{"56527":{"#nid":"56527","#data":{"type":"news","title":"Many Happy Returns!","body":[{"value":"\u003Cp\u003E\n\u003C\/p\u003E\u003Cp\u003EDuring the holiday season that just past, millions of Americans stood on\u003Cbr \/\u003E\n  line to return something they received or purchased. Whether it was an ugly\u003Cbr \/\u003E\n  tie, a waffle iron that didn\u0027t work, or a digital camera that was just\u003Cbr \/\u003E\n  too extravagant, product returns represent an important part of the total supply\u003Cbr \/\u003E\n  chain. How important? In the US, companies spend roughly $950 billion annually\u003Cbr \/\u003E\n  on logistics and 4.5 percent of this, or $43 billion, is for returns. At the\u003Cbr \/\u003E\n  retail level alone, returns add up to $16 billion a year. And retailer return\u003Cbr \/\u003E\n  policies have made headlines lately with stories about services that track \u0026quot;frequent\u003Cbr \/\u003E\n  returnees\u0026quot; as part of an effort to prevent return fraud.\u003C\/p\u003E\n\u003Cp\u003EDepending on the industry, return rates range from around 3 percent to as high\u003Cbr \/\u003E\n  as 50 percent of total shipments. The average retail store has about a 6 percent\u003Cbr \/\u003E\n  return rate. In the consumer electronics industry, the rate is about 8.5 percent,\u003Cbr \/\u003E\n  in the apparel\u003Cbr \/\u003E\n  industry it\u0027s 19.4 percent, and online apparel purchases are returned\u003Cbr \/\u003E\n    at a rate of 35 to 40 percent. Yet in spite of the magnitude of these numbers,\u003Cbr \/\u003E\n    returns management gets little attention from most companies. When they develop\u003Cbr \/\u003E\n    their logistics strategies, the focus is usually on outbound supply chain efficiency.\n\u003C\/p\u003E\n\u003Cp\u003E The dollars involved aren\u0027t the only reason to pay attention to returns\u003Cbr \/\u003E\n  management. Consumers care about how their returns are handled, and may make\u003Cbr \/\u003E\n  future shopping decisions based on their returns experience. They are extremely\u003Cbr \/\u003E\n  sensitive to the returns process and it plays a big part in customer satisfaction.\u003Cbr \/\u003E\n  Manufacturers also have cause to be concerned about the disposition of returned\u003Cbr \/\u003E\n  products: if off-quality items are allowed to re-enter the retail channel they\u003Cbr \/\u003E\n  can have a negative impact on brand image. \u003C\/p\u003E\n\u003Cp\u003EGiven its volume and importance in the overall supply chain, returns management\u003Cbr \/\u003E\n  offers sizable business opportunities for 3PLs, and many of them are now targeting\u003Cbr \/\u003E\n  this sector with reverse logistics services and programs for customers. UPS,\u003Cbr \/\u003E\n  for example, works with companies to facilitate product returns and repairs\u003Cbr \/\u003E\n  through its network of UPS Stores, its package delivery services, and its Supply\u003Cbr \/\u003E\n  Chain Solutions services. Toshiba America Information Systems and UPS have\u003Cbr \/\u003E\n  joined forces to provide a convenient, fast \u0026quot;return and repair\u0026quot; program for Toshiba\u003Cbr \/\u003E\n  laptop computers. Consumers who need service start by getting a repair consent\u003Cbr \/\u003E\n  from Toshiba, then they take their laptop to the nearest UPS Store where it is\u003Cbr \/\u003E\n  packaged and shipped to a specially designed repair\u003Cbr \/\u003E\n  center at UPS Supply Chain Solutions\u0027 campus in Louisville, Kentucky,\u003Cbr \/\u003E\n    adjacent to the UPS Worldport global air hub. With this system in place, it\u003Cbr \/\u003E\n    is possible to receive, repair and return a laptop to its owner \u0026ndash; all\u003Cbr \/\u003E\n    in the same day! This system underscores one of the most important features\u003Cbr \/\u003E\n    of an effective returns management network: speed. Fast, responsive returns\u003Cbr \/\u003E\n    management increases customer satisfaction. Another major concern for manufacturers\u003Cbr \/\u003E\n    is the high cost of improper returns. These include products misused by consumers,\u003Cbr \/\u003E\n    products returned after warranties have expired, and products from other\u003Cbr \/\u003E\n    manufacturers. While these returns occasionally involve fraud or stolen goods,\u003Cbr \/\u003E\n    most often they are the result of errors or improper training on the retail\u003Cbr \/\u003E\n    level. Whatever the causes, last year Philips Consumer Electronics billed\u003Cbr \/\u003E\n    back $45 million to retailers for unauthorized shipments of returned goods.