April 2012 | Commentary | IT Matters

The Three Pillars of Effective Returns Management

Tags: Reverse Logistics, Logistics I.T.

Tamara Dwyer is Product Management Business Analyst, TAKE Solutions, Inc., 512-231-8191

Returns management presents both challenges and opportunities for inbound logistics. Waste management regulations and non-compliance penalties are increasing. Rising commodity prices and a growing secondary marketplace, however, create an opportunity to recover value from used and scrapped materials.

A cost-effective reverse logistics program connects the incoming supply of returns with the product information and demand for repairable items or re-captured raw goods. Three pillars support returns management processes: speed, visibility, and control.

Pillar One: Speed

For fast and easy returns management, automate decisions about whether to generate return material authorizations (RMAs) and how to process returned material. Three tools to speed returns processing are:

  1. Automated workflows. The disposition of the return depends on data points scattered throughout the enterprise: the item's value and materials, repair scope and cost, return source, and customer service contracts. Automating workflows drives repeatable processes and consistent routing that is efficient and measurably faster.
  2. Labels and attachments. Automated workflows validate RMAs, and generate labels and shipping documents. Accurately labeled shipments with required paperwork and pre-addressed, carrier-compliant labels experience fewer delays and create a predictable inbound return stream.
  3. User profiles. Profiles simplify user maintenance and permissions. User groups share attributes such as physical locations, payment terms, service contracts, and product return eligibility.
Handling inbound return shipments quickly and efficiently increases value recovery.

Pillar Two: Visibility

To improve visibility and predictability, information must be captured early in the process, ideally before the return is delivered to the receiving dock. Three of the most effective and easy-to-implement approaches to obtaining visibility are:

  1. Web-based portals. These online tools allow authenticated users to perform tasks from any location and time zone. Integrating Web-based portals with product data and financial applications provides consistent and accurate information across a diverse network of manufacturing locations, business units, and third-party service providers.
  2. Carrier integration. Linking RMAs to carrier tracking numbers provides shipment visibility, both within Web-based portals and through automated notifications.
  3. Bar-coded identifiers. Accurate inbound shipment information—including parts, condition, quantity, and dates—ensures the receiving dock and repair depot are stocked with the labor and equipment required to handle and process returns.

Pillar Three: Control

Synchronizing material movements is a common supply chain management challenge, especially for returns. Manufacturers must pay close attention to receipts and reconciliation, and notify stakeholders of impending quality issues. Reconciliation enables enterprise-wide visibility and control.

Three control touchpoints to build into the returns management process are:

  1. Regulatory compliance. Compliance touches all aspects of the reverse logistics process. In addition to national borders and individual state regulations, shippers must follow industry-specific regulations, such as those governing food and drug safety. Workflows used to speed up the process also provide controls that minimize corporate liability.
  2. Reconciliation and final disposition. Labeling and enterprise data integration reconcile RMA information with physical shipment, value, and accounting data. Combining financial systems and exception-based reporting enables quick shipment variance resolution and accurate credits, maintaining both external customer satisfaction and internal financial control. Integrating with product engineering determines the raw materials' resale potential and value.
  3. Quality assurance. Timely feedback helps teams address root causes of returns. Product engineering identifies quality control issues. Distribution centers review outbound shipment accuracy. Finance quantifies financial exposure and risks. Automated communication and metrics for each team improve quality throughout the enterprise.

Handling inbound return shipments quickly and efficiently increases value recovery—from repairing or reselling the item or its raw materials—and decreases costs incurred through storing scrapped parts or waste management fees. Software solutions can help speed returns management by providing user profiles and workflows that define supply chain partners and processes; labeling and documentation that track the material; and Web-based portals and exception-based reporting to deliver information for timely reconciliation.

These features, implemented with the three pillars, support a reliable and predictable returns process to provide value across the enterprise.