How to handle returns

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The logistics of the returns process is a significant problem for many companies and getting it wrong can have an impact on the bottom line. Speakers at the Logistics Manager Summit highlighted some different approaches to success, says Rosy Hill.

Two thirds of “faulty” returns are actually found to have “no fault found” or be “easily rectifiable”, according to Jim Gallagher, director of physical distribution and customer care at Philips, when he took to the stage at the Logistics Manager Summit at The NEC in Birmingham.

Chaired by Zavvi Entertainment’s Guy Meisl, the free one-day conference was a chance for logistics and distribution managers to hear from industry professionals on the topic of reverse logistics.

During his presentation Gallagher said that Philips never knowingly sells on faulty returned products in the UK, but, needing to recover revenues, the company focuses on reselling the 67 per cent of products where no fault was found.

Philips’ approach to faulty returns includes  five goals; remove wasted costs between Philips and its customers, create direct intervention with customers where it is sensible, retain brand integrity, make its consumer satisfaction scores meaningful, and enhance its product.

The company is seeing success through the introduction of methods such as warranty enforcement and testing before credit, and it has reduced faulty returns by £1 million so far this year compared to 2012.

Comparing her company to Gallagher’s, Andrea Wood, head of customer service at Oxford University Press, explained that although OUP deals with the same challenges, it has a completely different returns policy.

“In terms of returns, books are sold on a sale-or-return basis, as opposed to industries working on goods being returned if there is a problem. With us, both retailers and wholesalers simply return our products if they’ve ordered too many,” she explained.

In 1997-8 the company transformed its returns process, from manual to a cross-industry collaboration, after a study on how to take cost out of its returns process revealed that the book trade’s supply chain cost more than twice the industry average. The new collaboration resulted in the launch of an organisation called BIC, the Book Industry Communication, which Wood described as the booksellers’ supply chain organisation.

“The project was never looking at reducing the number of books returned, but removing cost of complexity, post and fax messages, and passing around bits of paper. 

“It also looked to agree an industry standard on how long a book can be kept for, before being returned, and under what conditions they can be returned.”

The BIC system sees booksellers electronically submit a list of books they want to return, with the publisher or distributor’s system saying yes or no. If it says no it explains why.

“The system can also determine whether a returned book will be wasted or put back into stock, which it lets the book seller know. We used to waste about 80 per cent of our returned books, but now we only destroy around 20 per cent of them, and put that 80 per cent back, selling it through third parties, for example.

“The system stops people at the warehouse end having to sort all the books out.”

Defining what returns means for both himself and Tesco, Ian Towell, national returns manager for the supermarket giant, said: “Returns is not just a logistical challenge,  that’s just one part of the approach.”

Towell used the summit as the opportunity to share his presentation “Tesco – The Vision and Journey”, where he spoke of how the company aimed to cut costs within the returns process.
He believes that returns are a commercial, technical, retail, but mostly a customer issue.

“If we get returns right, customers will feel as though they can advocate us, and advocacy drives loyalty.”

“To a significant minority of customers, a return policy represents an opportunity to exploit a retailer, but to the majority, it’s a safety net. My job is to ensure we meet customers’ expectations, without being a soft touch.” Tesco’s returns policy is the standard 28 days one, which it tries to enforce “firmly but fairly”.

“We have a vision at Tesco, to recover customers in line with their expectations, but to not lose any money doing so. It’s easy to say, but much more difficult to do,” added Towell.

Focusing on commercial terms, product quality, keeping it sold, logistical flow, and asset recovery, he said the company’s five point strategy is not complicated, but is a strategy which will help Tesco get to a position where it can recover customers positively in all cases, and break even.

A group discussion on the day saw reverse logistics manager, non-food, at Sainsbury’s, Steph Tite; returns process manager at Halfords, Peter Cobden; and omni-channel fulfilment profit protection specialist at B&Q, Matt Woolley; explore retail trends and emerging challenges in reverse logistics.

Cobden pointed out that one of the biggest challenges was to get a message to all stores when it comes to change in reverse logistics.

“We can see from the information we collect from our teams and customers, or surveys we produce, that around 50 per cent of our customers will want to return a product into a store,” he said.
“The reason for this is that they will get an immediate refund, rather than having to send it back and wait for a payment, which can take up to seven days.

“But our product range is so broad – we have around 40,000 different products, which we obviously don’t stock in all our stores, so some of our products can become trapped, he said.
“So for us, it’s important to understand both where the purchase was made and where it was returned, to help us manage these ‘trapped’ items.”

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