Managing Product Returns for Competitive Advantage

Effective product returns strategies and programs can result in increased revenues, lower costs, improved profitability and enhanced levels of customer service.

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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.”) 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”) 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.

Returns by the Numbers

View Exhibit

About the Research »
Controllable Returns.



1. J.H. Stock, “Product Returns/Reverse Logistics in Warehousing” (Oak Brook, IL: Warehousing Education and Research Council, 2004).

2. F. Fraser and J. Rickett, “Returns Project Gathers Pace,” May 27, 2004, 5.

3. T. Sciarrotta, “How Philips Reduced Returns,” Supply Chain Management Review (November/December 2003): 34–39.

4. D. Dubbs, “Many (unhappy) Returns,” Operations & Fulfillment 8, no. 3 (March 2001): 14–23.

5. D. Blanchard, “Moving Forward in Reverse,” Logistics Today 46, no. 7 (July 2005): 1, 8.

6. L. Langnau, “Winning with Returns,” Material Handling Engineering 56, no. 3 (March 2001): 13–15.

7. Stock, “Product Returns/Reverse Logistics in Warehousing.”

8. Blanchard, “Moving Forward in Reverse.”

9. B. Caldwell, “Reverse Logistics,” InformationWeek, April 12, 1999,

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Comments (3)
Carl Tucker
This is a very thorough article from MIT SMR.

Product returns, whether controllable or uncontrollable actually open up an opportunity for vendors to prove to their customers that they are dependable, and that the customers may feel safe to do MORE future repeat transactions.

More and more sellers are opening up online stores, this only means that returns processing will be a normal occurrence, not exceptions.

What can vendors do? They have to make sure that they're using a reliable Product Returns Management Software like RMAPORTAL. "The experiences by customers which are inherently bad can be converted into a valuable strategic opportunity" --  from
Clement Masters
Communication with the client during the return process is a tremendous opportunity to turn a bad situation into a potential client for life. Even if it is an uncontrollable return, a company can learn valuable information for product or service improvement. Many times, a clarification about the use of a product or service can remedy the return.
Carlos Aube
Product returns have often been viewed by companies as a necessary evil, a painful process, a cost center, and an area of potential customer dissatisfaction. However, say the authors, many successful business organizations have realized that an effective product returns strategy can provide a number of benefits, such as improved customer service and customer knowledge, effective inventory management, and product dispositioning.