Posted on - Friday, Aprial 20, 2011 by Manufacturing Today

The three pillars of effective returns management.

"Begin with the end in mind."These words of wisdom from Steven Covey apply to many situations, including managing the product lifecycle. The complete product lifecycle goes beyond the initial sale to the customer to include sales in the used market, repair and rework, as well as destruction, material recovery and disposal. Regulatory compliance associated with consumer safety, recycling and waste management creates additional pressure to carry responsibility through the product's end-of-life. Unfortunately, many manufacturers have not yet implemented programs to maximize value and minimize risks in the latter stages of the lifecycle. This leads to lower value recovery and excessive administrative costs.

"returns provide opportunities to increase customer satisfaction and recover value from assets. the key is to develop a comprehensive approach detailed enough to handle each situation"

Visionary manufacturers must address the true end point of the product lifecycle with an effective returns management and reverse logistics process, or risk losing their competitive advantage. In order to truly manage returns, it's critical that manufacturers fully understand what the course of action entails.

Returns management processes are supported by the following three pillars - all of which apply to the typical returns process flow:

  • Speed
  • Visibility
  • Control

Process Flow

To manage returns effectively, one must first become familiar with the five high-level process touch points of returns management in order to understand the context for the three pillars:

  1. RMA Create - The returning party notifies the seller receives authorization to send the materials back. This return material authorization (RMA) marks the start of the process.
  2. Route - The materials are physically moved from the start to its destination.
  3. Receive - At the destination, the materials are received and acknowledged.
  4. Disposition -Materials are routed from the receiving dock to the next step based on return type, material, and condition. Dispositions include: return to stock, replacement parts, scrap, repair, rework, remanufacture, recycle, liquidate and return to vendor.
  5. RMA Create - The returning party notifies the seller receives authorization to send the materials back. This return material authorization (RMA) marks the start of the process.

Pillar One: Speed

Returns and warranty services are, for the most part, a manual effort. In some cases, more transactions are required to process a return than to generate the initial sale.

Reducing time and effort at each touch point is the foundation for refining the returns process. First, let's explore four ways to make returns processing faster:

  1. User Profiles - Businesses today engage in ever-changing and complex relationships with one another. Further complicating the management of this network are the various contractual terms and relationship parameters for all parties. Profiles simplify processes for adding new users and maintaining users and user groups, altering physical locations, changing payment terms and updating service contracts or product return eligibility. User profiles are key to automated workflows and notifications which drive efficiency throughout the process.
  2. Workflow - Processing returns depends on the return reason and the product type. Additional information gathered during the process determines if material is routed for repair or scrapped. A well-defined process defines the expected outcome for various conditions, but leaves individuals following complex flowcharts with manual transaction touch points. Automating workflows drives repeatable processes that are efficient and measurably faster.
  3. Labels and attachments - Accurately-labeled material with required shipping paperwork reduces costly delays. Reducing shipment delays drives predictability. Fast and predictable shipments enable appropriate levels of staffing for the repair depot and spare parts, reducing the cost of the repair and rework processes. Workflow and rules-based logic embedded within the system provides labeling and shipment documentation required for each type of return, origination point, and destination.
  4. RMA and Return Unit Scanning - The labels generated for each return should include bar-coded data. Scanning barcodes for RMA numbers and returns data is quicker and easier than hand-keying data, reducing errors and improving throughput. Including barcodes in the processing strategy helps create a fast and predictable process which adheres to quality and regulatory requirements.

Pillar Two: Visibility

To improve visibility and predictability, information must be captured as early as possible in the process, ideally before the return is delivered to the receiving dock. How does one obtain visibility?

Let's explore three of the most effective and easiest ways to implement:

  1. Web-based portal - A Web-based portal can be deployed across a diverse network of multiple manufacturing locations, business units and third-party service providers. Users can login and perform tasks consistent with their profiles and permissions, from any location and time zone. Integrating the portal with the manufacturer's business information and financial applications provides consistent and accurate information.
  2. Unique Order Identifiers - A well-designed returns solution should support configuration of RMA numbering profiles, barcodes or RFIDs that are unique and tied to business data. Link the unique RMA number generated at "RMA Create"with data on the initial outbound shipment, such as the invoice, serial number or purchase order. Use this information to start the process flow for a quick and direct closure. At receipt, this data drives two efficiencies: (1) directing the receiving dock on disposition activities, and (2) transmitting information to the interested parties, such as the customer, third parties, quality and inventory control, operations or finance personnel.
  3. Carrier Integration - Issuing the RMA does not guarantee the materials are moving. Generating preaddressed and carrier-compliant labels and linking the RMA to the carrier tracking number in the "route"phase facilitates visibility. Visibility provides up-to-date information on the shipment, provided by access to the Web-based portal and notifications sent based on rules and workflows.

