Returns Processing Cost

The total cost to process repairs, refurbished, excess, obsolete, and end-of-life products, including diagnosing problems and replacing products. Includes the costs of:

  • logistics support,
  • materials,
  • centralized functions,
  • troubleshooting service requests,
  • on-site diagnosis and repair,
  • external repair,
  • and miscellaneous.

These costs are broken into Returns Order Management, Returns Inventory Carrying, Returns Material Acquisition, Finance, Planning, IT, Disposal, and Warranty Costs.

  • A returns processing cost is a key metric used to assess the effectiveness of a company’s return policy and procedures.
  • This cost can have a significant impact on a company’s financial performance and customer satisfaction levels.
  • An efficient return policy and the process can result in lower returns processing costs and improved customer satisfaction.

There are several factors that can affect the cost of returns processing, including the type of product being returned, the number of products being returned, the complexity of the return process, and the length of time it takes to process the return. In some cases, returns processing costs can be reduced by outsourcing returns management to a third-party provider.

Returns processing costs are typically incurred when a customer returns a product to a company. These costs can include the cost of receiving and inspecting the returned product, repairing or replacing the product, and packaging and shipping the product back to the customer. Returns processing costs also include any administrative costs associated with managing the return, such as processing refunds or issuing credits. In some cases, companies may also incur costs for disposing of returned products.

The Returns Processing Cost is the total cost to process all repairs, refurbishments, excess inventory, obsolescence, and end-of-life products. This would include diagnosing problems and replacing products.

The cost would be further broken down into different types of returns:

  1. Returns Order Management Costs.
  2. Returns Inventory Carrying Costs.
  3. Returns Material Acquisition Costs.
  4. Finance Charges.
  5. Planning and IT Costs.
  6. Disposal Costs.
  7. Warranty Costs.
  8. And other Miscellaneous Fees.

From this, we can see that there are many different types of fees that go into just processing returns. Depending on the product, different steps might be taken which could result in a higher or lower cost.

If a company outsources its return policy and procedures to a third-party provider, this could save on costs. The company would no longer need to manage the process themselves, nor would they be responsible for the associated costs.

It’s important to keep track of your returns processing cost so you can make necessary changes to your policy or process if needed. A high cost could be indicative of an inefficient process that needs to be changed. Additionally, if you’re seeing a trend of increasing costs, this could point to future financial difficulties down the road.

Related Links

Returns Management Processes Can Drive Up Logistics Costs – IndustryWeek
Return Processing Cost Definition – Operations & Supply Chain Dictionary
Reverse Logistics Magazine – The Six Hidden Costs of Reverse Logistics – RL Magazine – Reverse Logistics Association
The Six Hidden Costs of Reverse Logistics – Inbound Logistics
Reverse Logistics Returns Processing – TAGG Logistics New Homepage
Reverse Logistics – Effective Returns Management in an Integrated Supply Chain – Supply Chain Management Review
Returns Processing –