BILL LEE: Measure Twice, Cut Once
Eight steps to help your company reduce expensive— and unwanted— product returns.
BY: BILL LEE
Are returns a necessary evil in the building supply industry or is there something we can do to reduce returns as a percentage of sales?
I believe the answer is yes to both questions. As is necessary with anything you wish to manage more effectively, you must begin measuring how you’re currently performing in order to establish a benchmark. This is especially true with respect to returns. If you’re not measuring returns, I can just about guarantee you’re not managing them as well as you might.
As I travel around the country, I see dealers controlling returns in a best-case scenario at somewhere around 2% of sales and in a worst-case situation, as high as 8-10% of sales. Our research also shows that product mix definitely plays a role, i.e., full-line yards with a good millwork mix generally have a higher rate of returns than straight framing yards.
Like anything in business, management must make a commitment to doing a better job of controlling returns. The following are several suggestions that our most successful clients have found to be effective.
1. Visual verification
Insist that salespeople visually verify the accuracy of information when they punch up orders at the point of sale. By visual verification I mean to pause for just a moment before punching up the next item to make sure that the item description that appears on the screen is what was intended. It’s easy for salespeople to accidentally hit the wrong button on the keypad, and when this happens, the wrong material could end up on the job.
2. Read orders taken over the telephone back to the customer
Just like mail-order houses do when you place a credit card order over the phone, ask your salespeople to take the extra time to read back the order.
3. Staple handwritten order to computer-generated order
Several dealers I know use this procedure. A third party—usually a member of the office staff who is highly attentive to detail—then compares the handwritten order to the computer-generated order for accuracy.
4. Check each order for obvious omissions
It’s easy for a salesperson to omit easy to-overlook items like sill insulation or thresholds when writing up an order. Some dealers have significantly reduced additional trips to the jobsite by asking another knowledgeable employee to scrutinize orders for obvious omissions.