More Than an Afterthought: Moving Aftermarket Services Forward through Intelligent Returns Management

Best practices in returns management can help you overcome the "black hole" of the returns process

Best practices in returns management can help you overcome the "black hole" of the returns process

Aftermarket services are increasingly becoming a business priority for original equipment manufacturers (OEMs) and service providers. These services represent both an opportunity and a challenge. If managed well, selling services packages and service parts can contribute as much or more profit than the original purchase, and act as a competitive differentiator. However, poorly managed post-sale services can negatively affect customer satisfaction, damage service levels and generate higher operating costs.


The primary obstacles faced by the service parts marketplace revolve around effective inventory management and balancing the cost of central and regional inventories to meet service levels requirements, such as first-time fill rates, response times, or system up-time. As the number of field techs increase, as part SKUs increase and as service levels increase, these obstacles can become more and more troublesome. These challenges are further exacerbated by lack of visibility to field parts (there is no information about which parts are over-supplied or what parts have been sitting in inventory for months) and by a lack of field technical compliance in parts returns management, caused by a lack of convenience, a lack of enforcement or both.

This lack of visibility results in two obvious problems: higher inventory levels and a need to restock service parts with more costly, newer parts instead of less-expensive refurbished parts that are currently in the reverse supply chain but which are not visible to the service provider. These problems result in expensive parts inventory management. If parts being returned aren't visible, take longer than needed to get shipped back or don't get returned at all, higher inventory levels are needed to maintain service levels.

Increasing Parts Visibility and Recovery

For service providers, increasing visibility of inbound service parts is a key part of optimizing inventory management. With improved visibility, service providers can realize results such as lower centralized inventory levels due to visibility of in transit returns and higher asset recovery rates and increased recovery rates of parts within a defined time period by managing the return event.

The expense of shipping and handling returns is the most significant cost component for service parts returns. Whether the returns transportation fee is paid by the user or supplier, optimizing shipping and service levels creates significant value. For example, switching to a low-cost ground shipping service for non-mission-critical returns and using expedited shipping only for returns that are mission-critical can reduce costs considerably.

Another challenge for suppliers is to improve returns handling, minimizing the number of times a return is touched from customer to disposition. Additional savings can be realized by eliminating call tags and by transitioning customer service representative (CSR)-based return merchandise authorizations (RMAs) to online RMAs.

Best Practices

Returns best practices follow the overall return process, starting with the online return goods authorization, through data-rich intelligent barcodes and ending with dispositioning the returned item. Key best practices include the following:

Flexible User Access

The returns program needs to be configurable to enable access by customers, field technicians and customer service representatives. Suppliers must be able to both allow and prevent return initiation by specified user types to balance convenience, cost savings and returns policies.

RMA Management

An online process is the cornerstone of a best practice returns program. The RMA is used to initiate and authorize the return process and must leverage the supplier's business rules to support existing return policies. A configurable RMA rules engine provides dual roles of gate-keeping the return process and enabling the rich data for intelligent returns visibility services. Also, any management tool must be flexible and adaptable to both mobile and fixed systems.

Label Delivery Options

Providing a variety of ways to deliver a return label to the end user is both convenient and cost-saving. Best practice label delivery options include online printing, e-mail, postcards, pre-printed as well as including labels in outbound part shipments.
Carrier Management

A dynamic carrier management system can optimize both transportation costs and cycle time requirements by selecting the parcel carrier and service type for the returns shipment during the RMA process. A best practice program supports label creation, tracking and reconciliation for the leading parcel carriers.

In-transit Processing

Regional value-added services, such as inspection and multiple sorts, improve a supplier's receiving operations and can minimize the number of times a return is touched and transported prior to final disposition.

Disposition Management

By dynamically selecting the returns destination for the return, a supplier can improve both asset recovery and minimize inventory levels. During the RMA process (or during regional inspection), the return disposition is determined based return item, return reason, supplier inventory levels and business rules.

For example, returns that are already in overstock can be sent to central distribution centers, while back-order items can be dispositioned to regional stocking locations for faster replenishment and backorder reduction. Additionally, intelligent dispositioning can forward parts directly to a repair/refurbishment depot or recycler.

Returns Visibility

A best practice returns program includes intelligent tracking and advance notification of the return status, providing visibility to the RMA and return item information through barcode scans. Visibility of the return item early in the process helps suppliers manage parts inventory, enabling suppliers to restock inventory with returned "B" parts instead of more expensive "A" parts. This visibility also provides an audit trail and delivery confirmation to outsource partners that provide value added services.

Returns Communications

Trigger-based communications can be used to improve the return process and improve asset recovery. Text messages and e-mails improve the return process by providing field techs and customers insight into the "black hole" of the returns process, confirming that their return has been delivered. These communications can be used as simple reminders to close out RMAs that will soon expire, improving the asset recovery of parts waiting to be returned by field techs and customers.

In summary, intelligent returns management provides:

  • Lower transportation costs.

  • An increase in visibility of inbound parts returns through intelligent barcodes and in-transit scans, lowering inventory levels.

  • Increased parts recovery through proactive notifications (e-mail, text messaging, calls).

  • Operational efficiencies through dispostioning and inbound visibility for receiving and processing.

  • A reduction in contact management required for follow through to return valuable assets.
About the Author: John McAlprin is vice president of operations at Newgistics, a provider of SmartLabel and direct retail returns management solutions that integrate reverse logistics, asset recovery and returns marketing.. More information at