Returns management in your supply chain

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Most suppliers, either wholesale or retail, has to deal with returns and defective products and usually results in a financial loss. With an effective and efficient returns management process, a business will minimize its loss from products returned, and increase its bottom line in revenue. Efficient companies also tend to outsource other services as part of their reverse logistics process such as electronics repair, depot services in order to focus on their core business, reduce costs and maximize profitability.

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  • PSSI has done an outstanding job of consistently producing large volumes of repaired product... They delivered outstanding value by meeting AT&T's strict quality requirements on complex repairs at a low cost. And PSSI's flexibility - their ability to ramp up or down and take on large ad hoc projects - really differentiates them from their competitors.”

    Scott Huddle
    Frm. Dir. of Reverse Logistics Operations, AT&T Mobility
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Returns management in your supply chain

  1. 1. Returns Management in Your Supply ChainEvery supplier, either wholesale or retail, has to deal with returns and defective productsat some time or another. It’s all a part of doing business, but usually results in a financialloss, and a quandary as to how to dispose of the returns. If a company were to institute areturns management program for dealing with returns, there is a possibility to recoupsome of the financial loss.The typical supply chain process in wholesale or retail businesses consists of: • Purchasing a product from the manufacturer or a third party • Receiving the merchandise, determining a mark-up price and placing it on the shelf • Selling the product to the consumer, where it will be kept and used – or returned • Processing a returned product through customer service and returns departmentThe process that takes place, from the customer service department taking in the returnsto the final destination of the product, is called returns management. This is one area ofthe supply chain that many view as a loss to their business, but it has long beenoverlooked as a hidden revenue stream.You want to capture as much of the value of the product returned as possible.Statistically, 80% of all returned merchandise can be placed back into stock immediately.A few will need a simple repackaging. Of the majority of the returns that are not able tobe restocked immediately, some can be returned to the manufacturer under warranty andthe store can recoup their entire loss; others can be undergo a test and repair process
  2. 2. where they are refurbished, repaired, or remanufactured, either within the store itself orthrough a third party.Having a returns management program in place to handle all items returned to the store isessential to a business. Policies should be instituted at the store level for customer serviceagents taking in the returns. They must be trained in the correct procedures to ensureminimizing costs. That would include sorting returns in the appropriate manner: • Items that can be immediately returned to stock • Items that can be repackaged and then returned to stock • Items that are under a manufacturer’s warranty • Items that can be tested and repaired for future resale • Items that are not covered under warranty and cannot be repaired for resale (which may qualify to be donated to charity or trashed).Once the items are sorted, a set policy needs to be in place to take the appropriate actionto redistribute the products to their required destinations.For items that are leaving the store, communication with the various agencies shouldinclude authorization and tracking numbers to guarantee credit and ease in follow-up.Shipping of the merchandise needs to be the most efficient and least costly method, andthis could be negotiated with the manufacturer or remanufacture service provider. If youare outsourcing your returns to be tested and repaired communication should be set upwith the remanufacture agency as to turn-around time and warranties.With an effective and efficient returns management process, a business will minimize itsloss from products returned, and increase its bottom line in revenue. In addition, manybusinesses also tend to outsource other services as part of their reverse logistics processsuch as electronics repair, depot services in order to focus on their core business, reducecosts and maximize profitability.

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