\u003Cbr \/\u003E\n    Such post-shipment rejections are expensive for both the manufacturer and\u003Cbr \/\u003E\n    the retailer. To ease the problem, Philips now works with third-party vendors\u003Cbr \/\u003E\n    GENCO Distribution System and Ozark Electronics Repairs Inc. to ensure that\u003Cbr \/\u003E\n    only eligible products make it back to the manufacturer. The 3PLs place employees\u003Cbr \/\u003E\n    in retailers\u0027 return centers to verify that items are eligible for return\u003Cbr \/\u003E\n    before they are shipped. They also evaluate defects and determine if components\u003Cbr \/\u003E\n    are missing. The Philips returns management program has identified between\u003Cbr \/\u003E\n    5 and 10 percent of all retail returns as being ineligible for return to\u003Cbr \/\u003E\n    the company. It also speeds refunds and reconciliation because retailers\u003Cbr \/\u003E\n    know what to expect before the product leaves their return centers. \u003C\/p\u003E\n\u003Cp\u003E Some retailers including Target, Best Buy, Sears and Wal-Mart are preventing\u003Cbr \/\u003E\n    improper returns by beginning the screening process at the customer service\u003Cbr \/\u003E\n    desk of their stores. Using software developed by SiRAS.com, UPC codes and\u003Cbr \/\u003E\n    serial numbers of Nintendo, Sega and Philips\/Magnavox products are scanned\u003Cbr \/\u003E\n    at the time of purchase. That data includes warranty and product exchange\u003Cbr \/\u003E\n    information. Should the consumer want to return the item, the retail clerk\u003Cbr \/\u003E\n    can simply go to a website to find out when and where the product was purchased,\u003Cbr \/\u003E\n    what the warranty states about returns, and whether or not it is eligible.\u003Cbr \/\u003E\n    In this way, improper returns are caught at the store\u0027s customer service\u003Cbr \/\u003E\n    counter, avoiding the expense of shipping back to the manufacturer. \u003C\/p\u003E\n\u003Cp\u003EThe value of an effective returns network is magnified when product returns\u003Cbr \/\u003E\n  involve international shipments. ADTRAN, a telecommunications equipment manufacturer\u003Cbr \/\u003E\n  located in Huntsville, Alabama, entered the China market in 1999 through a\u003Cbr \/\u003E\n  network of distributors in major Chinese cities. The company met with great\u003Cbr \/\u003E\n  initial sales success. ADTRAN had neglected to establish clear reverse logistics\u003Cbr \/\u003E\n  procedures, however, and as a result soon suffered the usual fallout in terms\u003Cbr \/\u003E\n  of customer dissatisfaction, duplicate product replacements and reduced revenues.\u003Cbr \/\u003E\n  International trade issues, including double payment of VAT, duties, taxes\u003Cbr \/\u003E\n  and fees \u0026ndash; once for the original product and then again for the replacement \u0026ndash; further complicated\u003Cbr \/\u003E\n    the picture, adding expenses and delays. \u003C\/p\u003E\n\u003Cp\u003E To counteract these problems, ADTRAN has developed a comprehensive reverse\u003Cbr \/\u003E\n    logistics strategy that addresses warranty repair, non-warranty repair and\u003Cbr \/\u003E\n    advanced replacements. The strategy is designed to tap opportunities for\u003Cbr \/\u003E\n    savings by cutting VAT costs, eliminating China Customs penalties and quarantines,\u003Cbr \/\u003E\n    and saving on labor and