The Importance of Having a Strong Return Goods Policy in Distribution
All too often Distributors either do not have a Returned Goods Policy, or tend to ignore whatever policy they have. The impact of this lax policy can have a significant negative impact on your bottom line, and make things WORSE with your customer, rather than better. A typical scenario:
Joe Customer orders:
· The wrong parts
· Too many of the right parts
· The right quantity and part number, but they no longer want or need the product
Your Salesman walks in the door and purchasing says “I need to return some parts. How about you take them back with you while you’re here?” Everyone wants to be liked, especially by one of your bigger customers. “Sure, NO PROBLEM” says your salesman. He/she grabs the box of parts, and at the end of the day:
· Puts them in his/her office or cubicle to manage later.
· Puts them on a shelf in the warehouse and mentions it to someone in receiving or inside sales.
· Puts them back where they belong and issues full credit.
Several opportunities for negative consequences are the result of not having a strong return policy.
· The customer becomes frustrated because a credit memo is slow to be issued, or no credit issued until the customer reminds the salesperson a credit is owed.
· The parts are back on the shelf, but now you have too many.
· Perhaps they were really old, so the parts are out of spec from current parts.
· Perhaps the parts were special ordered just for that customer. Now you have JUNK in your inventory. You’ve wasted $, and then proceed to count those parts year after year because they will never, ever sell.
· Even if the parts are ok, and you can resell them, you incur significant costs to handle the transaction of issuing credit. You transport the parts, pay to re-receive them, count them, put them away, and have accounting process a credit. A $100 return ends up costing you $100 just to process the credit memo!
And on and on. Instead, have in place a solid procedure and conditions about what you will, and will not take back, how you will take it back, and what happens when you DO take it back. Customers should feel the consequences of returning stuff they messed up on, and my guess is THEY have a return goods policy way stricter than yours. Let your customers know your policy BEFORE they want to return something, and stand by your policy. If, by chance, it is your BEST customer, and the parts are resalable, and there aren’t too many, and you will easily sell them QUICKLY, then, and only then do your customer a favor and tell them you will waive the restocking fee. Better yet, CHARGE THEM, then issue a credit against the restocking fee noting the reasons behind your willingness to take the parts back.
· Items are new and in original packaging
· Items are something we carry and can resell
· Because you are ONE OF OUR BEST CUSTOMERS, so THANK YOU FOR YOUR BUSINESS.
Here is an example of a strong Return Goods Policy. Feel free to make it work for you.
Return Goods Policy
At its discretion, (Distributor) will accept the return of goods in resalable condition with a possible restocking charge on the following terms:
b. Obtain a Returned Goods Authorization number.
c. Return merchandise as indicated on the Returned Goods Authorization or by the POC who issued such to the (Distributor) facility designated within 30 days of authorization. A copy of the RGA must accompany the materials being returned.
d. Ship prepaid, unless otherwise instructed.
e. Upon receipt, inspection, and acceptance by (Distributor), credit will be issued by Accounting Department at “Phone Number”.
Unauthorized returns or returns without copies of original invoice or packing slip and return goods authorization form or number will be refused.
· Product was defective.
· An offsetting order of equal or larger value was issued at the same time.