. It also provides software that integrates with an inventory management system providing better visibility. This can help determine, say, the impact on inventory levels of items in salable condition moving back into primary sales channels when there’s already a lot of stock available.

“We can learn from what’s happening in one area and apply that learning to how inventory gets handled in a different area,” Jakubovitz said.

Key is determining the condition of each good. While robots may be able to do this in the future, for the time being a human operator makes the call, based on predetermined criteria. The software will then route the item depending on that condition category.

That’s not as simple as it sounds. The SKU is the basis of warehouse inventory management. But with returns, one SKU can have within it several conditions of goods, warranting different actions.

“The real value here is the ability to make a routing decision on each and every item that gets returned and comes back through the supply chain,” said Jakubovitz.

This involves what is called “decision sciences” technology, basically decision routing guidance systems. What happens to an item, where it goes in the warehouse, is based on its condition.

Doing this accurately, but also efficiently, is another major goal of returns software. Lack of speed has historically bedeviled the returns process. It does no good to have an individual spending ten minutes on a single return. “You need to be able to handle every item individually and act quickly,” said Jakubovitz. “The combination of those two things has unlocked a lot of additional opportunity in this space.”

The kind of data analytics and machine learning that companies such as Optoro provide have profound consequences up and down the supply chain. They affect pricing decisions, based on the number of returns and when they arrive. They impact refurbishing decisions. They assist on inventory positioning.

Optoro’s systems offerings include a package specifically for returns to vendors, or manufacturers. In the past, the company says, retailers have defaulted to sending all goods back to vendors, even if they could make more money by reselling or have already reached their quota. Returning to vendors, as well, has historically been even more laborious and less automated than even returns from customers. “Returning to vendor is a relatively complex concept that we believe justifies its own treatment as a technology offering,” Jakubovitz said.