transportation costs by performing tests and repairs\u003Cbr \/\u003E\n    in China. To facilitate the program, ADTRAN hired a 3PL reverse logistics\u003Cbr \/\u003E\n    partner with expertise in China Customs procedures, and a post sales service\u003Cbr \/\u003E\n    partner with the facilities, staff and resources to handle testing and repair\u003Cbr \/\u003E\n    of failed products locally, as well as to destroy obsolete products within\u003Cbr \/\u003E\n    China. By setting up clear reverse logistics flow procedures that integrate\u003Cbr \/\u003E\n    the services of these 3PL partners, ADTRAN is now seeing immediate savings\u003Cbr \/\u003E\n    and a more fluid flow of products to the world\u0027s second largest telecommunications\u003Cbr \/\u003E\n    market. \u003C\/p\u003E\n\u003Cp\u003EThese examples, as well as other successful returns management systems, help\u003Cbr \/\u003E\n  us define the characteristics of an effective reverse logistics strategy. First,\u003Cbr \/\u003E\n  a returns management process must have clear guidelines regarding what can\u003Cbr \/\u003E\n  be returned, replaced or repaired, and these must be implemented consistently.\u003Cbr \/\u003E\n  Speed is also critical in returns management so that returned products don\u0027t\u003Cbr \/\u003E\n  lose their potential value while awaiting disposition. In addition, the returns\u003Cbr \/\u003E\n  procedures must address the issue of disposition, not only in terms of what\u003Cbr \/\u003E\n  to do with each returned item, but also when and where to do it in order to\u003Cbr \/\u003E\n  get the most value out of the returned goods without compromising the supply\u003Cbr \/\u003E\n  chain. ADTRAN, for example, realized significant savings both in time and money\u003Cbr \/\u003E\n  by moving the disposition decision to China and Philips realized savings and\u003Cbr \/\u003E\n  improved relations with its customers by moving the initial disposition decision\u003Cbr \/\u003E\n  to its customers\u0027 returns centers.\u003C\/p\u003E\n\u003Cp\u003E If forward logistics is all about getting the right product in the right\u003Cbr \/\u003E\n      place, reverse logistics is all about making the right decision in the\u003Cbr \/\u003E\n      right place, and a key part of making the right decision is having the\u003Cbr \/\u003E\n      right information. An effective returns management process serves as an\u003Cbr \/\u003E\n      invaluable information resource, providing a stream of data that can enhance\u003Cbr \/\u003E\n      the returns process as well as improve product design and manufacturing\u003Cbr \/\u003E\n      quality, indicate packaging problems, and draw attention to marketing issues.\u003Cbr \/\u003E\n      A carefully planned reverse logistics network provides a wealth of information\u003Cbr \/\u003E\n      to help fine-tune forward logistics processes and keep you from returning\u003Cbr \/\u003E\n      to the same mistakes again and again. \u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":"","field_summary":"","field_summary_sentence":"","uid":"27279","created_gmt":"2005-03-31 01:00:00","changed_gmt":"2016-10-08 03:06:15","author":"Barbara Christopher","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2005-03-31T00:00:00-05:00","iso_date":"2005-03-31T00:00:00-05:00","tz":"America\/New_York"},"extras":[],"groups":[{"id":"1242","name":"School of Industrial and Systems Engineering (ISYE)"}],"categories":[{"id":"145","name":"Engineering"},{"id":"135","name":"Research"}],"keywords":[],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cstrong\u003EBarbara Christopher\u003C\/strong\u003E\u003Cbr \/\u003EIndustrial and Systems Engineering\u003Cbr \/\u003E\u003Ca href=\u0022http:\/\/www.gatech.edu\/contact\/index.html?id=bt3\u0022\u003EContact Barbara Christopher\u003C\/a\u003E\u003Cbr \/\u003E\u003Cstrong\u003E404.385.3102\u003C\/strong\u003E","format":"limited_html"}],"email":["bchristopher@isye.gatech.edu"],"slides":[],"orientation":[],"userdata":""}}}