Warehouse Returns and Cancellations Management – Reasons, Problems and Their Solutions


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When you start your e-commerce business, there are some things that you just cannot escape and no matter how perfect your entire warehouse operation is, returns and cancellations happen.

No matter what the reason, you have to be well prepared to handle returns and cancelled orders at all times. To prepare for such situations, there are certain steps you must take that ensure better management of orders and increase the overall productivity of your warehouse operations.

Warehouse Returns and Cancellation Policy

You need to make sure that your e-commerce return policies are clear to understand and visible on your website for users to read. Having a dedicated section that gives out crucial FAQs about how your consumers can expect the return process to go, get insights about the refund structure, etc., increases the trust amongst your customers and ultimately encourages more sales.

You also need to build around some strict rules so that the possibility of returns reduces and people do not take advantage of your returns and cancellation offerings. By doing so you also have a better hold on the entire process of reverse logistics. Some of the things you can include in your return and cancellation policy:

  • Fixed timeline to create a return request
  • Eligibility of an item for returns or cancellations
  • Additional charges on returns, if any
  • Returns applicable only on specific payment methods 
  • Destination account of the refund to be credited

Warehouse Returns & Cancellation Management

Once you have established these basic returns and cancellations regulations, you need to now equip your warehouse for smoother, faster and efficient returns management

Returns need to be processed with care and for that, you need to have a robust returns management system that automates operations, gives real-time updates, keeps track of each return, analyze the reasons for returns and a lot more.

The methods involved in making your warehouse fully functional at handling returns with care include:

  • Optimizing your warehouse space for returns
  • Allocating a dedicated area to store returned items
  • Sorting of the returned products based on category, size, fragility, etc
  • Updating records in real-time to ensure complete accountability 
  • Dividing each return into RTO or CIR

Re-evaluating Product Performance

Now that you have managed to store your returned or cancelled items, you need to initiate a thorough examination of your overall performance. You need to take the following measures to get a good understanding of the reasons for such returns.:

  • Flag the most returned items
  • Check for customer feedback 
  • Track customer purchase pattern
  • Improve product depictions
  • Enhance response time

By paying attention to these 3 major aspects of your overall business operations, you can better your services and reduce the reasons for returns and cancellations in the long run. 

Now that you have understood the best possible ways to tackle your returns and cancellation, you need to also grasp the steps involved in completing the entire process as well. 

Cancellation of Products

Starting off with cancellations, it can be initiated either by the customer or by the seller. There can be a number of reasons to cause either of the two to cancel an item. 

For sellers the reasons for cancelling an order can be:

  • Item out of stock
  • Issue with the quality of the product
  • Errors in pricing information
  • Inability to deliver at the given location

On the other hand, cancellations done by customers can be caused due to:

  • Order placed by mistake
  • Item no longer required
  • Found a cheaper option
  • Wrong size or quantity ordered

Whatever may be the reason, but  each time a cancellation request is received, your warehouse staff initiates various actions depending on the status of order processing which include: 

  • If the order cancelled was not yet approved, it is directly removed from the list of the pending orders.
  • In case the order was approved but the picklist was not generated then that order is moved to the cancelled list.
  • If the cancellation request came before the invoice was generated, a part of the order is eligible for cancellation or some orders in the picklist can be cancelled by automatically updating the invoice and cancelled items or orders are Putback.
  •  If the cancellation request comes after the invoice is generated but before manifest is produced, the user has to putaway picklist item in the system and generate a new invoice.
  • In case the cancellation request happens post the manifest was generated, then items are considered to have exited the warehouse and this is when cancellation request turns into a return request, followed by the process of returns management.

Return of Products : Types

Returns can be of majorly of 2 types, return to origin or RTO and customer-initiated returns or CIR and these returns happen when you sell either from a marketplace or your own website respectively.

Following are the ways by which returns are processed depending on the type of return.

1. Return of marketplace orders

In the case of marketplace oriented returns, the e-commerce warehouse management system (WMS) taking care of your entire operations is updated via market API and an RTO initiated. Now, most RTOs are classified in the following return types:

  1. Immediate Reship and Return: In this type of return, a replacement order is created immediately when a return request is raised and a new SKU is mapped against the old one. A courier manifest is signed and the returned item is received later.
  2. Reship and Return Later: Opposite of the first process, in this return type a new item to be delivered is mapped against the old one without focusing on the item to be returned.
  3. Reship post Return: When a return request is raised for this type, the item to be returned is first mapped and only after a courier manifest with return confirmation is signed, a new order of the same item is created with a new SKU against the old SKU.
  4. Return and Cancel: This process does not require a new item to be sent out to replace the returned item, rather complete cancellation of the purchase. In this type, once the returned item is received a refund is initiated and the entire order is cancelled. 

2. Return of orders from Website

 If you sell from your own website opting the Direct to Consumer trends, the method of returns becomes CIR or customer-initiated returns, and in this method, returns are updated through the API of your shipping provider. 

Using the method of CIR, returns may be picked up by logistics partners and updated by the seller in their respective order management system. Another less popular method of CIR is when the customer ships the product back to the seller and gives detailed information about the return via mail.

Just like RTO, CIRs are also distinguished into the same 4 types. 

3. Return of order directly to Warehouse

When you choose to direct your returned item back to your warehouse, you have to be fully aware of some of the inclusive and extra expenses involved along with any specific procedure that may need to be followed. 

In case of such returns, the order is usually cancelled rather than returned and is putaway in the same way as it was sent out in the first place after going through another quality check. 

Performing all these various tasks and methods can help you achieve greater results and minimize your returns in the long run, but managing each of these tasks all at the same time can be a real challenge, especially when you have manual dependencies.

But with the right returns management solutions by your side that offer complete automation of tasks, you get to improve the speed of each process exponentially, deliver better services to your customers and achieve higher growth for your e-commerce business.

Unicommerce is a one-stop solution for all your warehouse management needs. With technologically advanced and analytically superior services, you get to experience the true potential of your eCommerce business. 

Take a step forward in providing your business with the best support to accomplish higher sales, increased productivity and maximized profitability. 

Do read the other blogs in Prerequisite of Warehouse Management Series:

  1. Prerequisites of Warehouse Management: Vendor Onboarding and Procurement.
  2. Enhance the Operations of the Warehouse with Order Picking: Process and Methods
  3. Boost the Efficiency of Warehouse Operations with Packing and Dispatch

Also, do check out how the leading fashion brand reduced returns and cancellations and achieved 30% growth in sales.

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