Pillar One: Speed

Returns and warranty services are, for the most part, a manual effort. In some cases, more transactions are required to process a return than to generate the initial sale.

Reducing time and effort at each touch point is the foundation for refining the returns process. First, let's explore four ways to make returns processing faster:

  1. User Profiles - Businesses today engage in ever-changing and complex relationships with one another. Further complicating the management of this network are the various contractual terms and relationship parameters for all parties. Profiles simplify processes for adding new users and maintaining users and user groups, altering physical locations, changing payment terms and updating service contracts or product return eligibility. User profiles are key to automated workflows and notifications which drive efficiency throughout the process.
  2. Workflow - Processing returns depends on the return reason and the product type. Additional information gathered during the process determines if material is routed for repair or scrapped. A well-defined process defines the expected outcome for various conditions, but leaves individuals following complex flowcharts with manual transaction touch points. Automating workflows drives repeatable processes that are efficient and measurably faster.
  3. Labels and attachments - Accurately-labeled material with required shipping paperwork reduces costly delays. Reducing shipment delays drives predictability. Fast and predictable shipments enable appropriate levels of staffing for the repair depot and spare parts, reducing the cost of the repair and rework processes. Workflow and rules-based logic embedded within the system provides labeling and shipment documentation required for each type of return, origination point, and destination.
  4. RMA and Return Unit Scanning - The labels generated for each return should include bar-coded data. Scanning barcodes for RMA numbers and returns data is quicker and easier than hand-keying data, reducing errors and improving throughput. Including barcodes in the processing strategy helps create a fast and predictable process which adheres to quality and regulatory requirements.

Pillar Three: Control

Synchronizing material movements and maintaining the corresponding ERP data is a common challenge in supply chain management. With respect to returns, the issue is further complicated. Close attention to receipts, reconciliation, and notifying stakeholders of impending quality issues is critical for manufacturers. Reconciliation enables enterprise-wide visibility and control.

  1. Four control touch-points to build into the process are:
  2. Regulatory compliance - Compliance touches all aspects of the reverse logistics process. When parts are sent across international borders customs documentation is required. Global manufacturing and reclamation efforts have to generate documentation to comply with regulations in each country and for local governments. In the United States, twenty-four states now have regulations for electronics recycling; four of those were passed in 20101. In addition to touching each process point, from shipment through final disposition, regulatory compliance has industry-specific regulations, such as those governing food and drug safety. Workflows used to speed up the process also provide controls for process adherence, which in turn guard consumer safety, reduce fees and fines, and minimize corporate liability.
  3. Quantity shortages and overages - The accuracy of the return material authorization is an unknown until the shipment arrives and the quantity and quality of the material is assessed. Overages occur when receiving dock workers find extra units not listed on the RMA. Compliance labeling speeds up processing while providing controls used to reconcile the RMA data with the physical shipment, package and materials. Exception-based reporting enables quick resolution of shortages, missing returns, and overages..
  4. Account reconciliation - Account reconciliation processes identify the source of the return and provide data for accurate updates to inventory balances and invoices. Exception-based reporting provides information the finance team needs to respond to errors and proactively maintain high levels of customer satisfaction and financial control.
  5. Quality control - When the return is due to faulty material or process failure within the enterprise, feedback helps teams address the root cause of the failure and minimize risk. For instance, design and engineering teams need to identify quality control issues. The distribution center needs information on mis-routed or incorrect outbound shipments. Finance needs to quantify the financial exposure and risks. Updated information must be communicated to each the correct parties in a timely manner.

Specific features of a solid software solution are used throughout the returns management process: User profiles and workflows define the actors and processes; labeling and documentation track the material; and the Web-based portal and exception-based reporting deliver information for timely reconciliation and quality control.

Returns management poses both challenges and opportunities for manufacturers. Ever-increasing regulations for recycling and waste management increase the need to track, trace, and control the disposition of returned materials. Returns also provide opportunities to increase customer satisfaction and recover value from assets. The key is to develop a comprehensive approach detailed enough to handle each situation, and flexible enough to adapt to exceptions. The three pillars - speed, visibility and control - support a reliable and predictable returns process that provides value across the enterprise.

Tamara Dwyer is product management business analyst for TAKE Solutions Inc., an international business technology company with products and solutions backed by a strong domain expertise in life sciences and supply chain management. Dwyer can be reached at tamara.dwyer@ takesolutions.com.

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