Posts Tagged ‘disposition management’

Last week at the Reverse Logistics Association conference in Bentonville Arkansas, there was much discussion about the future of vendor return agreements.  These are agreements between retailers and manufacturers that will govern returns privileges and related fees.   So what can manufacturers expect in the future.  In a word: “Simplicity”.  Retailers are dealing with more and more vendors with more complex returns requests.  With the push toward sustainability, more regulations coming, and the continued growth in off shore manufacturing with no domestic facilities, the need for simplicity is understandable.

So what will the future options be?  Manufacturers will be given two choices:

1. The retailer will ship returns to them.
2. Retailers will dispose of returns as they wish and pass on any additional costs that are incurred.

Fees for these two options will vary depending on the choices made and the retailers will expect the same amount of credit for the goods themselves from the vendor regardless of the choice made.  Manufacturers should consider the variables and options involved carefully.

If a manufacturer goes with the second option and retailers will  dispose of the goods as they wish, which gives the retailer the option to liquidate the product, keeping all the proceeds; or dispose of the product and charge additional disposal fees if incurred.  Like many things, the devil is in the details and both retailers and manufacturers should carefully variables and associated charges.  If both retailers and manufacturers work together, they both could find opportunities to reduce handling, transportation and disposal costs.   For example,  if a manufacturer is going to dispose of the returned goods when they receive them, they might want to work with the retailer to dispose of the goods at their returns facilities and save the extra leg of transportation and handling.

If accountability is a concern, manufacturers should work with their retail partner to negotiate a damage or swell allowance.  How these allowances will be set and confirmed should be clarified and agreed to but again, additional transportation and handling can be avoided.

When negotiating return agreements with retailers, the manufacturers should keep the following points in mind:

If you want to have the product sent back, leverage a return authorizations and condition requirements in order to get a lower consolidation fee.

If returned goods are liquidated by the manufacturer, work with your liquidation partners to coordinate shipping returned goods directly from the retailer to the liquidator, saving two legs of transportation and additional handling.

If you are going to allow retailer to do what they want it the product, ensure agreement is made on fees and related liability.

If you are going to negotiate a swell allowance or a similar off invoice credit, get agreement on how the allowance is going to be calculated, how it will be verified, and how often it will be adjusted.

One thing that will not change is the need for manufacturers to have an exit strategy for their goods.  Thinking through an “exit strategy” for merchandise is an important concept for every manufacturer, regardless of what they sell or to whom they sell it.  Developing a well thought out exit strategy for returned goods will significantly impact  retail customer satisfaction.  Developing an exit strategy for both customer returns and recalled goods will make a manufacturer easier to do business with, help avoid additional liabilities, and will ensure they maximize the value of goods in their reverse logistics pipeline.

In today’s podcast, Curtis Greve talks about the primary differences between  distribution center operations and return center operations.  There is more than meets the eye when it comes to how product is handled in a return center, compared to a distribution center operation.  A company’s ability to deal with these differences will have a major impact on their overall profitability.  Return centers are housed in a warehouse, just like a distribution center but that is where the similarities end and the competitive advantages often begin.

The Reverse Logistics Podcast

Your host is Curtis Greve.

In today’s podcast, Curtis Greve talks about Disposition Management and why it is the key to maximizing the value of assets flowing through your reverse logistics pipeline.

There are only six possible dispositions for any item in a return center, whether it is a can of soup or an expensive computer.  Do you know what they are?  Do you understand how the disposition of the item impacts the value received for an asset and how that determines the cost of processing?  You will after you listen to this podcast.

RLP #1 – Disposition Management

The Reverse Logistics Podcast

Your host is Curtis Greve.