Minimizing Wasted Resources in No Fault Found Returns

Only 5 percent of returns are attributed to actual defects, while 68 percent fall under the no fault found umbrella

Scott D. Smith
Scott D. Smith

Like it or not, returns are a part of any supply chain solution. No amount of planning, testing or troubleshooting can ever fully rid your brand of the financial burden of returns. That said, there’s still quite a bit you can do to prevent returns from happening in the first place.

While there are legitimate reasons for a return—such as a defective product or a product accidentally damaged during shipping—according to the recent report, Reducing the Quantity and Cost of Product Returns in Customer Electronics, by Accenture, more than half of all electronics returns fall under the umbrella of no fault found (NFF). NFF means that, when these returned products arrive at a repair facility and are tested, nothing is found to be wrong with them. If you’re the company that just issued a refund or sent out a new device, this can be very frustrating. But to fix a problem, you need to first understand it better.

The same report found that 11 to 20 percent—depending on the product—of all consumer electronics sold will come back as a return; most likely, a majority will include a customer feedback note that reads something along the lines of “it doesn’t work.” Right away, this should raise a flag. No company could continue to do business if one or two out of every 10 products it sold was defective.

So, what’s really driving these returns? According to Accenture’s research, only 5 percent of returns can be attributed to actual defects, while 68 percent of returned products fall under the NFF umbrella, which, more often than not, get returned for free under the guise of a defective product. These products then tie up valuable resources as a technician must go through and test each one, only to find out that there’s nothing wrong with the device.

If you are going to accept a product as a return, make sure it arrives at your facility with as much actionable intelligence as possible, as this will help to expedite the repair and resale process. One reason companies have so many NFF returns is that they simply don’t know why so many products are coming back. You need to identify and control the information about why returns are happening—and then act on what that information tells you.

The easiest way to cut back on the resources wasted by NFF returns is by making sure they don’t happen at all. For this to work, you need to make the process for a customer to initiate a return slightly more involved than simply checking a box and attaching a free shipping label. It’s simply human nature to take the easy way out and opt for this method every time.

The first step is to mandate that all returns must be sent back in their original packaging. While this seems like a basic first step, you know that a product that is sent back unopened in its original packaging was never used, and therefore, does not need to be tested once it arrives at your facility, thus saving time and resources.

The next system to put in place (when applicable) is a web or app-based diagnostic program that can remotely scan a device to determine any faults or defects. This system then has the ability to push software patches, or flag a product for return and link the error directly to the serial number. This intelligence is then stored in a company database, ready to be used by a technician at your returns facility in the repair/refurbish process. However, this method only works if the product can be turned on—and can be limited by software issues that prevent the program from running—so it is not a fix-all solution.  

The most important system to have in place to not only reduce the amount of NFF returns, but also reduce the resources spent on returns, is a gated frequently asked question (FAQ) and troubleshooting website for your product. Right off the bat, having a gated system can prevent on average up to 10 percent of NFF returns. This system must be gated with a simple registration process tied to a serial number in order to help the customer diagnose and fix the product, or to capture as much data on a product as possible for use once it is returned.

Once inside this system, we at ModusLink found it to be best practice that a customer should be greeted by four questions that address the most common known issues with a product. Any more and a customer risks a misdiagnosis, any less and you are just creating unnecessary steps later on for the customer.

Selecting the correct questions is of great importance and involves closely monitoring your returns program to properly identify the most frequent performance issues your products are having, so that the four questions cover 80 to 90 percent of known issues. These questions attempt to first diagnose the defect, and then either fix the issue if possible, or if not fixable, flag the product for immediate return. There is nothing to be gained from dragging this process out into a seemingly endless stream of questions, as the key is to determine quickly whether or not the product can be fixed at home, or if it needs to be addressed in a facility.

Once this is identified, the issue can be rated by the type of fix, and therefore, the type of facility and skill set needed to fix the issue. If it is a simple issue, such as removing the device and substituting it with a new or refurbished device, then it goes to a facility with workers of a lower skillset and lower compensation level, or a customer can be sent a part they can replace themselves, as it’s cheaper than sending it back and forth. If a more involved repair is needed, it is directed to a properly trained technician who commands a higher hourly rate. This ratings system prevents the time and resources of highly trained repair staff from being wasted on simple tasks better suited to someone in a lower pay scale.

This classification system can also help determine whether or not the product is even worth repairing. If the issue can be fixed for less than the cost of a new or refurbished product, then it makes sense to repair the issue and ship it back to the customer. Conversely, if the time and material needed to fix a problem exceeds the cost of the device, it is in the best interest of resource efficiency to simply send the customer a new device, while sending the broken device to be stripped down for either parts recovery or recycling, depending on the nature of the issue.

The key is to prevent the waste of resources whenever possible. While these solutions are not meant to cover all NFF return issues, making sure to assess your current system against even these few best practices can lead to a drastic reduction in NFF returns.

Scott D. Smith is executive vice president and chief commercial officer at ModusLink. In this role, he leads ModusLink’s global sales, marketing and client management organizations with a focus on growing revenue and enhancing the company’s market position.

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