Managing returns with WMS
Warehouse management systems are now able to take the headaches out of returns, recalls and reverse logistics.
By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 10/1/2004
With so much focus on pushing orders out the door at warehouses and DCs, it stands to reason that managing returns doesn't quite get the same attention.
'A lot of the problem with returns is that it's a sideline to the main business and no one is dedicated to managing it well,' says Chris Heim, president and general manager, HighJump Software (952-947-4088). 'It just gets thrown into a corner.'
Returns are complicated by the fact that customer expectations are changing, thanks to the Web. 'There is a growing complexity to handling returns because customers have come to expect better service and a lot more accommodation in returns,' says Jan Young, product manager, Catalyst International (414-362-6800). 'They are demanding a higher level of service.'
And returns are not the only challenge for warehouse and DC managers. There is also the matter of reverse logistics and recall management.
While a warehouse management system (WMS) won't make those problems go away, it can streamline all three by bringing automation, discipline and repeatability to the process. 'A WMS makes returns (in whatever form) part of the business process,' says Heim.
And the software does more than just manage the movement of returns. A WMS also provides timely feedback of information about them to other systems, like the order management system that's tied to the consumer, according to Noah Dixon, industry strategy leader, RedPrairie (877-733-7724).
Returns are unique
One reason returns are different from forward logistics is that effective returns management cuts across an enterprise.
'Returns don't just happen in the warehouse,' explains David Hommrich, senior director of reverse logistics, Manhattan Associates (770-955-7070). 'If you look at the process with a myopic warehouse view, you miss an opportunity to save money by managing the process upstream.'
That's where the WMS comes into play. 'Successful returns management is about all the processes from consumption back to the source,' says Hommrich.
In fact, some companies use the WMS to facilitate the returns process even before a product is shipped. 'Many direct-to-consumer companies will have the WMS create a return label when they are printing out the initial paper work,' says RedPrairie's Dixon. 'A residential customer can then go to a shipper like FedEx, UPS, or the post office and use that label to process the return.'
In addition to managing reverse logistics, the WMS might also be used to track and manage returnable assets. 'Products have to come back, but so do returnable pallets, shipping platforms, and containers,' says Dixon.
Managing with WMS
There are at least five distinct steps in managing a successful return: authorization, receiving, inspection, disposition and crediting.
Authorization starts the process when a customer service representative creates a return authorization number that is forwarded to the WMS. That ties the incoming product to a specific customer. Customer service may also forward transportation routing information and information about why that product is coming back.
Authorization also facilitates planning. The information about the number of authorized returns can now be used by staff to handle the work.
The WMS really begins to shine once product arrives at the receiving dock. 'Receiving returns is different from other receiving processes because it always involves some form of inspection before you give the customer credit,' says Young of Catalyst. 'That inspection will also determine how we dispose of the return.'
Once an item is scanned into the system, it's routed to an inspection area. There, a receiver can verify that the item returned matches what the customer bought and said they were going to return.
After a return has been inspected, comes the disposition of that item. This will be done according to workflow rules programmed into the system.
That might involve routing the item to a repackaging or repair area. Or it might involve returning the merchandise to stock just like brand-new merchandise. Other returns may be crossdocked to another retail location, to the original manufacturer, to a discount retailer, or to a charity. Product beyond repair may be scrapped.
Finally, once the return has been confirmed, the WMS passes information back to the order management or customer service application so that the customer can be credited for the return.
Recall management
Some products are returned by the customer, but others are recalled by the manufacturer.
This is a different process from traditional returns because the manufacturer creates a recall. 'A direct-to-consumer apparel manufacturer doesn't create a return,' explains Ronald Riggin, chief technology officer, MARC Global (866-703-8279). 'But if a pharmaceutical company detects a manufacturing problem, it has to create an inventory of what is expected to be returned.'
When a product defect is discovered, many companies simply bring back everything that's been shipped out. A WMS with lot and serial number tracking, however, allows a company to bring back only the product with that defect.
'When a WMS has traceability functionality, we can identify the goods, the batch, the lot, the manufacturing dates, and the raw materials that went into a particular lot,' Riggin explains. 'We can also identify which customers received a shipment right down to an individual bottle of pills. That narrows the scope of the recall.'
Once the WMS has identified the specific product affected by the recall, 'traditional reverse logistics and returns management take over to record the actual receipt versus what was expected,' Riggin adds.
The next step
Evolving WMS technology is also being applied to streamline returns and recall management.
One French beverage company has combined lot tracking with supply chain event management to speed up the quality control process.
In the past, the company had to hold finished goods at the manufacturing plant for up to three days while quality control checks were done before they could ship to the warehouse. That consumed valuable manufacturing space.
Now, the manufacturer ships the product to the warehouse while the QC tests are being conducted. 'The product is received and put away by the WMS as quarantined stock,' says Brian Price, senior solutions manager for WMS applications at SSA Global (312-258-6000). 'Once the quality control checks are complete, the WMS is alerted to remove the hold and the product is available to ship days earlier than it used to be.'
In the rare event of a recall, the system identifies the specific pallets and containers that need to be shipped back to the factory.
In the future, RFID and WMS technology may be combined to narrow the scope of a recall. 'RFID allows us to track the pedigree of products and assign unique serial numbers to individual products,' says Riggin. 'We can do that now with bar codes, but RFID may streamline that process.'
Click on the icon to learn how cell phone distributor CellStar handles more than 50,000 returns a month. (Turning around cell phones - Oct. 2004)
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