Chapter 15: Returns Management. Process Management: Creating Value Along the Supply Chain (1 st edition) Wisner and Stanley. Chapter Outline. Introduction Defining Returns Management Returns Management and the Product Life Cycle Developing a Returns Management Strategy - PowerPoint PPT Presentation
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Introduction Goods flow backwards from customers in the supply chain when they are returned. The number of mistakes made in the returns process has risen as the number of marketing
channels increases. Retail customer returns account for 6% of sales. Catalog returns may account for up to 35% of sales revenues in returns for soft goods
such as clothes and shoes. The logistical costs to process returns can be very high. Challenges of remanufacturing and returns management
Defining Returns Management Reverse logistics: “The process of planning, implementing, and
controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.”
Returns: process of receiving and processing merchandise returned for any reason and includes after-sales customer support.
Closed-loop supply chain management: broader term, encompassing both forward and reverse flows of products
Returns management incorporates the definitions of returns, closed-loop supply chain management, and reverse logistics.
Returns Management Major returns management activities Recycling Repair Refurbishing Remanufacturing Cannibalization Landfill Return to supplier Sell as new Sell through outlet or discount store Sell to secondary market Donate to charity
Developing a Returns Management Strategy Asset recovery : the process of classifying and disposing of any
returned goods, scrap, waste, surplus or other assets to maximize a return to the owner while minimize the cost and liability associated with disposition.
Organizations should develop a returns management strategy based on
The role of returns in their customer service strategy The way returns can improve their profitability Their current capabilities (current processes, facilities, and
Establishing Returns Policies Gatekeeping: the screening of defective and unwarranted
returned merchandise at the entry point into the reverse logistics process.
Avoidance: avoiding or minimizing return requests through a number of means.
One way is clearly written instructions and to implement reward systems to reduce the number of returns.
Suppliers provide product support to manufacturers and service companies to avoid returns. Activities resulting in fewer consumer returns Everyday low pricing : consistently selling products at their
lowest profit-generating price Upselling: letting customer return a product in exchange for
an upscale model Cross-selling: cross-sell complimentary products that will
Key factors in returns policy and guideline development In retailing: Retailers typically take back merchandise and refund the full
purchase price with a receipt. In some cases without a receipt, customer might receive a
credit for the current sale price. Some stores require merchandise to be returned within a
certain time frame to receive a refund. In B2B: Chargeback: the supplier allows straight deductions or
discounts for returns to be taken from the supplier’s invoice. Short payments: pay less than the invoice amount Zero returns policy: no returns, give return allowance
Design of the Returns Network Returns management is impacted by the design of returns and related
information networks: CRM team, order fulfillment personnel In-house or 3PLs? (Example: Xerox) Transportation modes: companies choose the least expensive mode for
returns regardless of service levels Movement of recalled products: an effective communication network is
Design of the Returns Network Returns management information systems : should be able to link every
return to a specific customer and the date of original purchase, along with the manufacturing location an the date of manufacture. Return authorizations (RA): numbered authorization forms used to
permit the return of a product. Advanced shipment notification (ASN): electronic version of the
shipping notice that is transmitted by the retailer to the manufacturer once the returned product is released to the transportation provider.
An effective returns management system should enable to analyze the costs to serve each customer by profiling each customer’s returns history and looking for trends for abuse.
The Returns Management Process in Practice (cont.)
Centralized returns center: if the product is sent back to the manufacturer, a centralized return center, or a warehouse is notified of the incoming shipment.
Advantages of a centralized return center: Economies of scale in the center and during transportation
occur Specialization of workforce is possible More consistent decision making Store processes simplified Shrinkage is reduced Retailer can focus on core competencies Inventory control easier
The Returns Management Process in Practice (cont.) Determine disposition: once returns are delivered to the warehouse or
centralized returns center, they will be inspected. Each return is then assigned a code based on the reason for its return. The appropriate disposition must be determined.
Recycling: process of returning products for reuse in either the same form or something completely different though remanufacturing or refurbishment.
Refurbishing: to renew or to restore to a new condition and/or appearance
Reclaiming: the use of reclaimed materials to create new products (i.e. the automotive industry uses shredded metal from older vehicles to make new parts)
Collect and analyze performance metrics: at this stage companies develop a relevant set of measures to monitor the success of the process and then acts to address any problems that have been identified.
Companies may also be interested in measuring the impact of their return policies on customer satisfaction or loyalty.
Disposal of Hazardous Materials in the United States Communication issues: specific warnings regarding each
shipped hazardous material must be communicated on shipping documents, package markings and labels, placards, and written emergency response information
Packaging requirements: should contain similar warnings that are provided on shipping documents.
Operating rules: Carriers must report all incidents and keep them in an automated hazardous materials information system database.
Training: Employee training is designed to increase an employee’s awareness of safety considerations involved in transportation of hazardous materials, thereby helping to reduce the number of incidents and mitigate their effect.