It used to be that customer returns were treated as the ugly duckling of retail management. Returns were tolerated, because they had to be, but were pretty much tossed aside and seen as a drain on the bottom line.
Not so anymore. Many businesses now consider returns to be a revenue generator, with returns finding new life in secondary markets including outlets, “pre-owned,” and “overstock” venues. Businesses are also realizing that proper returns management can be a terrific customer service opportunity. A few facts:
- According to the National Retail Federation, consumers returned almost $2.2 billion worth of merchandise during 2011, a figure that accounts for almost 9 percent of all sales.
- The 2007 National Shopping Behavior Survey, conducted by KPMG LLC financial advisory company, found that 58 percent of consumers said that a company’s returns policy was a factor in their decision whether or not to shop with that retailer.
- Accenture consultants found that only about five percent of returned merchandise actually have defects, with “defect” defined as something as minor as torn packaging. While those returned products cannot be resold as new, they can be resold on the secondary market. The Chicago Tribune reported that during 2007, electronics manufacturers reaped $13.8 billion by repairing, repackaging and reselling returned goods.
Key to a solid returns management process though, is a comprehensive logistics plan that takes into consideration everything from compliance penalties to waste management regulations to packaging mandates. Inbound Logistics recently included an article by product management business analyst Tamara Dwyer, in which she outlined three “pillars” of returns management – speed, visibility and control.
According to Dwyer, returns management considerations fall within one of these three pillars and, when taken as a whole, will produce an effective returns management supply chain:
- Automated workflows: Clearly defined data points must be present throughout the supply chain, including the item’s value and materials, repair scope and cost, return source, and customer service contracts.
- Labels and Attachments: Supply chain must include process for validating RMAs, and for generating labels and shipping documents.
- User Profiles: By capturing key data such as physical locations, payment terms, and service contracts, profiles can be created that improve efficiency and reduce errors.
- Web-based portals. Allow authorized users to perform tasks from any location, at any time. Integration of data via a web-based portal also allows multiple business partners to have access to relevant information.
- Carrier integration. This involves linking RMAs to carrier tracking numbers, as a way to provide shipment visibility.
- Bar-coded identifiers. Each item should bear a bar code that includes information including parts, condition, quantity and date. This will ensure that parts and manpower are available when the product reaches the repair or processing destination.
- Regulatory Compliance. Dwyer accurately notes that compliance touches all aspects of the reverse logistics process. A supply chain must take into account everything from federal border clearance processes to state regulations to industry-specific mandates.
- Reconciliation and final disposition. This is the process whereby all shipment data – RMA data, accounting data, product data, etc., are brought together so that a determination can be made with regard to resale potential and value.
- Quality assurance. Mechanisms must be included in a returns management plan that allow for feedback across all parts of the supply chain. By dissecting each step of the process, a business can better understand why certain products have been return, and to determine if there is a design or quality issue that should be addressed.
With most businesses pressed to find efficiencies wherever possible, the spotlight is increasingly turning to the previously overlooked returns sector. And as the above discussion indicates, a properly managed returns process can be a bright spot, both in turns of revenue and customer satisfaction.