Returns, Refunds, & Recalls:
Reliable Reverse Logistics

You can't just run your forward practices in reverse

By Bruce Tompkins, Executive Director, Supply Chain Consortium

How well do companies plan their returns processes? What systems do they use? How are refunds and recalls handled? Who pays for transporting the returned product? -- Many companies seem unconcerned with reverse logistics even though it is a crucial part of the supply chain process.

Many times we have heard the two rules of customer service: Rule #1, "the customer is always right." Rule #2, "if customer is wrong, see rule #1." Although rule #2 may sometimes be considered the punch line, there is some truth to the foundation of these rules, especially in the reverse logistics process.

The Supply Chain Consortium's Hot Topic Survey Report, Reverse Logistics: Returns, Refunds, and Recalls, reveals some background to these concepts and exposed gaps in companies' processes for accepting and dealing with customer returns and recalls. Below are insights from the report. Use these key findings to see how your company measures up in regards to reverse logistics.

• Many companies are tracking reverse logistics metrics. However, there is a large percentage not tracking metrics or only focusing on a few.
• A great majority of companies assign causes or reasons for returns. The leading reasons are: product quality, product doesn't work as expected, purchased from another company, inadequate delivery, and shipped wrong product.
• More than half of the survey respondents request feedback from customers on their returns process. Most don't feel good about what they learn.
• Less than half of the companies require pre-approval for a return.
• Warehouse Management Systems (WMSs) are the most common systems used for returns processes, although many use more than one system.
• Responses for the "ship to" locations for returns are different for retailers than for manufacturers. Retailers are more likely to ship returns to a company-operated facility or store, and manufacturers have them returned to their fulfillment centers.
• Retail companies are likely to pay for returns transportation, while manufacturers most often expect the customer to pay.
• Events that trigger a refund or credit and the time interval from receipt to refund or credit vary greatly by company and industry. However, nearly 60% of all companies issue refunds or credits within 24 hours.
• The most common disposal methods for return products are: reselling through the primary channel, discounting through a secondary channel, or returning the product to the vendor.
• Recycling of products leads the list of environmental concerns with respect to returns processing.
• There is no great indication of which department or organization owns returns, and the position level responsible for returns varies by company size.
• Nearly 60% of companies have contingency plans in place in the event of a large-scale recall, but recall strategies do not appear to be a top priority for most organizations.
• An alarming number of participants do not know if their companies have a contingency plan or not. This implies that the plan is known mostly to very senior managers and is not being communicated to the organization as a whole.

• The most common recall strategies involve data availability, functional teams, and communication processes. (See figure on product recall strategies above.)
• Very few companies have special software for the data management aspects of a product recall.

Overall, in terms of reverse logistics, companies need to focus on returns policies and customer service, information technology, markets and speed, organizing for returns, physical facilities and resources as well as product and packaging. The bottom line is -- to successfully manage the reverse logistics process, you must pay attention to all the aspects of the returns process just as you have for the forward process. You can't just run the process in reverse.

The full Hot Topic report is available to Consortium members, as well as to "contributing members" who add their data to the Reverse Logistics database. For more information on the Supply Chain Consortium or membership, contact Bruce Tompkins.

The Supply Chain Consortium is the premier source for supply chain benchmarking and best practices knowledge. With more than 180 participating retail, manufacturing and wholesale/distribution companies, the Consortium sponsors a comprehensive repository of 17,000-plus benchmarks complemented by search capabilities, online analysis tools, topic forums and peer networking for supply chain executives and practitioners. The Consortium is led by the needs of its membership and an Advisory Board that includes executives from Campbell Soup, Hallmark Cards, Ingram Micro, Mervyn's, Molson Coors Brewing Co., Target, The Pep Boys, and Coca-Cola Co. To learn more about how your company can become a member of the Supply Chain Consortium, contact John Foley, 919-855-5461 or visit www.supplychainconsortium.com.

This article is available for re-print with attribution. If you would like more information or an interview, please contact Keri McManus, (919) 855-5516.