Use these 14 best practices to avoid profit drain on product returns

10/03/2017

Mail stamped return to sender

Mail stamped return to sender

The aim with supply chain management is to provide maximum customer value while maximizing profits and managing costs. Several best practices have been developed that can help a company enhance its customer service offerings and reduce the costs associated with managing returns.

Here are the top 14 best practices to follow to ensure your reverse logistics don’t eat into your hard earned profits.

1. Provide clear returns instructions and policy

When dispatching goods, companies should include information about returns with the packaging. This information should be duplicated on the company website.

2. Generate smart serial numbers

Manufacturers are now producing products with smart serial numbers that have the date and location of manufacture coded into them. This serial number can help companies determine the age of a product, link performance problems from manufacturing locations, and assess the validity of warranty repairs.

3. Provide a warranty lookup service

For customers who are uncertain whether their product is still covered by a warranty, a warranty lookup service is invaluable. The customer can enter their product serial number on the company’s website to see if the warranty has expired. This service can also be provided by telephone.

4. Enable customers to register products

Most companies provide a method for customers to register ownership of a new product. This can be through the company website, by sending in a pre-paid postcard, or by phone. This registration means that customers can still obtain service even if they cannot find the original receipt. It also enables the company to send targeted marketing information to customers for other products or upgrades. 

5. Provide testing methods

Some products are returned unnecessarily because customers think they are malfunctioning when they are not. To avoid the costs associated with shipping and processing of unnecessary returns, some companies provide a method for customers to test their product before sending it back. Such testing methods include diagnostic software provided by computer manufacturers, instructions on websites, and step by step instructions provided in leaflets that are sent with the product.

Alternatively, larger companies can provide customer technical support helplines. Support personnel can make preliminary diagnoses, suggest troubleshooting fixes, and authorize returns only when it is certain that they are required.

6. Enable customers to create a return material authorization

One way in which smaller companies can save substantially is by permitting customers to create their own Return Material Authorizations (RMAs). Usually, this is performed by providing a web page with relevant instructions that will generate the appropriate form. Companies are often concerned that enabling customers to create their own returns authorizations will result in a large increase in product returns. If this is a concern, companies can validate the RMA and issue an approval before the customer ships the product.

7. Create standardized return processes

Many companies have several different methods that a customer can use to request a return authorization. Regular customers, especially if customers are retailers or distributors, quickly realize that there is more than one person that they can call to get a request authorized. In some cases, a return that is denied by one representative can be accepted by another. Best practices for returns management involves using an IT system to process all requests for returns and ensure that they are properly authorized.

8. Replace return for repair processes

Many computer and consumer electronic companies only offer Return for Repair for products that are within their warranty periods. This results in customers undergoing a lengthy wait while their product is shipped to a repair depot, processed through a repair, and shipped back to them again. The most customer friendly companies offer a replacement service to their customers, which includes immediate shipment of a replacement when a product is received for repair. This system creates large cost savings for the companies because product shipments and repairs can be organized in bulk instead of individually. However, it is not suitable for products that contain personal data or for companies that are unlikely to have sufficient inventory in stock to ship to customers as replacements.

9. Use bar codes

One of the most effective steps companies can take to manage returns is to generate pre-paid return labels that incorporate the customer’s order information and send them with dispatched orders. When customers need to return a product, the company can scan the bar code to obtain the customer return information automatically and quickly.

10. Use emails

Many business consumers and other customers now have access to the Internet and email. As soon as a return is processed, an email message can be automatically generated that reassures the customer that their returned product has been received and is being processed. In environments in which email is not a common form of communication, this automatic message generation can be transferred to creating printed letters that are processed for sending through the mail within days of the return being received.

11. Enable visibility of replacement stock

When customers call to request a return, a warranty might specify that a replacement product will be supplied. Many companies have IT systems in place that enable customer service representatives to view available inventory and planned shipment and delivery times.

12. Enable status lookup

Providing customers with the details of a website or a phone number that they can use to check the status of their return, repair, replacement or refund, will enhance customer service and reduce the incidence of inquiries.

13. Provide regular status updates

Customers appreciate regular updates on the status of their returned goods if they are expecting a repair or a replacement. Barcoding enables automatically generated emails or printed notifications to be prepared when goods are received, shipped or credited.

14. Enable customer feedback

A very cost-effective method of making improvements to returns processes involves including a card with the shipment that asks for the customer’s feedback about the returns experience and performance.

The reversed flow of materials through the supply chain needs to be planned with as much care as the forward supply chain.

Recent mass product recalls have highlighted the problems that large returns can create, with goods having to be transported and stored in inventory awaiting disposal or recycling. Companies can ensure good customer service and cut the costs associated with product returns by establishing returns policies and strategies.

Effective gate keeping policies will cut down on the number of unnecessary product returns and associated handling and processing costs. Setting up separate inventory locations, or using 3PLs to manage returned products, will ensure that returned goods are handled quickly and categorized according to the action that must be taken with them.

This content is an excerpt from the FITTskills Global Supply Chain Management textbook. Enhance your knowledge and credibility with the leading international trade training and certification experts.

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About the author

Pamela Hyatt

Author: Pamela Hyatt

I am a Content Marketing Specialist for the Forum for International Trade Training (FITT). You can find some of my work on TradeReady.ca. My background is in copywriting, journalism and social media. My passion lies in connecting people to the stories that are most important to them.

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