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:
 

1. Procedure to Return Merchandise to (Distributor)

a. Request authorization (Return Merchandise Authorization, RMA) for products/goods from inside/counter sales.
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.

1. Returned Goods Policy
2. Only stocked items are eligible for return. 
3. No special size or non-stock products or parts are eligible for return unless sent to the customer as the result of an error at the factory. If we have “special ordered” a part for you, return is subject to manufacturer’s willingness to accept it. If the manufacturer charges a restock charge, this will apply to your return.
4. We reserve the right to not accept large quantities even if the item is a stocked item and in resalable condition.
5. Returned merchandise must be in resalable condition, in the original packaging.  Credit will not be issued for that portion of the merchandise that is not considered resalable. Any merchandise that has subsequently changed (e.g. plating, dimensions etc.) will not be eligible for return.
6. (Distributor) reserves the right to inspect all returned merchandise and issue final determination as to its condition. Cut hose and hose assemblies will not be accepted.
7. Credit will be issued based on the invoice price, less a 25% restocking charge, or the restocking fee from our vendor (whichever is higher) plus original freight costs, both in and out if applicable.
8. Merchandise will not be accepted for return after 180 days past the invoice date.
9. Merchandise must be returned to (Distributor) within 30 days from the date of issue of the Returned Goods authorization.
10. Restocking charges will not apply under these circumstances.

·       It was our error.
·       Product was defective.
·       An offsetting order of equal or larger value was issued at the same time.

1. You will be notified if any merchandise is not eligible for return and notified that you may pick it up or have us ship it back to you freight collect. Merchandise not claimed will be destroyed after 30 days.

 
 

 

• Cash/Counter
  • A customer at the counter that does not have an account and pays by cash or credit card
    
  • Usually is NOT price sensitive. Good customer service and proper inventory should give high margins.
    
  • Make sure to demand higher profits the smaller the order. Consider a minimum threshold.
    

 

• Small MRO
  • Typically purchases from 1-25K per year.
  • Perhaps does much of their purchasing from retail distribution.
  • Usually does not have a storeroom or purchasing agent. Buys what they need when they need it
  • Less sensitive to price. Relies on our inventory, expertise, and relationships
    
  • Examples could include:
    • Small construction companies
    • A truck repair shop
    • A roof cleaning company

 

• Large MRO
  • Typically purchases 50-500K per year
  • Typically has a purchasing department.
  • Typically manages their MRO supplies using a business replenishment system and has a storeroom or warehouse dedicated to their MRO inventory
  • Typically is more sensitive to price. Has time to shop
    
  • Typically has a higher level of sophistication around our products; not so reliant on our inventory or expertise
  • Examples could include:
    • A sawmill
    • A mine
    • An aluminum manufacturing plant
    • A refinery

 

• Reseller
  • Typically fulfills a channel that is more specific to a market or location.
  • Typically resells our product without altering its form or function.
  • Typically is more sensitive to price.
    
  • Examples could include:
    • An air nailing and stapling distributor who purchases hose and quick couplings from us (Market driven)
    • A food processing and equipment distributor who buys food grade hose and sanitary fittings from us (Market driven)
    • A small town hardware soup to nuts supplier who buys adapters, brass fittings, sanitary fittings etc. Meets his customer’s need relying on our inventory and expertise (Location)

 
 

• Associate Distributor
  • Typically a reseller who fulfills a need in the marketplace, either by location or channel, and purchases/is loaned/is given Fabrication equipment (Krimper(s), Tube Fabrication Equipment, flanging equipment) to resell primarily hydraulic hoses, fittings, tubes, and perhaps other related equipment
  • Typically is more sensitive to price
    
  • Examples could include:
    • A hydraulic repair shop (Location)
    • A mobile marine repair truck (Location and Market)
    • An agricultural equipment distributor (Location and Market)

 

• OEM
  • Typically a manufacturer whose end product being sold in the marketplace contains a component or components that we sell them to allow their product to function
  • Typically has a purchasing department
  • Typically manages their OEM supplies using a business replenishment system and has a storeroom or warehouse dedicated to their MRO inventory
  • Typically is more sensitive to price. Has time to shop
    
