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How Aldus handles returns.

"This is really the only industry I know that allows its resellers to send stuff back unconditionally," says Dave Collings, director of manufacturing at Aldus Corp. And because distributors wield so much economic clout, he adds, most companies routinely issue a stock balancing credit for virtually any product that shows up on the loading dock. "Even if we didn't sell it to you, we'll take it back," he says.

Returns can become an invisible but fairly important drain on profits, Collings notes; worse, returns typically require extra paperwork and complicated coordination among sales, finance, and production employees. (At one point, he says Aldus was spending more on custom programming to process returns than to build a new order fulfillment system.) To keep the cost of returns under control, Collings offers several suggestions:

* Minimize channel inventory: Aldus carefully monitors sell-through and reseller inventory levels, in part to minimize the inventory it has to take back when an upgrade ships. "We got burned three years ago with a new product release and wrote off millions of dollars," he says. Collings' goal now is just two weeks of channel inventory at the end of a product's life cycle.

* Take control of the paperwork: Resellers rarely do an adequate job of identifying or even counting the product they ship back, Collings says. "Eighty per cent of the receipts we get are discrepant," he notes. To reduce confusion, Aldus sends dealers a special shipping label as soon as a return order is authorized--"though getting them to apply the label is another matter," he admits. When a return shipment arrives, a receiving clerk checks the order and issues a credit only for the value of what the reseller actually returned.

* Resolve disputes immediately: Not surprisingly, resellers often claim larger return credits than Aldus issues. Rather than let these disputes drag on, Collings tries to settle every claim within four days of receiving a return shipment.

* Create tamperproof packaging: Aldus used to have a problem with dealers who would open a package, remove the disks, and then return the product with fresh shrinkwrapping. (In one case, a chain even inserted its own sales literature in a consignment it returned.) Now, Aldus wraps its packages with a special embossed shrinkwrapping. If the Aldus shrinkwrapping is intact, the box goes back into inventory; otherwise, it's broken up for salvage.

* Build a salvage system: Collings calculates that it costs him just $2.50 to break down and repackage each returned unit. The key to this recycling process, he adds, is to give each component its own part number, so that assemblers won't mix up components when they build new packages. You can't just put returned product back into inventory," Collings says.
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Title Annotation:Aldus Corp.; of software
Article Type:Tutorial
Date:Dec 15, 1991
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