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OK, so you have a solid plan for inbound from your vendors to the DC. And you have a plan for outbound from DC to your customer and/or stores. So what’s missing? Do you have a plan for handling returns from the DC or stores back into the DC or direct to the vendor? If not, then it’s time develop a well thought-out and coordinated plan for handling returns, or be prepared to live with the unnecessary operating expense that is sure to result!
Once upon a time, I worked for a retail company whose Merchandising BRAIN TRUST decided to purchase multiple 40-foot container loads of a certain hot-selling import product. The primary logistics focus was on the import supply chain delivery into the DC in sufficient time to ensure in-store availability to meet the newspaper sales ads. Even though the purchasing contract specified the need for a vendor returns procedure and designated physical location, Transportation was not involved in the upfront vendor contracting process to ensure that a viable plan was in place to execute a return shipment if necessary.
Well, you guessed it. The containers were unloaded at the DC. The damage/defect rate for the product was in excess of 40 percent on average. Immediately the RETURNS started—literally—piling up. One reason the returns started piling up at the DC was the vendor’s return location was an empty and unmanned warehouse in a large West Coast metropolitan location.
So, while we waited for the vendor to staff up and prepare to receive our truckloads of return merchandise, the piles in the DC grew into mountains of return product. Needless to say, this had a major impact on the DC, as returns occupied receiving and shipping floor space, not to mention the drain on available labor for normal operations.
So what’s the point? There are several key points here. 1. Where was the alignment between Corporate goals and objectives (i.e., import new hot-selling item) and Transportation's strategic and tactical planning to be able to handle and ship this product in the end-to-end supply chain? 2. There was no all-encompassing new product introduction process that included Transportation as part of the team in assessing and planning for all contingencies with the new product purchase for resale. 3. There was unnecessary transportation expense (i.e., the return from the store to the DC and the return shipments from the DC to the vendor return location). In the example above, this amounted to hundreds of thousands of dollars in freight expense, and inordinate time and effort spent trying to sort out the vendor charge-backs that resulted. 4. There was no Quality Control at the Vendor’s Sourcing Point. MOST of the above could have been avoided if our company had provided for a Quality Control Inspection at the manufacturer’s dock, before any product was accepted and loaded into the import container. That cost would have been small in comparison to the return expense incurred downstream.
So, do yourself and your company a favor. If Purchasing hasn’t invited Transportation to be part of the new product introduction process, make friends with your buyer, and use the above example to demonstrate that YOU should be a part of the team that helps to ensure that a viable plan is in place to handle any item in the end-to-end supply chain, especially if the end of the supply chain winds up being the vendor’s return Ship-To location.