different sizes to assure a fit and then return all but one.
Handling this kind of volume can be challenging, but if
done well, returns can actually benefit a company by providing an opportunity for positive interaction with customers. Returns can also be a valuable source of information
that a company can leverage to optimize its supply chain.
“Returns, often considered a problem, are actually a
valuable resource for gaining insights that can be used to
improve the customer journey,” says Stef de Bont, founder and CEO of 12Return, a company that specializes in
returns management software. “If done well, returns can
really be turned into value for you and your customer.”
ALL RETURNS ARE NOT CREATED EQUAL
Part of what makes reverse logistics so difficult is that not
all returns are handled the same way. The determination
of how to treat a return largely hinges on the item’s condition, where it is in its lifecycle, and the reason why it was
returned in the first place.
Products in the early stages of their lifecycles include those
that are returned simply because the customer changed his
or her mind. Items returned to a store in perfect condition
can be re-entered into inventory and put back on store
shelves. Often, though, product is returned with damaged
packaging. (Sometimes this is not the consumer’s fault, as
the packaging for many items must be destroyed simply to
open them.) In these cases, the product will need new pack-
aging or a change to the existing packaging, which might
require it to be sold at a discount.
Other products in the early stages of their lifecycle are
returned because they are damaged or not working. In
these cases, the items need to be evaluated and, if possible,
repaired. In some cases, the products may be returned to
stock as refurbished goods. In other instances, the products
may have to be sent back to the original manufacturer for
Mid-cycle items are those that are returned for warranty
issues. These typically need to be replaced or repaired and
then returned to the customer. Retail stores generally do not
handle these sorts of claims, but certain distribution centers
will. In some cases, the repairs may be done at the facility;
in others, the items will be returned to the manufacturer.
End-of-life returns are those where the product is beyond
repair. When possible, these items are typically broken
down into component parts. The individual parts may be
reused for refurbished goods, or they may be recycled. In
As of Nov. 7, 85 percent of all the Galaxy Note 7 “phablet”
smartphones sold in the U.S. had left U.S. consumers’
hands, according to Samsung Electronics, the maker of
the device that was recalled in September and discontinued in October after repeated incidents of the phones
catching fire due to overheated batteries. To encourage
customers to return the remaining phones, Samsung said
at the time it would issue a software update that would
limit the phone’s ability to charge beyond 60 percent
power. Virtually all of the returned phones had been
exchanged for new devices, Samsung said. The recall covered 1. 9 million phones in the U.S.
The stunning chain of events that within two weeks
turned what was arguably the most anticipated product
launch in Samsung’s history into a $5 billion debacle
and resulted in a black eye to the company’s reputation
has seemingly run its course. If Samsung can take any
solace, it’s that the returns process itself appears to have
been competently handled, according to Irv Grossman,
a pioneer in the design of reverse logistics programs for
the wireless communications industry and executive vice
president of the Americas for Atlanta-based Chainalytics,
a supply chain engineering and consulting firm.
In a phone interview, Grossman said Samsung has
shown evidence of a fast response to product issues
by matching the products with their owners, a process
known in the reverse logistics trade as a “precise recall,”
because there was already so much information connect-
ing the customer to the phone. The returns effort likely
was aided by the wireless carriers, whose level of involve-
ment was much higher than it would normally be in a
consumer product recall, Grossman said. The vast major-
ity of U.S. phones were returned to the carriers because
that’s where most of the devices were bought. Neither
Grossman nor Chainalytics was involved in the recall.
In published reports, Samsung described the use of a
special fireproof kit that would have allowed customers
to return the phones via air directly to the manufacturer.
However, shortly after the recall, the U.S. Department of
Transportation issued a ban on carrying the phones aboard
a commercial aircraft or classifying them as cargo. Instead,
the returns have moved via truck. Samsung U.S. executives
did not respond to requests for comment on this story.
In some customer returns scenarios, manufacturers
could refurbish the defective items and sell them back
into secondary markets. Given the nature of this recall
and the adverse publicity surrounding it, that is unlikely in
this case. The Note 7 is too unstable to be sold as new or
nearly new, Grossman said, and will either be harvested
for parts or recycled into metal.
For a while, though, the phones will sit on a warehouse
shelf in a stable state until Samsung determines how to
dispose of them.
Samsung’s total recall