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Management Side

How Returns and Allowances Boost Sales in the Mill

Pretty much everyone has returned something to Amazon. It's simple. You mail back whatever you bought (or drop it off at Whole Foods now, too) and your credit card is fully refunded. That's a big reason why so many people buy from Amazon in the first place: easy returns and full refunds (or occasionally a full allowance).

Dealing with returns and allowances is easy with small things, like shoes, toasters, or boxes of rubber bands that can simply be mailed back to the business. But how do you deal with returns and allowances with products measured in tons, shipped from a mill?

Giving allowances is easy, but those expenses add up alarmingly quickly. Not a great solution. So to use returns and allowances to boost sales in your mill, let's take a page out of an experienced consultant's book and learn about the changes made at one mill, which led to significant mill-wide improvements in just three months.

The strategy was quite simple.

A mill in Ohio had returns and allowances running, at the time, close to $50/ton on an $800/ton price (for you numbers nerds, that's 6.25%). That's a big problem.

The solution was to have the salespeople tell the customers that the mill didn't want the customers to work with junk, so ship back the order if they didn't like it. Simple as that. The focus was on the customer, and their satisfaction.

The results? In three months, returns and allowances were under $2/ton (that's 0.25%). And the effect on morale? The people in production became more motivated and happier at work.

Why did this work so well? Getting good at handling returns and allowances consistently lead to an increase in sales, an increase in quality, and an increase in morale, all while strengthening the relationship between the mill and its customers.

What's to lose? Well, the mill in Ohio lost some salespeople who thought the whole idea of accepting returns was crazy. But the (remaining) salespeople were confident because their mill made a great product. They had the backing and support of the whole mill to carry out their new sales policy, and sales were up.

Sometimes the simplest changes have the greatest results.

As you can learn from this example, you have little to lose and much to gain by focusing on quality, by examining your returns and allowances policies.

What can you do to improve your bottom line in three months?



 


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