A Returns Management System (RMS) is key to operating an efficient and economically sound reverse logistics function. Many companies underestimate the impact a quality RMS can have on their customers, the cost of processing returns, and the recovery rate on returned inventory. The fact is that the system you use to process returns is the key to maximizing the impact of reverse logistics on a company’s bottom line. There have been a number of studies that have found that improving your reverse logistics capabilities can improve a company’s line by 3% to 5% of revenue. This cannot be accomplished, however, without a well designed system that will drive the returns process.
If your company does not have a state of the art returns management system you have three options. First, you can live with what you have and continue to let money fall through the cracks and get thrown in the garbage. Second, you can attempt to write a package using internal resources, which will cost twice as much as promised, providing half the benefits, and take twice as long to to implement. Third, you can buy a state of the art RMS from one of over 30 companies that have been developing and implementing returns systems for many years.
Based on our combined 40 years of experience in designing and implement reverse system, the only option that makes sense is to buy a package from a software provider that has experience implementing returns management systems for similar companies. When buying an RMS there are a few key features that clearly separate the contenders from the pretenders. Purchasing a software package that has the required features and is installed by experienced reverse logistics professionals will pay big dividends. In fact, if you buy software that doesn’t have the right functionality in production, you are wasting your money and most likely financing the development of a new module for the software vendor you’ve selected.
When deciding which RMS application to buy, how will you know if you the software includes the components you will need to maximize the value of the returned assets that you will be processing? If you ask your software provider to explain the following, you will be able to separate the best-in-class from the jokers-in-class when it comes to reverse logistics software:
- Explain the process flow of goods and what happens to goods after they are received.
- Show me the report for units that are scrapped.
- Show the process for scrapping a unit and how you capture and track parts that will be used to repair other units.
- How does your system account for the parts inventory that is used to repair product?
- Can your system re-disposition parts that are not needed?
- Does your system facilitate parts harvesting / liquidation?
- Can your system track separate inventories of units that have different owners?
- How are Bill Of Materials (BOM) stored in the system?
- Can your system support more than one BOM per model?
- How does your system support warranty returns and related repairs?
- How many classifications of repaired units do you have and how are is the inventory valued?
- Show me the productivity reports for receiving, repacking, repair techs, picking processes, and shipping.
- Can you re-designate finished goods as liquidation, A, B, or C stock goods?
- When do you designate how and where to ship goods, can you add change shipment status from LTL to Small Package, or Truckload?
- Show me how your system supports selling refurbished goods directly to the customer or B2B?
- Does your system provide sustainability reports that provide an audit trail for carbon footprint reporting purposes?
- Can your system process credit back to the customer based on condition at time of receiving and based on diagnostic results?
- How does your systems track and process consolidation fees and transportation fees for both inbound and outbound processes?
- Demonstrate how your system processes advanced service parts orders and other similar transactions?
- Are all your reports available on the web and do you provide a report writer as part of your standard system?
If you ask a reverse logistics software provider these twenty questions along with the follow up questions that will naturally come up during the software demo, you will quickly be able to tell the wanna-be’s from the best-in-class providers. The last and most important step in purchasing reverse logistics software is to check their references. These references should be from companies that are similar to your own. If you are an electronics manufacturer and all the references are retailers, you can bet the software provider does not have the package you need to drive your process. Finally, insist on touring most, if not all of the reference locations to see the process and software in action. During the tour, talk to the customer’s implementation team. They will tell you what it really costs and how well your potential RMS provider performed during the implementation phase.
While buying an RMS package is usually the best option for companies looking to improve their reverse logistics capabilities, you must do be sure to get the right software providers involved in your RFP process and you need to go the extra mile in completing your due diligence before your company writes a big check for the software solution.