Return Processing Cost

Posted in Operations and Supply Chain Terms, Total Reads: 403

Definition: Return Processing Cost

Return processing costs are the costs involved with returning of the product by the customer to the company. Since the movement of goods in this case follows an opposite direction it is often referred to as the reverse logistics cost. These return costs form an important component of the business as sales especially for the e-commerce industry. This is because if the return process is tedious, it can lead to severe dissatisfaction among the customer leading to loss of future sales.

In extreme dissatisfaction it can also lead to the maligning of the image of the company, if the customer chooses to vent out his or her dissatisfaction on a social networking platform. Thus, it is utmost essential to ensure that there is almost no or minimal product shortages while ensuring outstanding customer services when the product returns processing is carried out for inventory stock.

For successful management of the returns process, equal attention must be paid to all aspects of the course of sales cycle. The part of the supply chain which deals with the returning, exchanging, repairing, re-marketing and refurbishing products is called reverse logistics. A number of companies tend to lose out their focus on the returns process cost due to increased focus on sales of outgoing orders thus impacting the revenue. What is essentially required is an efficient return process integrated in the complete end-to- end process.

A number of businesses tend to overlook on the return process aspect of the sales cycle, but it essentially acts as an additional point of contact with the customers, thus posing an opportunity for creating a positive experience for the customer. The returns policy has two major goals, first is to make the process of return as quick and painless as possible, second is to minimise the returns by following best industry practices.


Hence, this concludes the definition of Return Processing Cost along with its overview.


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