Returns - Supply Chain Strategy

Supply Chain Strategy – Returns

Are you a Manufacturer / Distributor or Retailer?

If so have you checked your Returns Policy and Procedures recently?

Are you aware that many companies offer a 12 month returns policy that falls short of both the EU & UK law?

If not read on.

Supply Chain Strategy is key to your business success and profitability. Most businesses realise this and spend time and effort to provide a first class service. However there is a “back end” to the Supply Chain that is often forgotten and can give untold problems.

Key Areas to consider in developing your Returns Policy:-

Customer Facing Issues
Research - What are your Competitors doing?
What is the UK & EU applicable law
Writing the Policy
Tell you Customer what your policy is
Fostering Loyalty

Internal Business Issues
Learn from your returns
Returns Processing
Cost of Returns

Consequences
What if I get it Wrong?
What if I get it Right?


Research - What are your Competitors doing?

Research is very important. You need to understand what your competitors are offering! Consumers have become more discerning and are looking for added value. If your returns process is complicated or of less value than your competitors, then you have lost the customer and the sale.

What is the UK & EU applicable law

A recent case publicised in the press and on the radio has highlighted the legal rights of individuals to return faulty goods to the place of purchase.
“A consumer returned his faulty product to the store where it had been purchased after a period of 15 months. The receipt was produced and the store asked to replace the faulty product. The store refused as they said that the warranty was for 12 months only. The consumer knew his rights under both UK and EU law and demanded a replacement. After much arguing and ado within the store the customer services desk called Head Office only to be told that the consumer was right and to give him a replacement item and a full apology”
Key lessons to be learnt from this as follows:
· Train Customer Service staff correctly
· Make sure the warranty is in line with the applicable law
· Because of this the store probably lost the consumers loyalty
· Other consumers witnessed the issue and probably thought twice about purchasing from the store.

Writing the Policy

The policy is in effect a legal document and is often written as such. Consumers may not fully understand the implications due to the use of legal jargon / legalese. The key rule here is to use plain English that everyone can understand.
History tells us that consumers will spread the word about poor policy and that extends to poorly written and incomprehensible returns statements.

Tell your customers what your policy is

Make sure all of your documentation accompanying the goods clearly shows the returns policy.

Fostering Loyalty

Your Brand name is important so:-
· don’t destroy it by having a bad reputation for exchanging damaged or faulty products.
· collect your customer e-mail address when product is returned for exchange or refund and

send them an e-mail with an apology and a comforting message.
· train your Customer Services staff to understand legal requirements and the customers’

needs.

Learn from your returns

Returned product can tell you a lot about your customers, their requirements and product issues. This information should be captured at source and added to along the returns process to provide a detailed picture containing:-
· Date of Purchase
· Date of Return
· Customers contact details
· Reason for return
· Exchange or Refund
· Issue with product as stated by Customer
· Issue with product after inspection by technical department
· Disposal method
· Cost of transaction
Use this information to analyse the returns and take corrective action.

Returns Processing

Once product is returned from the sales outlet you need to process it in a managed way. The first thing is to collect further information on the returned item and add the data to the history file.
Key Points for actions:-
· Process returns quickly (Returns are inventory and inventory is “dead” cash)
· Keep separate from new inventory (Expensive errors can easily occur)
· Involve Sales / Purchasing / Finance and Manufacturing in the returns process and data

analysis. (Issue resolution and action are required from these areas)

Cost of Returns

Calculate the cost of returns and relate this to each item. The cost is high and will focus the business to improve product quality and eliminate returns. This calculation should also include the cost to the business of a lost sale / customer.

What if you get it wrong?

· Your customer gets upset and goes elsewhere = LOST SALES
· Your product gets a bad name = LOST SALES & DAMAGE TO BRAND NAME
· You generate high levels of returns = CASH TIED UP IN INVENTORY
· Your warehouse has to process the return = INCREASED OPERATING COSTS
· You have to dispose of un-repairable products = INCREASED OPERATING COSTS
· You have to repair product and repackage = INCREASED OPERATING COSTS
· Additional handling in returning to stock = INCREASED OPERATING COSTS
· Customer Services incur additional workload = INCREASED OPERATING COSTS
· You have to manage the returns process = INCREASED OPERATING COSTS

Significant additional cost to the business

What if you get it right?

· Improved Customer Loyalty = INCREASED SALES
· Reduced product handling = REDUCED OPERATING COSTS
· Reduction in Customer Services staff levels = REDUCED OPERATING COSTS
· Safeguarding Brand Integrity = INCREASED SALES

Safety of Brand & Increased Sales

About the Author:-

Mike Forryan FCILT is the owner of MF Logistics & Associates and has worked within the Global supply chain arena for over 30 years. He has worked in both the Public and Private sectors across multiple markets in Europe and Globally. For the past 12 years Mike has managed his own Consultancy, operated as a Project Manager and an Interim Director / Manager. Contact Mike for further details on “Returns”. Tel 07711 083227