A returned product is often the first signal to a company that there might be a problem with their product. It can be just a single item, or an avalanche in the making. To avoid the avalanche, early inspection and notification often can keep manufacturers from continuing to produce a faulty product. Or inspection can determine a tainted product, potentially triggering a recall before customers become injured and things start spiraling out of control.
These become strategic roles for a modern warehouse to play, yet are often overlooked. At minimum, a warehouse operation should be able to determine that the product is faulty in some way and then route it to a facility that can deal with it. At the high-end, a warehouse operation can have a fully functional Return and Repair Center, or provide Recall Management (not the same thing, though there are obvious functions in common).
In addition, WEEE standards dictate having a return/recycle capability for many manufactured products, and brand manufacturers often turn to third parties in the local market to assume this task. This creates contracting and billing requirements between these entities.
These two processes, with their many scenarios, may require software that can support the business.
Warehouses that manage returns can be both third parties as well as part of a manufacturing or repair center facility.We won’t cover the entire Return Management process in this article, but will focus on the warehouse aspects.
Authentication of Genuine Product
Today many firms produce various brand products. Other firms may also produce branded products that might not have been produced by your firm. In addition, more and more counterfeits are showing up as returns or requests for repair from a retail channel. Before acceptance for repair, refurbish or refund, these items should have labels or serial numbers that are easily scanable and verified as authentic, as well as indicating the proper source.
Creates a Return Material Authorization with assigning of the proper codes for the RMA, can link to the proper work flow for action such as refurbish,quality diagnostic, scrap, proper disposal methods, recycle, etc. During Receiving a product code is applied to the type of product/process (i.e. stock item, service item, etc.)
Inventory policy and accounting, as well as location management. It won’t do to put items for repair in the same locations as new merchandise. Busy workers often can place the wrong items in bins, since they do have the same item numbers.
Receiving and Routing
Receiving and physical routing instructions.
For items being repaired, the system needs to assign some type of work order.
Labor and its proper charging of work hours, and assignment of skilled labor.
Repair centers are often like mini manufacturing centers. Not only do they have their unique workflows within the operation, but they can call on resources within the larger warehouse — orders, pick and delivery, to the repair, etc. If parts and material are ordered for repairing an item, there are rules around allocation of new vs. used parts; and once an item is repaired, how it is potentially restocked: ‘like new’for sale, or returned to the owner and charged to the warranty issuer, brand manufacturer, retailer, etc. Charges can be fixed-price or labor based. So that Labor Management software you might have bought with the WMS can come in handy here. It should also include a costing/billing module.
The warehouse returns module can leverage a services solution if it includes the service and repair modules (some service management solutions focus on service parts planning and are not full service life cycle solutions).
Often the warehouse is a routing center into another entity, so receiving and accounting for the product and then tracking its routing may be required to assure delivery to the proper entity. This need is most common and unautomated, and is the source of too many paper trails, phone calls and hassles.
Although many people view recalls as ‘just reverse logistics’ or just returns, the challenges can be far more complex.From a legal, industry and multi-party, and potentially government regulatory process perspective, there is a lot going on. Interestingly, we do not see a lot of software for managing the whole process. We suppose that often the expertise is not so present in the product company, especially for certain types of products that are Food or Pharma, or even Consumer products (toys and electronics). The methods to provide logistics support (from retailer, dealers, or consumers), to possible government agency requirements can require a level of expertise or capability not present in the firm (or its software).Consultants are often brought in to manage the recall process, due to its complexity and regulatory implications.
Whether turning to third parties or managing the process yourself, the warehouse is the ‘first line of defense’ in recalls, and so the appropriate technology and employee training needs to be in place in order to manage the proper procedure and protocols.
Specific umbrella of recall.
Product instructions and work flow. Some type of inspection activities may be required, and how the product will be routed in the process for quarantine, etc.)
Serial, Lot, Batch become extremely important; labeling/relabeling.
Compliance and government reporting as well as internal quality reports; integration to customer, accounting, etc.
Since the warehouse is the collection point of recalled items, providing visibility and status and potentially linking to other systems.
Assurance of skills match to assignment, since certain goods returning may have special procedures and paper work.
Recalls often require industry-specific warehouse domain expertise. For example, quarantining the recalled material from other batches that might be in the warehouse, and its proper, legal disposal, are issues specific to Pharma/Medical supply products. The FDA and the manufacturers are quite specific about what needs to happen and how to account for these, so that these products don’t wind up in the national water supply, contaminating drinking water, or in the hands of the black market.
Food recalls are also a big issue. Often a grocer will throw food out and claim a certain volume, vs. actually returning the product. Again, quarantine is important, but so are the charge backs. Today many grocers just allocate a certain percentage of costs (and charge the food and beverage company) for expirations, damaged material, etc., and therefore they are not motivated to address the issue. This makes recall management more difficult, especially when tracking the affected customer base, the affected lots and batches, and the cause of the problem.
As mentioned earlier, in some consumer categories such as electronics, one has to not only deal with the affected module that is recalled, but the workflow of the rest of the product – how to dispose or recycle these? Since there is ‘big business’ in recycling in the electronics industry, this is not a trivial capability, if you are in the Electronics Recall and/or Returns game.
Records management and accounting also vary. In B2C environments, customer level data and item returned are critical, so that the company can refund the customer. Recall systems, in total, do a lot in managing customer level data to assure notification and product collection (depots, mailers, etc.). Integration between the warehouse receipt and the customer data is the key here.
Disposal is an interesting challenge, since accounting for items, not only financially but also following and reporting various compliance and regulatory procedures are required. Again, these vary by industry.
Most of the buzz in recalls is about data management and auto/id, but the real workhorses are quality, logistics, and customer service in the actual management of the processes. We would like to see more attention placed in the Recall System. Many solution providers have most of the components for managing the process, but without a roadmap for the Recall Management process, essential functions will naturally be missing.
For more Warehouse Management technology topics in this series see:
3PL accounting and invoicing requirements – Part One in this series
SaaS vs. on-premises solutions in the warehouse – Part Two in this series
Vertical/Industry functionality in the warehouse – Part Three in this series
Service Management – Part Five in this series
Other recent Warehouse Strategy articles:
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