1. SCM Customer Service Operations LB 4
Returns and Reverse Logistics

2. Learning Block Objectives
Understand the key aspects of and employee responsibilities in the customer returns process
Recognize what encompasses reverse logistics, why reverse logistics are important, why reverse logistics are needed, and which key metrics are used in customer returns
Apply the key metrics used in customer returns functions
Create good key practices for the customer returns process
LO1

3. Understanding Reverse Flows in the Supply Chain
Reverse logistics is the return of products by customers through the supply chain
Companies now allow customers to return products for credit exchange
LO1

4. Forward Flow Vs. Reverse Flow
Forward flow is historically important because by filling customer orders, companies generate revenue
Reverse flow was viewed as less favorable because it can result in negative cash flow and inventory restocking
Today, firms see reverse flow as a potential area to show good customer service and ensure customer retention
LO1

5. Reverse Logistics
Companies are focused on cost reduction by making the returns management more efficient and effective
Returns reduce net revenues, increase inventory costs, packaging costs, customer service costs, and processing
Defective products impact the company negatively and cause a decline in future sales
Globally, reverse logistics take on a more significant role due to distance, time and transportation costs
LO2

6. Contributing Factors for Focus on Reverse Flow
Increase in the quantity of returns
Popularity of internet sales
Many companies now allow returns if customers are dissatisfied with their purchase
Companies now view reverse flow as a value stream
LO2

7. Reasons for Returns Flow of returned products include: Repair
Refurbishment
Resale
Disposal
Reasons for returns include:
Failed, defective, unwanted or damaged products
Obsolete or expired products
Products recalled due to quality or safety defects
Apparel merchandise purchased online that does not fit
LO3

8. The Customer Return Options
Returns process typically occurs in the warehouse
Returns process made easier through the issuance of return labels for customers
Return labels have customer information in the barcode which triggers replacements to be manufactured, picked, or credit to be processed
LO4

9. Return Material Authorization Form (RMA)
RMA’s are used to authorize product replacements or refunds
Many firms have automated the process by electronically providing a packing slip with an RMA number to be printed
Warehouses have designated areas for return items and return processing
LO4

10. Refund, Restock, & Refurbish
Returned items are inspected to determine their quality and condition
Based on the return policy, a replacement or credit is approved
3PL companies may refurbish the product for resale
Sometimes the repair process takes place in a warehouse
LO5

11. Recycling
Different countries have different rules about reverse logistics and its impact on the environment
Companies must pay attention to these regulations and manage their disposal & packaging processes effectively
Many firms now offer recycling programs for toxic items such as batteries
LO5

12. Returns Management Systems
Returns involve complex processes as they impact physical inventory, electronic inventory, and accounting systems
Once the product has been examined, decisions must be made regarding
Returning the product as is to storage
Repairing the product and returning it to storage or the customer, or scrapping the product
Return Management Systems (RMS) support the return process

13. Return Management Systems
Handheld scanners – radio frequency equipment
Interface with warehouse management systems – Allows for real time inventory control, immediate inventory allocation, rapid picking, and cross-docking
Interface with accounting systems – To decrease crediting errors

14. Stages in the Customer Return Process
Return Authorization – Customers obtain an RMA from customer service with shipping and return instructions
Receipt – Products are returned by customers and received by warehouses
Sort and Stage – Products are sorted according to the nature of the returns and are staged for return processing
Processing and Analysis – Reasons for the return are entered into the system and customers credited
Disposition Activities – scrap, repair, or return

15. After-Sale Warranty
Involves inspecting, sorting, handling disposition, and managing enforcement of the warranty program for returned products
3PL’s often perform all or some of these functions
3PL’s usually provide a range of services including warehousing and transportation
Firms assign logistics functions to 3PL’s so that they can focus on their core competencies, reduce costs, and leverage logistics-related assets of 3PL’s

16. Industry Differences in Reverse Logistics
Retail Fashion Industry – Returns are common and often relate to wrong sizes, or customers changing their minds
Usually, products are placed back into stock
In the Pharmaceutical Industry – Strict rules apply for batch control.
Food Industry – Expiration or use dates apply

17. Best Practices in Reverse Logistics
Best practices are the focus to achieve ultimate goals
Good practices should be emphasized and used everyday
Customer return best practices are:
Reduction of cycle lead time
Information systems and technology
Organization for returns
Layout
Asset recovery
Efficient returns processes and procedures

18. Key Metrics Used to Assess The Returns Process
Length of time to process returned products
Volume and value of products reclaimed and resold
Percentage of materials recycled
Waste produced in the returns process including wasted time, wasted effort, or wasted materials
Percentage of costs recovered
Handling cost per return or per item