For manufacturers, customer returns are often seen as a major inconvenience, an expensive mistake, and ultimately something unavoidable in the best of direct spend situations. Regardless of how well a company excels in quality, there will always be a dissatisfied party, and there will inevitably be some percentage of returned stock. While some teams accept the costs associated with returns management as part of doing business, others recognize the opportunity to improve these processes to realize significant savings that can be redistributed for value-added activities and provide an advantage over their competitors.
At present, most companies put minimal planning into their customers' returns process, if at all and instead spend towards making their outward journey as efficient as possible. As a result of their lack of returns process, businesses often are misinformed of their progress towards sales targets. They are unaware of how the impending lack of process is eating away at their margins.
One example of this lack of process is in the retail, pharmaceutical industry. This sector is unique because its products expire and may not even be sold past a certain date. Therefore, there is a brief period where products about to expire must be stored somewhere before they can be returned to a manufacturer. Without accurate insights into these products, many businesses often have false projections regarding the number of goods sold.
To help your team take advantage of this opportunity, we have outlined some guiding principles to take your returns management process from a cost-intensive process to a profit-generating opportunity.
Considering the Customer Returns Process
Regardless of industry or the good being returned, returns management typically looks at creating the returns order, receiving the product, sorting it in your warehouse, inspecting the product, and determining the next step, including any necessary support. Each stage of the process can be further optimized to ensure cost savings and minimize losses.
1. Ensure Your High-Quality Standards are Maintained
One of the primary reasons returns occur, with the exception of regulated industries like pharmaceuticals is that the quality of the offering does not meet expectations of the receiver. As the manufacturer, you can take precautionary steps to ensure that you are regularly evaluating your suppliers against your quality standards to ensure minimal defects and therefore fewer returns.
These evaluations can be improved with automated solutions that can be connected to your ERP system. Such solutions often highlight price differences and delivery times but keep details about quality more hidden and difficult to reference. By ensuring tools highlight all relevant details and supplier quality data, your team can conduct more informed negotiations and make decisions that help to ensure quality while limiting the chance of returns.
2. Maximize the Number of Products That Are Being Refurbished
Only so many returns can be controlled with quality guidelines, so what about those that still don’t make the cut? Typically, when returns come back, several of them can be fixed, remanufactured and later resold. On a small scale, the savings may be minimal but consider what happens when volume is at play.
Major cost savings can be seen when refurbished and returned stock is reused, and the amount of new orders for future stock is minimized. With an inventory management solution that properly sorts incoming products while accurately tracking the whereabouts of these items, companies can reduce the number of items disposed of and ensure a higher percentage of goods go back to the distribution pipeline. This example is especially applicable with brands like Apple who allow users to trade in older models for credit to the customer, but then must inspect it, recertify it or upgrade/fix it.
3. Gain Returns Efficiencies with an Interconnected Process
Along with the cost savings that come from an accurate sorting process, the speed at which a return can be processed can further ensure products aren’t sitting in warehouses, adding to storage costs. When returns are dealt with promptly, it also helps to preserve relationships in the supply chain and provides a higher likelihood that these items can be reused in a way that is cost-efficient.
To achieve these efficiencies, these teams are encouraged to leverage operations that are interconnected, linking back to their ERP system. When systems are all connected to the same digital core, businesses can take advantage of having all their data in the same place, which can easily be referred to at different stages in the return process. In some cases, users can also take advantage of touchless operations across connected processes to automatically populate fields or assign a proposed next step with limited human intervention.
4. Don’t Start Implementing Solutions from Scratch
Whether your team is starting from a blank slate or currently has several point solutions deployed, investing in a custom solution is not the way to turn your returns management system into a profit-generating system. Developing a custom solution is costly, and since it is unique to your team, there is little insight into when this investment will begin to provide any returns. For this reason, our team has released an out-of-the-box Customer Service Requests & Returns Management application as part of our end-to-end Rapid Vendor Portal that ensures users can gain complete visibility into all returns across their enterprise. The result is that users can accurately view all the steps in the process, including stock transport orders, credit memo requests and orders with fees removed.
With this application users will also be able to manage customer escalations, authorize customer returns, and locate and contact suppliers involved with returns.
Completing the End-to-End Process
Of course, returns management is only a subset of a larger and more comprehensive vendor management process. Therefore, to ensure your team is getting the most out of an improved returns process it becomes crucial that it is interconnected with sourcing, forecasting and dashboard views to ensure your procurement team understands the full story your data is presenting.
To learn more about our solutions for managing customer returns, along with the rest of your procurement processes, check out the ConvergentIS Rapid Vendor Portal for Vendor Management.