There are an enormous
number of issues to anticipate when considering an OMS or WMS. One that you ought to spend some time on is
how will you handle returns, exchanges and backorders?
First, if you look at the
most successful retailers (Nordstrom, Zappos, etc.) they have very generous
return policies. The most important
customer is the one you already have. You could spend a lot of money trying to recruit new customers, or spend
a little money providing extraordinary service to the customers you already
have. Every business is different and
it’s possible that returns could cost you more than somebody else, but
generally, across many retail environments, returns represent are a small cost
in most operations. You have to be able
to predict of instituting a generous return policy, but in most cases, the
positive customer experience you offer will more than outweigh the expense
associated with allowing “no questions asked” returns.
If you allow returns
without questions, your customers will probably be happier. But, it’s critical to maintain real-time
records of returns and manage credits, return-to-vendor activities and
return-to-stock activities, if items can be repackaged and made available for
resale.
Credit processing ought
to be independent of inventory management processes. Automate the credit process, if
possible. Remember, you have already
accepted the cost as a customer service enhancement strategy. Certainly, a small percentage of your
customers will take unfair advantage, but that is a part of the cost you have
already accepted. Process credits
automatically and immediately. Your OMS
should create frequent reports to alert you to increases in return
activity. These reports should relate
back to your vendor and the particular items being returned. Even the most generous return policy needs to
be monitored so that you can quickly identify real problems and address vendor
management issues or concerns about particular products.
Similarly, with exchanges,
it’s important to keep a close eye what is being returned and establish metrics
to help you understand why. For example,
is a particular apparel product being returned for exchange at a
disproportionate rate because of sizing issues?
Identifying a popular item and providing helpful sizing advice for
customers can help you sell more, with a lower cost associated with returns and
exchanges. A well designed OMS will
allow you to customize reports that help you focus on the exceptions and make
fast and well-informed decisions.
Your WMS should have the
capacity to accept returns without unnecessary administrative oversight, but
with the ability to input data about why particular items are returned, and as
mentioned above, to accumulate that data into customized reports that show
trends and exceptions as they relate to particular vendors and / or products.
Your WMS must also allow
refurbished and repackaged items to be returned to inventory. It is important to consider how the cost
information associated with these items will impact your average costing. It
probably won’t have a significant dollar impact, but it might have an adverse
system impact. It is important to
understand how your system maintains
average cost and ensure that items returned to inventory will not
disproportionately effect those records.
Your WMS must also be
able to disassemble kits. If, for
example, an order is returned for refund or exchange and there were 5 items
that had been assembled into a kit (e.g., a telescope, an eyepiece, a tripod, a
filter and a case) and only one of the items was defective (the case was
damaged) the other 4 items must be disassociated from the returned order and
returned to inventory, while the defective case must be addressed and a
decision made concerning its disposition.
The order might be repackaged with a new case and assembled into a new
kit for redelivery. The order might be
cancelled. Your OMS and WMS must
communicate effectively to maintain data integrity. Often, an integrated WMS and OMS is the best
solution. Does your OMS provider also
offer a sophisticated WMS? There are
many software options that do, and Avectous Integrated Software is a solid
candidate for your consideration.
During the processing of
these activities, does your WMS have a way to identify where the inventory
items are? Is there a “returned
inventory hold” location? Are value
added process accounted for? Again, your
WMS ought to be sufficiently customizable that it can reflect the processes in
use in your business.
If your WMS assigns
“receiving functions” to locations and personnel, it is a good idea to assign
priorities to processing returns and exchanges.
It is all too easy to handle the hottest emergency first and when the truck
backs into the receiving dock, that is always the hottest emergency. A WMS with a “personnel load” function is
attractive, because it not only tracks receiving activities, but allocates them
in accordance with personnel and location availability.
Your WMS will manage all
warehouse activities in accordance with a warehouse map in two or three
dimensions. When mapping your warehouse,
make realistic forecast as to the amount of space you will need for processing
and storing returns and exchanges. The
location of the area to be set aside should correlate with the putaway location
for the returned merchandise.
Another consideration
when choosing an OMS and WMS is how you will handle backorders. The integration of your return / exchange
process and your backorder processes is worthy of some consideration. First, if you get a return that can be
repackaged and put back into inventory, is there a way to associate that
information with your backorder log? If
the item can be sent directly from the return processing department to the
shipping department, several time consuming steps can be avoided. Second, if an item is subject to a
disproportionate number of exchanges (where a replacement item is sent to the
customer) it may result in inventory shortages of that item. Again, a WMS and an OMS that allows the
synthesis of this information and the creation of custom reports can help you
to respond quickly to “out of the norm” rejections, to allow you to manage
suppliers quickly and with accurate information to help them solve problems and
help you to avoid them.
Avectous Integrated
Software can meet all of these challenges.
Please call us to discuss the challenges you face and how we can help
you address them.
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