A Case Study in Returns Processing

No retailer likes product returns, but returns happen, and how you handle them dramatically influences the likelihood of customers purchasing from you again in the future. As a recent best practices article in MultiChannel Merchant reports, "there is a direct correlation between flexible returns practices and future customer orders" (click here for full article). And for catalog and Internet-based sales, a well designed and efficient returns process can set you apart in ways that add enormously to the bottom line.

As your strategic fulfillment partner, FSI is positioned to develop and implement a returns process that makes sense for you. As a quality provider of 3rd-party fulfillment services, we of course have a number of different ways to handle returns. Yes, it can be as simple as putting returned items back in stock and issuing an appropriate credit to the customer. But what if you need more?

After reading a related article, "Best practices for returns processing" in MultiChannel Merchant we decided to write a short case study on how we helped one of our Clients handle product returns. The Client in question is a well-known manufacturer of software and video game titles, for which we handle both original product shipments and returns. The volume can top 4,000 orders per day during peak ordering periods, and thanks to a generous return policy, product returns can be as high as several hundred per day.

So here was the challenge: how could FSI transform an expensive returns process in such a way that sustainable increases in efficiency could be realized while at the same time allowing the Client to remain in control?

The FSI Management and IT teams put their heads together and agreed that automation was the key. On a daily basis we received a single file containing all returned merchandise authorizations (RMAs) that our Client had processed on their web site. Any customer needing a product return could request it online, and the resulting RMAs sent to FSI on a daily basis. (FSI also has the capability of setting up online return processes on our web sites.)

With the RMA in hand, FSI developed a program that would automatically produce a shipping return label in electronic form and email it to the customer. No longer would the customer have to wait for a label to be mailed to them or have to pay for return postage themselves; they would simply print the label, affix it to their package, and drop the box off at the nearest UPS facility. This eliminated any postage costs that would have been used to send the customer a shipping label and got the label in their hands virtually within moment of our receiving and processing the RMA file.

With the label in hand, the customer then sent the return to FSI’s main fulfillment center near Atlanta, Georgia, where custom-designed returns processing software speeds the receiving process via barcode technology that instantly identifies the order. Customizable business rules such as requiring a dated sales receipt can be optionally enforced so that the returns process can keep up with your evolving returns policies.

One thing the MultiChannel Merchant article points out is the critical need to use information technology to track and monitor the returns process. To assist Clients with this need, FSI developed a “Master RMA Report” providing multiple views of data, including virtually every piece of data for any given RMA. Accessible from our secure reporting portal known as FSI Enterprise, this is one of the most valuable reports to this Client because it provides them with all the data they need to manage the RMA process without even involving the FSI Customer Service Team. That translates into quicker customer service decisions at a reduced cost. Have we received an initial RMA from the Client? Have we emailed them their shipping label? When? Have we received the actual return? When? Did we send the item back to the customer due to lack of proper sales receipt? If so, when and what was the tracking number? All this data and more is stored in a real-time database that allows the Client to know what’s happening in their returns department and provide a tangible way to improve their customer relations through the rapid, accurate handling of product returns.

Taking the returns process even further, we integrated with the Clients' own systems so that certain returns data automatically makes it back to the Client's system with no human intervention. So how effective was it? Was our development investment worth it?

To answer that question, FSI recently was awarded the returns management job for this same Client for a brand new product line that FSI isn't (yet!) even fulfilling. This is a textbook example of how FSI's innovation has helped our Clients in their business successes since 1996.

So how well does your returns process work? Could you use a partner who understands how a well-designed returns process can actually increase your profitability?