I have managed many catalog fulfillment centers and toured many other facilities in my 25 years of experience. If you want to evaluate an operation quickly, start with returns. Good companies can ship on time, but the best catalogs do it all — including returns.
Where do you process returns? All too often, customer returns are squeezed into a back corner of the DC. The best catalogers are not embarrassed by returns. They have planned enough space to process returns efficiently and are not afraid of what employees or visitors might see. At Nordstrom’s catalog DC, customer returns are processed up front by the main office. All employees walk past the returns department several times every day. While I don’t recommend that all catalogs locate returns up front, it does seem to work for Nordstrom. What I do suggest is that you avoid the back corners.
What mail date are you processing today? The answer to this question reveals how quickly you process returns. Most companies have goals for returns that are better than the seven days mandated by the Federal Trade Commission for refunds on check orders. The real test is how quickly returns are actually processed, not what the goal is.
How big is your backlog? A key performance indicator (KPI) for fulfillment operations is the number of unprocessed returns in-house or the returns backlog. The best companies manage backlogs to meet or exceed customer service goals and optimize efficiency. Start with your company’s customer service goals for returns. Then manage your backlog to meet or exceed these goals.
How many returns are expected? If you can’t answer this question for a given day, week, or month, you probably don’t forecast returns. Don’t wait for marketing or finance to provide an “official” forecast. Take action now and make your own.
How many returns will you process today? A specific answer to this question indicates some level of planning. If your answer is “it depends,” it generally means that returns are processed only when everything else is done.
In such cases, processing returns takes the lowest priority in the fulfillment center. The most successful companies accomplish all of their operational priorities, including returns. They plan daily, weekly, and monthly staffing based on the volume of returns projected. A good staffing plan is a must.
Can backorders be filled directly from returns? If the answer is yes, the company is among the best. It has developed return systems to improve efficiency and customer service. Companies without this functionality are forced to return the item to stock and re-pick it. This increases labor costs and adds up to two days to the process.
How do you refurbish returns? Are you liquidating good-quality product because you don’t have the time or the resources to refurbish returns? You’re not alone. I have seen expensive shoes and autographed sports memorabilia liquidated for pennies on the dollar because the box is damaged. I am not suggesting that you take bad merchandise and return it to stock. Rather, take good merchandise, make it look new, and return it to stock.
Does your company keep defective returns up to 30 days? If so, it is among the best. More likely, your answer will be, “it depends.” Merchandise buyers and liquidators often don’t take action until DC space becomes a problem.
Companies can use methods such as return to vendor (RTV), employee sales, outlet stores, online auctions, or professional liquidators.
Next time you want to evaluate a fulfillment operation, start by asking — “Show me your returns.” You can learn a lot from them.
Jeff Kline, founder and president of Kline Management Consulting (www.jklineco.com), has over 20 years of experience with companies such as Nordstrom and toysrus.com. He provides operations assistance for catalog and e-commerce companies. Kline can be reached by phone at (901) 850-0645 and by e-mail at email@example.com.