Purpose of Returns “Effective method for handling an item that does not achieve its intended purpose�
Cabbage Production 70 Days from seed to Market 69 million metric tonnes Globally China, India and Russia
Who is RMS In Business Since 1986
Multiple Locations across the United States Many retail industries – Food, Hard goods, Entertainment, Sporting Goods, Drug Stores, etc. Developed own proprietary systems
Operate returns centers and provide system solutions
Return rates by industry Magazine Publishing
50%
CD/DVD
18-25%
Book Publishers
20-30%
Printers
4-8%
Book Distributors
10-20%
Mail Order Computer
2-5%
Greeting Cards
20-30%
Mass Merchandisers
4-15%
Catalog Retailers
18-35%
Auto Industry (Parts)
4-6%
Electronic Distributors
10-12%
Consumer Electronics
4-5%
Computer Manufacturers
10-20%
Household Chemicals
2-3%
Drug Stores
2- 4%
Grocery
.5 – 1.5%
Source: Going Backwards Reverse Logistic Trends (University of Nevada) & FMI/GMA joint study
DVD Returns
Book Returns
Book Returns
Before Automated Returns 10,000,000 units in annual returns Accuracy rate of 70% on orders
After Automated Returns Returns reduced by 15% Accuracy rate increase to 99% Savings of $5,000,000
Customer A 75,000 square feet 1 shift - 55 people 900,000 units/month 5 receiving stations
12 primary scan stations 1500 pallet asset recovery 5,000 RTS slots
High Value Item Returns
High Value Items
Electronic Returns Unique Product
Relationship between Manufacturer and Retailer/Distributor Clear communication as to crediting policy Branding profile/image Liability/product visibility Marketing Trends/strategy
Objective of a Returns Process Maintain customer service experience
Move product out of the selling space Recover costs associated with returns
Categories of Returns Defective Warranty Out of Warranty
Performance or wrong item ability for consumer to use
Guilt – buyers remorse Outdated
Types of Returns Consumer Performance Defective Guilt Product Use Retailer Defective Slow moving Outdated/Model Change Discontinued In-house Damage Pilferage
Purpose of a Returns Program Give retailer/distributor a tool to move product back
Identify Credit process Manage non-selling inventory Track product
Challenges Accurately Identify Products
Track & issue credit Cover costs for returns = Who pays Product liability Brand Image
Duplication of efforts Business relationship – trust Non-revenue process
Solution Parties need to establish the following:
Communication and expectations Credit policy Tracking procedures Reporting
Product flow Product Disposition Compensation
Communication Both parties agree on the following:
Standardize data exchange What and how items are to be returned for credit Agreed upon handling procedures Agreed upon disposition procedures
Credit Policy Warranty versus Non-Warranty returns
Credit rate – what is the policy Retail, Cost, Cost +, % of Sales (Cap), etc.
Physical product handling Return, Repair/Refurbish, Liquidate, Destroy and or Recycle
Tracking Procedures System interface
Item tracking through the process Credit handling and disposition Handling instructions Disposition
Reporting Retail Activity
Products shipped from retail location Variance reporting from Retail location Compliance Consolidated Supplier charge backs
Authorized versus Un-Authorized items Disposition/manifests Liquidator Manifests
•Items received and checked against – retailer/supplier returns agreement •Qualified items for return are consolidated and Return Request filed •Not-Qualified for supplier return are liquidated/refurbished/ recycled and or destroyed
At Manufacturer level
•Customer brings product back •Quality Check item •Return to selling space •Defective/Warranty return to supplier for credit •Through Distribution channel or directly to supplier
At Distribution level
At retail level
Product Flow
•Items are checked in to validate reason for return •Refurbished/repaired •Liquidated •Recycled
Product Disposition Return to Manufact urer
• Automatic Return Authorization • Request Authorization
Liquidate
Destroy / Recycle
• Bulk Sales • Refurbish
• Landfill • Recycle/Break down to parts/ Donate
Compensation The goal is to make the consumer whole
Who takes ultimate responsibility for item Manufacturer, Retailer, Distributor? Ultimately costs of returns are reflected in the costs of goods. How returns are managed can determine how much impact they have on the overall cost model
Conclusion “Electronic returns are like cabbage, unlike fine wine, They don’t get any better with age”