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Enterprise Resource Planning (ERP) Systems - Why not forgetting the 'returns' process is so important.

One of the major selling points of an ERP system is its integration across departments and modules. The promise of a relational database is that you can share customer, product, pricing and interaction data instead of having silo's of information. What is not advertised is that if one person makes mistakes in one department, if the process isn't designed and implemented correctly, this can impact several other departments.

Take our real life example: We saw warehouse receiving people entering serial numbers incorrectly due to the receiving process being badly designed.

The result: Questions and Re-work!  Reports not working correctly!  What's the real serial number of this asset? Has the service contract ended? What is the cost now? Which item is it? How does the salesperson look for this item now? What about if a customer rings in with the old serial number when it is re-used at another client site?

Additional hidden costs:  Training is now needed to help people understand the impacts they can cause in the new ERP environment, but this training is often implemented too late.  It's simply easier to blame the system for these faults, and not fix the root cause of the problem.

What are returns and Return Material Authorisations (RMAs) used for?

The system functionality of 'returns' are used for a variety of business process reasons.  Ones we have seen include:

  • simply returning products back to stock;
  • correcting financial transactions;
  • crediting customers for a service not rendered;
  • disconnection of a telecommunication service;
  • exchange of products;
  • repair or refurbishment of products;
  • disposition of products;
  • repair or refurbishment of product components;
  • repair or refurbishment of spare parts, and;
  • recall of defective components.
  • return of Spare parts (defective or usable), recovered by the field technician, are consolidated, repaired and returned to inventory at the warehouse for redistribution.

Returns are not a single process and can result in different outcomes and actions. For example, some returns may trigger a receipt of goods and a credit to a customer, where some may simply credit the customer with no receipt of goods.


Triggers for the start of a returns process can be started by different roles in a business and so need different system modules (i.e. telesales, service).   Often this requires system configuration of many return types both at header and line level. In addition functionality from either Telesales, Service or Order Management can trigger RMA's.

A Generic Returns Process - It's not that simple:

In general, the returns process consists of the following major steps (refer to the graphic in this article);

  1. Return Material Authorisation (RMA) Request;
  2. RMA Creation (header and lines);
  3. RMA Authorisation;
  4. RMA Communication – with customer, salesperson and courier/shipping company;
  5. RMA return line to receipt;
  6. RMA Receipt;
  7. Product Inspection;
  8. Product Decision (refurb/disposal/sale/part recovery);
  9. Credit customer if credit is due.

Channels for Returns - Why do companies get returns?

When we've been out at client sites, the variability of returns channels is pretty big.  Channels for returns are really interesting, and come from:

  • Damaged stock returns (when product arrives at a client site and is damaged in
  • transit);
  • Dead on Arrival returns (when product doesn't work after the client has received
  • it);
  • Returned loans (product that has been loaned to a client for a short period);
  • Lost Sales;
  • Rental returns;
  • Repossesed equipment (when the client goes into receivership, or doesn't pay rental);
  • Exchanged item return;
  • End of Contract item returns;
  • Return of Professional Service lines - for refunds;
  • Returns created to credit a customer's account for a water, gas or electricity bill;
  • Return of demonstration equipment, and;
  • Return of spare parts.

Reverse Logistics is Overlooked

Questions answered by our customers have uncovered one simple fact. The returns process is left until last during ERP implementations by Supply Chain Consultants. As a result, reverse logistics;

  1. Is sometimes put aside to make way for getting the sales process right;
  2. Doesn't have the resources assigned to it that it should;
  3. Is neglected in ERP implementations;
  4. Lacks the business management support that it deserves.

Ask yourself - Why do the returns processes always get left until last in ERP implementations?

  • Is it because they are not seen as important by a business?
  • Is it because they are seen as standalone?
  • Is it because there are no dedicated professionals in a business who manage the returns processes?

So heed our warning - Beware of neglecting returns.

It is a misunderstood, neglected and complex area of the supply chain.  If you approach an ERP implementation project like this, returns will come back to haunt you. They will bite back if you don't design your items, BOM's, Install Base setup and sales processes with returns taken into account, with a dedicated team to build the process.

Oversimplification

At two of our audited clients, they had in place a 'one size fits all' returns process.
Users of the system were transacting multiple returns processes in the pre-ERP business environment using paper systems and the telephone. They were trying their best to continue as they did without a system, but fudging the new ERP system as a result.

Overly complex

At another of our clients technical consultants had been used during the implementation rather than functional consultants. The developers had designed a process using flexfields to capture return details such as serial number and counter readings. What the technical consultants didn't know was that these are fields that are readily available in the standard ERP system. The result of bypassing standard functionality like this is user confusion and other issues such as:

  • Staff working out that something is wrong, but because of their lack of ERP knowledge can't put their finger on what it is;
  • We saw Custom functionality designed to bypass standard ERP system rules in Sales Order Management. Once you start to bypass standard functionality, you start to create viral problems for yourself, for other modules (particularly install base and service) and ultimately for Finance ($$$$$);
  • Decreased supportability. The system becomes difficult for the front line ERP support team to help you, as it takes a while to work out what has been done by the developers;
  • Decreased maintainability:  More complex upgrades and patching.

So please, if any of the above rings true for you - call us, we're itching to help resolve issues like this, because we've helped out with lots of other clients - and they are now happy!

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