Understanding the DNA of Reverse Logistics
Author: Michael R Blumberg
A common expression among Reverse Logistics (RL) professionals is that nothing happens until a product is returned. To be more precise, nothing gets done without a Return Material Authorization (RMA). Anyone who has experienced a situation where a product just shows up on the receiving dock without an RMA knows what I am talking about. As such, the RMA process is one of the most critical elements in the management of the Reverse Logistics (RL) Supply Chain.
The RMA can be considered the DNA of the reverse logistics process because it provides all the critical information about where the product has been and the reason for its return. This information in turn provides guidance about what should happen next to the product once it has been returned. For example, should it be tested, repaired, or destroyed? It also provides information that enables the service provider to complete financial transactions related to the returns process such as warranty entitlement, adjudication, and reimbursement.
When designed correctly, the RMA function enables a manufacturer or service provider to obtain critical information required for processing the return (e.g., reason codes) and tracking labor and material costs associated with this return process. That’s why it is important for information captured in the RMA process to be linked to other corporate information systems such as their ERP, CRM, and WMS applications. Data gathered from the RMA can be analyzed to anticipate and forecast future returns. More importantly, it can be evaluated to determine the root cause of the returns. With this root cause information in hand, manufacturers can take steps to reduce returns by designing better products or improving the service delivery process (e.g., troubleshooting, remote support, etc.). In short, capturing and analyzing data about the return process will lead to reduced operating costs, enhanced service quality, and improved corporate profits.
The RMA is more than simply a transaction; it is a process that must be coordinated strategically. Indeed, products get returned for a variety of reasons at any time during the product lifecycle. By capturing the appropriate information about why the product is being returned, manufacturers and service providers can more efficiently manage back-end processes, for example by routing the returned product to the right point in the supply chain, whether it is a depot repair facility, asset recovery provider, or liquidation vendor. By anticipating returns, service providers can also take the appropriate action to ensure they have the necessary resources in place to process the returns and support the customer in a timely manner.
In summary, manufacturers and service providers are urged to place greater emphasis on the RMA when designing business processes and information system requirements related to the reverse logistics supply chain. This perspective can have a positive impact on identifying opportunities for improvement in productivity, profitability, and customer satisfaction. End-to-end integration of the RMA process and related transactions with other corporate information systems is a critical element to achieving this outcome.
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