Product returns have often been viewed by customers as a necessary evil, a painful process and, usually, unavoidable. For retailers, manufacturers and distributors, returns have often been seen as a nuisance, a cost center and an area of potential customer dissatisfaction. As long as products are being sold, there will always be some returns. And, for many sellers, the process of handling product returns has been mostly on an ad hoc basis. However, many successful organizations have realized that the returns process incurs significant costs (See “Returns by the Numbers,” p. 58) and that an effective product returns strategy, which is a major aspect ofreverse logistics (the term that encompasses returns as well as a number of other activities related to items moving “backwards” in the supply chain) can provide a number of benefits.1,2 (See “About the Research,” p. 59.) Product returns can be categorized into two groups: (1)controllable returns, which can be avoided or eliminated by actions taken by the company, and (2)uncontrollable returns, which companies can do little or nothing about in the short term.

Controllable Returns.

Controllable returns result from problems, difficulties or errors of the seller or customer and can be mostly eliminated with the proper strategies and programs by the company or its supply chain partners. Every controllable factor has a cause or causes that could be minimized or eliminated with better forward logistics processes, improved market forecasting, improved product handling or storage and so forth. Products returned because of damage can be eliminated through some combination of improved handling, better packaging, improved transportation and storage of the items as they are being distributed in the supply chain. In essence, this is eliminating problems before they happen.

To illustrate, Philips Consumer Electronics North America took preventive steps to reduce controllable returns by implementing a variety of policies and programs, including improving their products’ ease of use, enforcing company return policies and improving their service network. Specifically, the company established a dedicated product returns department and eliminated the implied corporate policy of “taking anything back, from anybody, anytime.”3

Sierra Trading Post Inc., a seller of outdoor and recreational footwear headquartered in Cheyenne, Wyoming, minimized product returns by hiring “a size and fit specialist for shoes and put a lot of effort into accurately presenting product colors in its catalogs, including describing the various shades within a single color range.