Manufacturers can reap benefits by focusing on 'returns'

By Ian Roper, Supply Chain Solutions Divisional Director, Access Group.

Product recalls are an expensive business. In 2010 automotive manufacturer, Toyota, recalled over eight million vehicles worldwide over a faulty accelerator pedal, in 2006 computer manufacturer Dell had to recall four million notebook batteries due to overheating problems, and Bridgestone/Firestone recalled 6.5 million tyres in 2000 when treads separated on models used with Ford Explorers and Mercury Mountaineers. The recall cost Ford $3bn.

Components used in complex, manufactured products, such as those produced by the automotive, aerospace and electronics industries, are required to conform to the highest quality standards. Failure of a supplier to monitor the quality of its output can have costly consequences for both the manufacturer and the brand.

However, all manufacturing operations, large and small, have a vested interest in ensuring that product quality is maintained and that customer satisfaction is retained. Returned product can reflect issues relating to materials, manufacturing process, human skills or the quality of supplied components, so close analysis of returns can offer a valuable insight into customer experience and the customer's interaction with the product – feedback that could influence product design. What's more, warranty claims can erode margins and impact corporate profits if systemic issues exist within the way items are made. And for these reasons managing returns in an efficient, process-led and cost-effective way is vital for the commercial success of a manufacturing enterprise.

Managing returns is a complex issue that requires a sound process-map and step-by-step actions, leading from capturing information such as product reference, batch code, and serial number, to the validation of the sale of goods to the customer, product inspection, and actions on whether to return the item to stock, repair it or recycle it. Further decisions and actions may relate to financial and administrative aspects of the return, whether a refund or credit note is generated.

Having intelligent systems in place to process returns makes the identification of faulty batches easier to track and simplifies the issuing of recall notices, should it be required. Such systems can also be used to process returns to suppliers and close integration of systems, such as financials, will automate the process of refunding the customer.

With a growing proportion of manufacturers now responsible for fulfilling internet orders directly or on behalf the retailer, returns have become an increasingly burdensome and complex part of their business. The demands and expectations of those purchasing on the internet have introduced more exacting parameters for the handling of returned goods. Consumers expect the fast processing of returns and even quicker refunds. So those manufacturers looking to engage directly with consumers will need to ensure their returns operations are up to the mark. In the retail arena returns can be as high as 40%, making the efficient handling of returns critical to protecting margins.

An important point about a returned item is that it holds value. So getting that value back into the business through quickly returning a product to stock, selling it on as a 'second' or recycling it, plays a significant part in maintaining profits.

Manufacturing businesses have a lot to gain from automating the returns process – from gaining valuable insights into quality issues, product design and customer feedback, to the fast re-allocation of assets and the rapid return of cash to the business. But perhaps, the most compelling reason for any manufacturer to implement a returns system is to focus the business on customer satisfaction and to ensure that those with a problem regarding a product are responded to in a fast and efficient manner – so retaining business and protecting future profits.