We will with this article, assume that you are in some way motivated to find a solution to better manage your returns. Perhaps you’re highly-motivated and are simply being proactive in addressing the needs of your constituencies. Or, maybe your leadership requires significant cost reductions from your organization and you think the returns arena may be a great source of those savings.
Irrespective of your motivation, however, we want to provide you a blueprint for evaluating software solutions that have the potential to assist you in meeting your objective. It will not be comprehensive, as the needs specific to your market and company should dictate requirements. However, we will outline below, the top ten variables to consider when soliciting requests for proposal, or for designing and developing your own solution in-house. These are not necessarily listed in any order of importance, as only your business needs can adequately establish the most appropriate prioritization.
As initially conceived in 1947, the term "gatekeeping," was used to describe a mother as the person who decides which foods end up on the family's dinner table¹. Extending the concept to supply chains, it is more commonly used today to describe a decision point at which information or materials are determined acceptable for entry into a system.
As it relates to returns, the concept is a bit more complex. Two primary functions are served. First, the traditional role remains in that unauthorized materials are refused from entering the reverse flow. Second and just as importantly, its purpose is to capture data related to that specific return so that the opportunity exists to drive a disposition determination at the point of inception, or alternatively, so that synthesized intelligence about the returns population can be published to interested parties (e.g. Quality, Supply Chain, Customer Service, Aftermarket Services).
This function occurs at the point in time where a Returns Material Authorization (RMA, also known as Returns Goods Authorization or Returns Merchandise Authorization) is granted to the initiating party (e.g. Distributor, Customer, Vendor). It is critical to differentiate here between the ability to simply issue an RMA (which many systems can do), and the ability during the process whereby an RMA has been requested to validate individual items against predetermined variables (which fewer systems can do). The latter is where the heavy lifting associated with gatekeeping is performed. Figure 1 depicts the data sources that enable gatekeeping via automated rules and validation.
Equally important, buyers should consider the ease of which the gatekeeping criteria or system flows may be altered to support ever-changing business needs. While some solutions in the market today demonstrate robust functionality, business users remain reliant on information technology resources (internal or external to their organization) to alter the returns system. Solutions do exist, however, that provide greater flexibility via user empowerment, thereby minimizing this dependence on others. Consider the following two areas during the evaluation process.
a. Rules. User-defined, rules utilize data attributes to define acceptable actions in a system. For example, rules may be applied to requested returns as a point of validation, automating the decision point for acceptance or rejection.
As a point of illustration, consider that Customer A maintains a 5% return allowance with your company. This allowance, having been established as a rule in your software, will dictate whether a request by Customer A to return 500 units falls within the 5% parameter. The resulting action would be an acceptance (full or partial) or rejection of that specific request.
Using the same example above, factor in rules for a return reason type of ‘defective’ and a determination of whether a specific serial is in warranty, a possible outcome using the ruleset might be: approve the return, send the asset to Destination B, trigger a replacement order and send an email to both Customer A and to internal Quality Assurance personnel as confirmation.
Incorporating this level of flexibility into the application makes incremental improvements to process much easier to execute for the business user.
b. Workflow. The processes that materials undergo may differ dramatically in your business by: facility; product type; the condition of materials; or say return reason (e.g. warranty repair or trade-in). Moreover, a need to drive incremental throughput improvements may require alterations to the material flows. Irrespective of the driver, it is quite likely that your business will experience change and as such, flexibility should be considered for a software solution.
Equally important to flexibility is the ease with which users may automate and implement those flows. Business users should be able to rely upon user-friendly software such as Microsoft Visio or other proprietary software to define process flows for specific parts or subassemblies (see Figure 2), as well as upload those flows into the returns management software. Supporting this type of work minimizes dependence on internal IT resources for system changes, and also empowers the functional constituencies that derive value from the application.
The technology platform and integration methods are important considerations with any Returns Management solution. The returns process typically involves multiple systems and locations supporting a variety of communication protocols. The integration points may include ERP systems, WMS systems, and proprietary systems at 3PLs and Repair Depots, among others.
The returns system should have native integration support for the most popular systems such as the ERPs from Oracle and SAP to help accelerate deployment. To further streamline integration, the returns system should support standards-based integration protocols and a connector methodology to easily connect existing business processes without duplicating the work already taking place. In the case where the ERP is already effectively managing 20% of the returns process, it is important that the returns management system may be plugged into the existing process and provide incremental, required functionality without disruption.
Service Oriented Architecure (SOA) is the key to efficiently tying all these complex systems together. This interoperability is driven through the use of web services that leverage XML-based open standards such as Web Services Description Language (WSDL) and Simple Object Access Protocol (SOAP). These services can also bridge the gaps through communication protocols such as RosettaNet and EDI. Without the use of web services and a connector methodology, the implementation of a returns management system can turn into an integration nightmare.
Performance is another important consideration related to integration. The returns system must be flexible enough to support real time validation to external systems when needed, but also support batch upload processes when data is less volatile and performance is critical.
4. End-to-End Process Automation.
Presently, systemic gaps exist in the management of returns. This is due to two primary factors. First, many organizations have outsourced a significant portion of their supply chain (including the reverse logistics elements). This results in a heterogeneous environment of systems and processes. Figure 3 serves as an oversimplified depiction of this outsourced network.
Secondly, systemic capabilities do not meet the needs of most organizations. Generally, the market can be partitioned into one of two camps. Either the organization remains manual in processes (85% employ the use of Microsoft Excel spreadsheets²), or they have cobbled together systems to handle the myriad functions related to returns. Few solutions incorporate the primary functions into one package. Thus, the entire process flow is generally not automated.
5. Intelligence Accessibility.
An application that yields the aforementioned benefits will do wonders for any company. However, those elements alone prove insufficient in today’s competitive market. It is critically important to provide access to not only the data but also the intelligence garnered during the process to internal and, as appropriate, external stakeholders.
a. Web-based user interface. Increasingly, organizations are outsourcing, or planning to outsource, activities related to returns management. AberdeenGroup recently published a study identifying the fact that nearly 70% of telecom and utility companies currently outsource repair/refurbishment functions and 44% rely on partners for asset recovery³. Further, 30% of Aerospace and Defense, and 20% of High Tech firms plan outsourcing initiatives in repair/refurbishment and returns management over the next 12 to 24 months³
This partnership orientation creates a geographically disperse environment that potentially spans multiple time zones and work shifts. Moreover, by employing user- and role-based authentication, users from across the world can login and perform functions or access data or intelligence, consistent with their permissions, at all hours of the day, each day of the year. Thus an inherent limitation of the outsourced model is minimized.
b. Dashboard. Supply chain executives close to returns management identify with this one fact: most do not have good data or intelligence related to their returns population. AberdeenGroup published the following findings³:
Lee Norman is senior manager of Enterprise Returns Management for ClearOrbit.
¹Lewin, Kurt, "Frontiers in Group Dynamics," Human Relations, v. 1, no. 2, 1947, p. 145.
²AberdeenGroup, “Revisiting Reverse Logistics in the Customer-Centric Service Chain”, September 2006, page 13.
³Ibid, page 8, pages 6-7