In today’s volatile economy, every business is looking for ways to cut costs and protect profitability. For wholesale distributors and manufacturers, returns management is often an overlooked area where inefficiencies can quietly erode margins.
As the U.S. economy heads toward potential downturns, distributors should anticipate increased returns as end customers focus on reducing costs, optimizing inventory, and tightening their own supply chains.
Returns—whether due to over-ordering, defects, or the need for quick inventory turnover—can have a serious impact on your bottom line. With rising pressure on cost of goods sold (COGS) and mounting economic uncertainty, the time to assess and improve your returns processes is now. In this article, we'll explore several key indicators that could suggest a growing need for better technology and processes to manage returns, warranties, and repairs more profitably.
The Growing Pressure on Wholesale Distribution
Historically, economic downturns push customers to tighten spending and demand more value from their suppliers. Distributors must prepare for fluctuations in customer demand and an influx of returns, which can dramatically increase operational expenses. As the volume of returns rises, the inefficiencies in how they are processed—whether through added labor costs, missed credits, or warehouse disruption—become more apparent.
Wholesale distributors and manufacturers often overlook the real cost of these processes, treating them as inevitable. However, better management of returns can significantly reduce these operational expenses and boost profitability. Here are three indicators that could point to a costly returns management problem within your business.
1. A Growing Customer Service Team
As distributors grow, they may see the need to expand their Customer Service Representative (CSR) teams. Many assume that handling returns, warranties, and repairs is just a small part of their CSR’s responsibilities, but as returns grow in volume, this assumption can lead to inefficiencies.
Distributors often add CSRs to handle returns without considering how better processes and technology could alleviate the need for more headcount. Growing a CSR team to manage returns is a reactive, and often expensive, solution that cuts into profits.
Tip: Consult with your CSR team to identify how much time they spend on returns, warranties, and repairs. If a significant portion of their day is spent on these activities, it might be time to track their time and assess whether your returns processes are costing you more than you realize. Simply adding more staff to handle this problem is counterproductive when smarter, automated systems could reduce the need for additional labor.
2. Increase in AR/AP Disputes
Another sign of eroding profitability can be found in the increase of Accounts Receivable (AR) and Accounts Payable (AP) disputes. Unclear returns policies, missed vendor credits, and manual tracking often lead to a surge in financial discrepancies.
Distributors that lack streamlined return processes may find themselves offering excessive customer credits or write-offs, all while chasing down vendor credits that may never materialize. Worse, without a proper system in place, distributors may lose track of returns altogether, leading to missed opportunities for both vendor credits and potential resale of returned products.
Tip: Review your financial reports for an uptick in customer credit adjustments or disputes with vendors. The inability to resolve these disputes promptly can cost your business significantly, eroding margins and tying up valuable resources.
3. Increase in Excess or Dead Inventory
An influx of unplanned returns can wreak havoc on your warehouse operations or delivery fleet. When returned products arrive at your dock without clear instructions or visibility across teams, the result is often an accumulation of dead or excess inventory.
Distributors may accept and warehouse returns with good intentions, but without a clear process for what happens next—whether the products should be sent back to the manufacturer, flagged for resale, or disposed of—this returned inventory can quickly become a financial burden.
Tip: If your warehouse team frequently finds themselves dealing with unexpected returns or excess inventory that sits idle, it may be time to assess your returns process. Look for systems that connect your warehouse, sales, and customer service teams so that everyone is aligned on how to handle returns efficiently.
Streamlining Returns with Technology
These indicators—growing CSR teams, AR/AP disputes, and excess inventory—are all signs that your returns process is costing your business more than it should. Fortunately, with the right tools in place, you can reduce the operational burden of managing returns, improve customer satisfaction, and protect your profitability.
Continuum is the only Returns Management Software designed specifically for wholesale distributors and manufacturers. Our solution connects all departments—from customer service to finance to warehouse management—through streamlined processes, real-time communication, and full accountability. By automating returns workflows and integrating with your existing systems, Continuum helps you recapture revenue lost to inefficiencies, missed credits, and unnecessary labor.
Now is the time to rethink your returns management processes. As economic pressures mount, distributors and manufacturers who proactively streamline returns, warranties, and repairs will be best positioned to maintain profitability in a challenging market.
Want to see how Continuum can help you optimize your returns management process? Request a demo today.
Comments