Returns Management | 5 mins read

How to Improve the Returns Management Process - 7 Best Practices

how to improve the returns management process 7 best practices
Chloe Henderson

By Chloe Henderson

The returns management process ensures that returned products meet quality standards before reintroducing them into the inventory rotation.

Even companies that prioritize their inventory quality experience return requests from customers who change their minds, have different expectations, or prefer a different variance. This means that retailers must have an adequate procedure that can document and facilitate returning stock.

By establishing a returns management process, businesses ensure they can orchestrate returns in a timely manner, without delaying regular operations.

What is Returns Management?

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Returns management is the supply chain process responsible for gathering, organizing, inspecting, and reintroducing returned inventory. This procedure has become an essential part of order fulfillment, as many product returns and exchanges are caused by delivery errors.

Many companies have taken the omnichannel approach to expand their customer reach and increase sales potential.

However, this makes order fulfillment exponentially more complicated as customers can now order online, shop in-store, visit social media marketplaces, and use curbside pickup. This creates more opportunities for order fulfillment errors, leading to increased returns, exchanges, and refunds.

In order to accept returned items, businesses need a standardized process that adequately vets, sorts, and documents this inventory to reduce discrepancies and expenses.

Steps in the Returns Management Process

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While the returns process varies slightly depending on whether the product was purchased online or in-store, the typical procedure involves five steps.

1. Customer Requests a Return or Refund

The return process begins when the customer receives their product and decides they are unhappy with it. This can be the result of numerous factors, such as-

  • Fulfillment error
  • Damage
  • Change of mind
  • Product is not as expected

Whatever the reason may be, the customer must submit a formal refund, return, or exchange request from the company.

If the item was purchased online, shoppers should visit the store's website to view their return policy. Customers that bought the product in-store should return to the location with the product and receipt.

2. Company Runs the Approval Process

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Depending on the store's return policy, employees may be required to inspect the product before approving the return. Other policies require returns to take place within a certain number of days.

3. Company Receives the Product

If the return request is accepted, smaller items are returned via mail by the customer. Larger items, such as appliances, are typically picked up by the retailer by their drivers or a third-party logistics provider.

4. Product is Delivered to Warehouse for Inspection

Eventually, the item is delivered to the warehouse or sorting facility for further inspection. The employees are responsible for determining-

  • Why did the customer return the product?
  • Was the item damaged during transportation?
  • Was the product's quality compromised?
  • Is the product good enough to restock?

5. Product is Restocked

If the product passes the inspection, it is reintroduced into inventory to be sold to a future consumer.

Best Practices For Efficient Returns Management

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Returns management can become overwhelming for large corporations that handle thousands of orders daily, making it challenging to monitor. Therefore, businesses should consider following the best returns management practices-

Use Reverse Logistics

Reverse logistics is the process of maintaining the value of items that are returned from the consumer to the business. By using this strategy, dispatchers can redirect drivers to pick up returns in their area, saving logistical and labor costs.

Plan Routes for Returns and Deliveries

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Logistics managers should incorporate returns into their delivery schedules to reduce customer wait times and transportation expenses. By planning transportation needs ahead of time, drivers can optimize their operation hours, route efficiency, and delivery capacity.

Plan Ahead

In addition to planning delivery routes to incorporate return pickups, warehouses should prepare their facilities for the expected influx of products. By anticipating returns, warehouses can ensure they have enough space to unbox shipments, carry out inspections, and restock products.

Managers should also consider returns when planning restocks, as they can significantly reduce the amount of inventory needed.

Increase Capacity for Holidays

Many retailers experience a significant increase in returns following the holidays, such as Christmas, when customers return duplicate items or wrong sizes. Studies found that consumers returned approximately $41.6 billion worth of merchandise online during the 2019 holiday season alone.

Without an adequate returns management system, facilities can quickly become backed up, delaying operations and increasing customer wait times.

Therefore, companies need to increase their warehouse and transportation capacity during the holidays so they can withstand the influx of exchanges and returns without interrupting normal processes.

Establish an Efficient Documentation Process

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Each return, refund, and exchange must be properly documented for inventory, asset, and financial management. However, if requests are recorded manually, businesses are left with an extensive paper trail that is hard to organize and manage.

Organizations should consider eliminating physical requests and establishing a centralized database that digitally records and files every return. A universal interface ensures that all employees can access inventory information to streamline the returns management process.

Share Return Policy with Customers

Employees have to answer customers' questions about returns on a daily basis, consuming valuable time that could be used to address more demanding concerns. By making the return policy more available to shoppers, companies can answer frequently asked questions.

Stores can promote their policy in several ways, including-

  • Printing it on all receipts.
  • Posting it on their website.
  • Emailing it with every order confirmation.

The policy should outline everything expected of the customer, from the documentation they need to present to the type of packaging to return the item in.

Use Point-of-Sale Software

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Regardless of whether a store is traditional or online, it must have a robust point-of-sale (POS) system that orchestrates transactions and records returns. Most modern POS software has return features that update accounting, inventory, and other back-end systems with each returned product.

POS software also establishes a centralized database so employees can view if returns are pending, processed, or back in the rotation.