When the Supply Chain Consortium surveyed top American retail and manufacturing companies about their returns management processes, researchers expected to hear about problems with direct fulfillment services. They did, but not nearly as much as they expected. Problems with order fulfillment ranked only sixth in a list of reasons why customers return products to vendors. In fact, customers mostly blamed themselves when vendors asked about the reasons for product returns.
Whether customers selected the wrong product or simply changed their minds, modern product fulfillment managers recognize the challenges of doing business in a buyers market. Shoppers and corporate buyers both demand the flexibility to make changes to orders, at any stage of the order fulfillment process. Success under these conditions requires a commitment to handle returned goods with the same care as original orders.
Applying Direct Fulfillment Processes to Returns Management
Most retailers and manufacturers track return rates to help manage their product lines more effectively. For instance, a low cost product with a high rate of return might be scrapped altogether from a companys offering. On the other hand, a critical product with high production costs and high margins may require changes to manufacturing, logistics, and packaging. Traditionally, order fulfillment centers provide limited returns management services that include reason code tracking and postage due processing.
Successful retailers and manufacturers have leveraged the power of product fulfillment principles to improve their margins. Retailers often aggregate returned merchandise, forwarding pallets of unwanted product to manufacturers in exchange for replacement product or for invoice credit. Manufacturers must find ways to process these inbound returns while maintaining compliance with international shipping and accounting standards. Unpacking customer-shipped boxes and verifying product integrity requires a different skill set than picking and packing live orders. Increasingly, both kinds of companies rely on third-party fulfillment companies or facilities that specialize in processing returns.
Integrating Product Rework into Fulfillment Center Operations
Retailers have also discovered another way to turn effective order fulfillment operations into a profit center. Americans love bargains, especially during weak economic times. Therefore, expert fulfillment services facilities offer product rework services to corporate customers. Rework professionals restore returned products back to sellable condition. Some fulfillment companies operate centralized facilities where skilled technicians perform these tasks for multiple clients, reducing the cost of reworking product.
In most cases, original retail packaging is replaced with alternative boxes that serve as efficient storage and shipment cases. Electronic devices can be rebuilt, if necessary, and recertified by skilled professionals. This product can be sold again to customers as "refurbished," "reconditioned," or "returned" at a significant discount to customers. The cost of rework services performed at fulfillment centers can be included in the markup on these items. Online "outlet" or "clearance" stores allow manufacturers to reach customers directly, without causing brand damage. Manufacturers can even rework large quantities of product for larger aftermarket clients, such as discount stores or overseas resellers.
Maintaining customer loyalty while maximizing profits requires an open-minded approach to managing returns. Even though attempts to reduce returns will net some small gains for companies, brainstorming effective returns management solutions preserves more margin in the long run. Partnering with fulfillment centers that excel at handing returned product is an increasingly important step toward success for any company that sells finished goods.