November 28, 2006
Volume 2 Issue 89

Reason Codes: How A Food Software System Does Return Management  

   When asked what a return is many people would say that it is just a cost of doing business and as we said before usually gets pushed to the side to end up getting thrown out. What many people do not know is that your returns are actually telling the story of your business. If you can track exactly why your returns are happening you will be able to better understand what you can do to prevent them. One commercially available food software solution does a great job in tracking why a returned occurred and also shows that you are losing a lot more than the $4.42 it takes you to process the return.  

   The food software solution handles returns by attaching a mandatory return reason code to the returned product. These codes will help you track exactly why your product is being returned.

As you can see from the above picture here are just some of the reasons why your product may be returned. These reasons are the backbone to effective return management. With knowing why your product is being returned you can now run reports by customer, by item, and even by return reason. These reports not only tell the story of the weak points of the company but will also show how much $$$ you are losing.

   This first report is our return reasons broken down by a specific customer:

As you can see the report shows all of the returns listed by invoice number and invoice date that occurred for our made up customer Aftdeck. Let’s take the highlighted item as an example.  The reason for the return is 10. If you go back to our list of return it shows that 10 means the product is out of code. Out of code returns are one of worst kind for you food guys. Not only do you have to pay the processing cost talked about in Issue 88, you have to throw the product out and loss the gross profit on it. (We will be talking about losing your gross profit next week) The weight column is the amount in lbs that was returned and the amount column shows how much the customer bought the amount for.  This report is a great tool to have if you have a customer that is constantly returning products. You can now have a breakdown of why the customer returned product. This is a great first step in trying to fix this problem. We have said countless time how important customer satisfaction is to a company. A great way to show your customers that you care is get them to return fewer products. A customer that is constantly returning product will sooner or later get fed up with it and not only will you be wasting money on returns you will eventually lose the customer.    

   The next report that you can look at and would be very beneficial to have is the return reason report broken down by item:

You can see all the occasions that the item was returned and the reason for their return. This report also gives you the total weight and total amount sold that is being returned. Let’s say that this 12oz T-bone steak continually is getting retuned to you. To figure out why this is, you run this report and see which return code occur the most. In this particular example return number 12(or Customer didn’t order) happens on 2 separate orders. You now can go to your order entry and picking people and ask them to explain why. Returns tell a story of your company, knowing where a problem is occurring will give a huge head start in trying to fix it.   

  The final report that we will be talking about is the return report that is broken down by the reason. This report gives you a complete overview of all the returns in your company. This is a great report to run to see weak points in your company and also a really good way to find out exactly how much all your returns are costing you.

This report gives you a summery of all the return reasons in the time period that you choose. Let’s just say this is for the month of November. Each reason tells it own story but let’s look at the ones that occurs the most. It looks like in the month of November that “out of code”, “Customer didn’t order”, and wrong product (which is wrong product sent) were the 3 that happen the most. Given these facts you can conclude that you may have a product picking problem. Almost half of the returns are from out of codes and wrong product be sent which tells us that the warehouse is not rotating his product and not looking at the product before it goes out the door or maybe this is a vendor problem.  In Issue 77, Issue 78, and Issue 79 we talked about getting your workers to take ownership of their product though Gainshareing. If you are using the Gainshareing system it should be very easy to find out who is at fault and you can address the problem with that person. You can now run a report that shows all of the items that have either out of code or wrong product reason codes and find out who is reasonable for those products. Since in the Gainshareing system a person is responsible for specific products this should he easy to found out.  

In next week’s issue we will be explaining the hidden costs incorporated with returns. We will be showing how one return can cost you about $3000 in gross profit.

Using a Relevant Software Package To Handle Returns Will Help Reduce the Costs of Returns

To Unsubscribe to this newsletter please respond to email with "UNSUBSCRIBE" in the subject line.

Thank you.