Product Returns: A Guide to Managing Holiday Returns

It's that time of year again when retailers should start preparing their businesses for holidays returns. The holiday returns season is a very important time of year for both retailers and manufacturers. A typical retail chain will process more than 45 percent of its total annual returns volume between the first week in January and the first week in March. Manufacturers of consumer goods, in turn, will get hit with this same tidal wave of seasonal recalls and product returns about a week to two weeks later as their retail customers process and ship returns to them.

A company's ability to process this onslaught of returns during the first quarter of the year will have a big impact on its bottom line. This is true for traditional brick-and-mortar retailers and especially online retailers, many of whom will see as much as 80 percent of their annual returns during the post-holidays flood.

The key to managing holiday returns is to have a good plan in place months before the returns season begins. This plan should include the merchandising, store operations, vendor relations, accounting and supply chain teams. This cross-functional team's goal is to "think returns" and communicate with each other about their expectations and concerns around holiday returns volume and processing from the store level through to final disposition.

To help your company prepare for holiday returns, I've put together a 30-point checklist that can be used to guide its preparation. It's like Santa's list only it not about being naughty or nice. This list is about maximizing the value of goods that will be coming your way after Christmas and minimizing the cost of processing those goods.

✓ Update defective returns estimates based on sales that have taken place since Thanksgiving.

✓ Update all seasonal recall volumes by both SKU and vendor/original equipment manufacturer/original design manufacturer.

✓ Review existing processed inventory waiting to ship and reduce returns inventory as much as possible prior to December.

✓ Prioritize shipments by value and cube to reduce inventory and create space.

✓ Contact primary and secondary temp agencies and review requirements to ensure you have a ready supply of temporary labor for processing.

✓ Review your management staffing and organization chart for the first quarter. Adjust based on your revised manpower plan.

✓ Review volume estimates and plans for outbound shipping with carriers. Meet with key carriers and get commitments on the number of trailers they'll supply during the first quarter.

✓ Contact your provider of storage trailers and ensure adequate supply of storage trailers will be available if you need them.

✓ Inspect all temporary space that will be used during peak season. If off-site warehouses are going to be used, ensure they're adequately secured.

✓ Review plans for temporary space and storage trailers with your loss prevention team. All security reviews and requirements should be outlined and factored into your plan.

✓ Contact the top 20 vendors in anticipated returns volume to discuss your plans and their return volume estimates. Establishing these tactical relationships prior to the holiday returns season can go a long way toward improving the flow of goods and increasing inventory turn rates.

✓ Review manpower plans for quality assurance and inventory control. Don't overlook the support team when developing your manpower plans. You'll have more inexperienced processors so you'll need more quality assurance and inventory control people working to maintain your quality levels.

✓ Review plans with your systems team to ensure no major systems changes are planned during peak season or with any systems that directly interface with the reverse logistics management system you use to process returns. I recommend freezing all changes from December through March.

✓ Review all parts supplies and ensure procurement plans and sourcing is ready. This is especially important if your repair any returns.

✓ Develop plans for leasing temporary forklifts and other power equipment if needed.

✓ If additional warehouse shifts are anticipated, procure additional lift batteries if needed.

✓ Review shipping plans and requirements with your liquidator, who will be selling your goods on the secondary market. When left on their own, many liquidators are more than happy to let a retailer hold their goods throughout the peak returns season until demand picks up on the secondary market.

✓ Review inbound sortation and shipping plans with your internal liquidation department. It's not uncommon for special holiday items to be returned or the volume of specific SKUs to be so high that revising your return center layout will be required.

✓ Test all risers, security systems and emergency procedures in early December.

✓ Schedule preventative maintenance ASAP for all equipment and conveyor systems prior to January.

✓ Review first-quarter manpower plans by function and shift. Pay close attention to your management staffing to ensure you maintain control.

✓ Review returns plans and volumes with your recycling and waste management companies.

✓ If there's a need for special preparation instructions to be sent to all stores, branches, etc., review with operations and determine the best way to communicate those instructions.

✓ Ensure key contact information is maintained centrally for all stores, branches, customers and/or vendors. Doing so will simplify communications during the peak season.

✓ Review plans of all outsourced repair vendors. Outside repair vendors should have a plan to provide both repair techs and parts to support peak volume.

✓ Get reports of existing backlogs for all repair vendors or outsourced support areas, then work with the companies to reduce their backlogs and inventory levels to ensure they can focus on the increased returns volume the holidays bring.

✓ Review weekly communications plans with key internal and external teams.

✓ Review aged files for any claims or disputes to clear up prior to year-end.

✓ Meet with financial support systems management and review plans.

✓ Contact high-volume vendors and ask if they have any plans to shut down during the first quarter for retooling. This is where merchandising teams can often help the flow of goods.

Working through this holiday checklist, you can be assured your company's reverse logistics function will be well prepared for this most critical time of the year. Careful planning is the key to ensuring that your company minimizes returns processing costs and maximizes the value of the goods returned to your manufacturers.

Curtis Greve is the CEO of TMG Reverse Logistics and co-author of "An Executive's Guide to Reverse Logistics: How to Find Hidden Profits By Managing Returns." Curtis can be reached at curtis@grevedavis.com.