Manufacturers and retailers have struggled with returns for years. Facilities that work just fine in forward gear, just aren't as efficient when shifted into reverse.

For that reason, many companies have traditionally relied on liquidators to handle their returns and over stocks. That was a small price to pay compared to the expense of processing returns.

Where others saw headaches, Lawrence Snapp saw an opportunity.

"There's a $100 billion a year market in returns and over stocks just in the U.S.," says Snapp, who co-founded ReturnBuy in Ashburn, Vir., in 1999. "With the emergence of online auctions like eBay, we saw an opportunity to turn returns into a profit center."

ReturnBuy is a third-party provider of reverse logistics services for manufacturers and retailers that don't want the headache or the expense of receiving, inspecting, and redistributing their returns, overstocks, or damaged goods.

The company operates a 250,000 sq ft reverse logistics hub in Columbia, S.C., and a smaller facility at the Virginia headquarters.

Other third party logistics providers process returns. What separates ReturnBuy from the competition is the next step. While ReturnBuy does utilize some traditional liquidation channels, more often it sells the merchandise on Internet auctions like eBay and Yahoo to maximize the value of the return.

The process works like this: ReturnBuy contracts with a company to accept returns on their behalf directly from an end user.

ReturnBuy then relies on a proprietary marketing tool to create a strategy to market the product online to individuals and businesses. ReturnBuy keeps a percentage of the sale for its services and passes on the rest to its customer.

"Some of the companies we do business with are seeing 200 to 500% increases in the revenue they produce from their returns and over-stocks," says Snapp. "We're making heroes out of them."

One key to ReturnBuy's success is the warehouse management system that manages the receipt and order fulfillment of returned merchandise and inventory overstocks in an unpredictable, high-velocity environment (Logility, 404-261-9777, www.logility.com). The facility may receive as few as one and as many as 30 deliveries in a day from its customers. On the outbound side, inventory turns over every 2 weeks.

"A flexible WMS is critical to our operation," says Snapp. "Our system has to simultaneously manage forward and reverse logistics processes while managing inventory and orders for 20 or more different customers at any given time."

The Columbia facility was designed to process more than 30,000 unique items per day. From toys to Palm Pilots, they all have to be inspected, packaged for resale, stored, and then shipped when they're sold.

For those reasons, half of the facility is dedicated to receiving and processing returns. The other half is used for traditional storage and order fulfillment.

The WMS manages both operations through an eight-step process.

The first step is receipt of the product at the receiving dock. While the facility is notified in advance to prepare for less-than-truckload (LTL) and full-truck shipments, parcel shipments show up randomly.

Bar coded items are scanned and pre-inspected at the receiving dock. Information about the items, who returned them, and an assessment of their general condition is entered into a proprietary inventory tracking system that links to the WMS.

That information is used to create a license plate bar code for every item in the facility. The bar code typically tracks an SKU number, UPC code, serial number of the product, and proprietary tracking information for ReturnBuy's inventory system.

At that point, the inventory not destined for liquidation is routed to an inspection area on the second floor of the facility for individual resale.

"Our goal is to get the most for the product we can over eBay or some other venue," Snapp explains. "Every item for resale is inspected, tested, and repaired when possible."

Once the inspection is complete, ReturnBuy's proprietary software tool values the merchandise. Items are then prepared for resale to individual consumers and businesses alike. That might include creating an electronic photograph and description of the product that will be listed on an Internet auction site, and packing it for shipment in a branded ReturnBuy carton. Once they've been processed for resale, items are weighed, cubed, and identified for shipment information at a later date.

The proprietary marketing tool automatically creates a plan for the optimal way to sell the item on eBay. "Our program is designed to intelligently merchandise a product," says Snapp. "We track 100 different variables in order to get the best price for our customers."

Once an item is ready for resale, inventory flows to the first floor storage area for putaway and the WMS goes into forward logistics mode like a traditional warehouse.

"We marry the bar code on the product with a shelf," says Snapp. "Since our inventory varies from day-to-day, we use random storage for the putaway to maximize the utilization of the warehouse."

When items are bought online, the buyer is sent an e-mail confirming their purchase. An electronic link in the message that takes them to the ReturnBuy checkout site.

Customer information from the sale is then transmitted first to an order management system in the ERP system. The item is removed from available inventory, and the WMS generates a pick order by carton number for a specific customer order.

Orders are batched to the warehouse floor at regular intervals during the day, beginning with a batch for orders received overnight. Typically, any order placed by 10 AM can be processed that day.

Units of work are created by a pick planner/supervisor. This is where the flexibility of the WMS comes in handy. "The WMS allows us to sort orders by zip code, by parcel carrier, or by storage row," says Snapp. "That allows us to pick in any order we need to maximize work in the facility."

The warehouse worker is directed by a wireless terminal to the storage location for the unique product. The product is scanned to confirm and validate the correct order. The system has been nearly error free. "I know this sounds crazy," says Snapp, "but I don't believe we've ever had a picking error! If we have, they've been few and far between."

Picked items travel by conveyor to a shipping area for automatic shipment processing for small parcel and LTL shipments. The WMS passes order information to a parcel manifest shipping system to manage transportation.

Finally, order information is sent back to the proprietary inventory system. "Our clients get a line item detail of every item we process for them, down to how long the item was at each station between scans," says Snapp. "Without the detailed and accurate data we get from our inventory systems and WMS, we couldn't stay in business."

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