  • Typically has a higher level of sophistication around our products; not so reliant on our inventory or expertise
  • Examples could include:
    • A donut machine manufacturer who buys pneumatic tubing and fittings that help his equipment work
    • A tunnel boring machine manufacturer who buys hydraulic hoses, fittings, and components that provide fluid power to his equipment
    • A carpet cleaning machine manufacturer who buys brass fittings and valves, quick couplers, and hoses as components of his machine
    • Channel Partner
    • Typically a customer buying inventory from distribution that is posted on Distranet or Warehouse Two
      
    • Price is prearranged so not an issue
    • Examples could include:
      • Another Distributor also posting their inventory on Distranet

 

• Government
  • Army, Navy, Airforce, Marines
  • Municipal
  • State, City, County, Utilities, Water Districts, Army Corps of Engineers
  • Power Plants, Dams
  • Anything procured and paid for with bond, city, state, or federal funds

 
 

• Project
  • A customer whose business is PREDOMINANTLY one off significant orders that are unlikely to repeat on a regular basis. Examples of project work would be Transair installations, dam builds, semi-conductor fabs, hydraulic systems built to solve a specific application etc. There will be times when an OEM or MRO customer whose business will significantly impact sales, but will not repeat. When segmenting these customers we need to determine the overall impact on sales and which classification is most appropriate for that customer. A Mechanical Contractor is a good example of a projects customer.
    

When any piece of equipment fails it can be annoying at best – but when your o-ring seal fails, it can be catastrophic. Here are seven tips you can use to help prevent o-ring failures.
Spiral FailureSpiral failure typically occurs on long stroke hydraulic piston seals and rod seals. This usually occurs when the o-ring twists and gets caught, resulting in deep spiral cuts.
Prevention: regular lubrication of the o-ring will prevent the twisting that causes spiral failure.

Chemical DegradationChemical degradation occurs when the chemicals in use are not compatible with the materials the o-ring is made from. Chemical degradation appears as hardening, cracking, discoloration, and/or blistering of the o-ring.
Prevention: to prevent chemical degradation, choose o-rings that are compatible with the chemicals that the o-ring will come into contact with.

Thermal DegradationThermal degradation is less common and is likely a result of use in an environment that the o-ring is not rated for. Signs of thermal degradation are deformation and radial cracking.
Prevention: choose o-rings that are rated for use within your specific environment and operating range.

Compression SetWhen the O-ring appears to be flattening out at the cross section you can assume that the failure is attributed to compression set. This usually happens when the o-ring has been exposed to temperatures or chemicals that are outside of the range for the seal.
Prevention: Make sure that the o-ring is rated for use within your specific equipment temperature range and chemical exposure.

Installation DamageUser error is a very common reason for o-ring failure. When an o-ring is installed incorrectly it can result in gashes, nicks, and cuts in the seal.
Prevention: Make sure to follow the installation instructions closely. Frequently lubricating the seal is also a good way to ensure that the seal was installed correctly and prevent cuts and other damage.

OutgassingFailure due to outgassing can be hard to spot as it typically presents as a decrease in the cross section. Outgassing failures can be the result of improperly cured seals or high vacuum levels.
Prevention: ensure that all seals are properly cured. This will minimize the effects of outgassing.

Proper MaintenanceOne of the most important things you can do to prevent O-ring failures is to properly maintain and care for them. This means following this maintenance routine:

• Regular inspection for signs of failure, wear and tear.
• Regular lubrication especially on seals that are opened and closed frequently. If the seal doesn’t feel wet or slippery, it needs to be lubricated.
• Regular cleaning with a soft brush or compressed air is another good way to prevent damage from abrasion and dust.

Prevention: when caring for an o-ring seal, make sure you refrain from poking and prying at the seal. This can create damage where there wasn’t any, to begin with. You’ll also want to refrain from introducing harsh chemicals to the seal when cleaning it or working on other parts of the equipment.