Executive Summary
This report examines the feasibility of two potential solutions for the return policy of Emac. The literature-based research methodology was aimed at evaluating of return policies of other companies and determining patterns in customers purchasing activity. The results of the research suggested two alternatives: A) accept product returns and B) charge a restocking fee. The report finds that, while both alternative solutions are being utilized by different companies, the second choice offers more advantages for the company than the first one. It is therefore recommended that Alternative B, charging a restocking fee, be chosen for the return policy of the company.
EMAC
Emac Complements is a manufacturing company headquartered in Spain. It the leading producer of profiles and trims for wall and floor tiles and structural joints, as well as, expansion joints for large projects (EMAC, n.d.).
Three distribution facilities are located in Italy, Africa, and the United States. The new office in Miami, Florida, was recently opened to offer better service to their American customers and reduce shipping costs. Emac America rapidly grows in the USA and Latin America gains new clients and satisfies more customer needs. Emac Complements promises to deliver the highest quality of its products. The company does not accept returns after the products were shipped out of the company’s distribution centers. The quality of returned materials cannot be guaranteed; therefore, product returns might hurt the monthly sales revenue (EMAC, n.d.).
Problem Statement
Emac America is rapidly expanding its customer base therefore the adoption of the new business culture is necessary. The company needs to develop a viable solution regarding return policy that would optimally serve the clients and would not undermine sales revenues. Accepting returns has become a problem for the company. Sometimes the materials are being returned after six months from the sale or in unsatisfactory condition. These returns have significantly diminished sales revenues and become a financial burden for the company.
Terminology
“Restoking fee” – money charged by a seller for a non-defective merchandise.
Report Overview
This report was created to help the General manager to find the best solution for the customer demand and the company. The general manager delivers this assignment to the sales, financial, and warehouse departments, to investigate different alternatives to determine the best recommendation for the customer and the company. The two alternatives were researched Alternative A No accepting returns Alternative B Charge a restocking fee.
The general manager’s criteria by which to judge the alternatives were as follows: re-stock fee percentage, time frame to return the product, proper packaging, and shipping, product condition, reduction of returns. Research methods included previous job experience a lot of distribution companies have a return policy, customers purchasing activity (help to determinate how often the customer purchases and customer analysis how often the customer return and reason. An evaluation of the two alternatives revealed that Alternative B’s restocking fee should be recommended since it offered many advantages that alternative A does not offer to the customer and the company.
Overview of Alternatives
The following two alternatives considered in this report meet the general manager criteria:
Alternative A
No accepting returns to Division three and four is no issue since this group is the architect, general contractor, and designer and they can use our product in other future projects which may help to increase sales since they will need more of the product to finish the projects.
Alternative B
Restocking fee is a proportion of our product price, subject to the type of item and the condition in which it is returned. We are not obligated to receive returns outside of the window time frame, but if we do, we may charge a restocking fee following the guidelines outlined in the table below. The sales department need to let the customer know in every sale about our new policy about the returns. RMA Department will inspect the material before process returns.
Criteria
The general manager would like the following standards would be used to evaluate the possibility of each alternative:
- Fee-Which will be the re-stock fee percentage? The general manager wants to keep the customer satisfaction by trying to accept the returns, also minimizing the returns.
- Time frame-What will be the specific time frame to return the product? The general manager wants a short period for the customer to return the material to our facility.
- Shipping Cost – Who will be responsible for proper packaging and shipping costs for the return of the material to our warehouse? The manager would like that the customer is responsible for proper packaging and shipping costs.
- Product Condition- The manager wants that the product arrives in the original package as we shipped originally and a good condition so can re-stock the product.
- Reduce returns- The new returns policy will help to reduce the customer returns since they paying the freight and material will be inspected for the RMA departed to approve the returns
Research Methods
My research includes previous job experience a lot of distribution companies have a return policy and RMA department, the phone call with the customer some of the customers surveyed how they would like to process with the return to resolve this matter. The Internet researches about the return policy and RMA process, internal customer analyses, customer purchasing activity.
Findings and Analysis
While both Alternatives A and B offered good alternatives for the customer, the company and the manager demands Alternative B offered many benefits to reduce the returns, considering all the costs that the returns may cause to the customer if the RMA department approves the return after the inspection the time frame. A restocking fee is a percentage of the item’s price, depending on the type of item and the condition in which it is returned. Note: You are not required to accept returns beyond the return window.
Another issue that had to be considered is the sales expenses which are covered with the re-stocking fee in alternative b in alternative A did not offer an alternative to the customer, it was the potential of losing a customer for dissatisfaction for the sales department. Make problem resolution painful. Policies and guidelines are great for ensuring that employees comply, but a customer with a problem doesn’t care about your policies. They just want her problem fixed (Haden, n.d.). I give more problem to a customer instead of a solution that customer will never come back to us and will be losing no only one client also a future customer
For a graphic depiction of the findings and analysis, see Figure 1 below:
Figure 1: Graphic Analysis of Findings.
Recommendation
It is recommended that the sales team start developed the new return police the 25% percent restocking fee, plus the shipping cost and the approval after the inspection for the RMA department and the time frame for the return. This alternative is a good solution for the company and the customer will evaluate better it is worth in return the material.
References
EMAC. (n.d.). Company. Web.
Haden, J. (n.d.). 8 Guaranteed Ways to Drive Customers Away. Web.