Establishment of RMA (Returned Material Authorization) Protocol

L

Lyregi - 2010

#1
Hi all, recently I was tasked to set up a RMA protocol, which is basically to cater for return of defective materials that are detected at customer's incoming quality inspection, due to recent incidents of high defective rates encountered at the customer's incoming inspection gate.

Some background information to share:

Materials are partially consigned by customer for production. My company is being engaged to perform assembly of product using the consigned materials as well as self-procured materials. Pre-agreed acceptable yield loss during production is 0.6%. My company is liable for compensation if yield loss is higher than pre-agreed level.

Production Qty: ~12,000 units per reel of finished goods
Outgoing Quality Inspection in my company: 800 random units.
Reel is accepted and proceed for delivery if <= 4 defective units are detected
Incoming Quality Inspection @ customer: 100% inspection

As there is no pre-agreement on the number of defective units acceptable by customer, my sales team has tasked upon me to work out on a protocol to determine if customer should return the defective materials and officially claim for compensation.

I am lost in this assignment as according to my understanding, Outgoing Quality Inspection is usually aligned to the Incoming Quality Inspection (AQL - LTPD). Is anyone able to provide advise on the defective rate for me to authorise the defective materials be returned and compensated? Should this defective rate be worked out by Sales or Finance team of Quality team?

Many thanks in advance. :thanx:
 
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B

brahmaiah

#2
Hi all, recently I was tasked to set up a RMA protocol, which is basically to cater for return of defective materials that are detected at customer's incoming quality inspection, due to recent incidents of high defective rates encountered at the customer's incoming inspection gate.

Some background information to share:

Materials are partially consigned by customer for production. My company is being engaged to perform assembly of product using the consigned materials as well as self-procured materials. Pre-agreed acceptable yield loss during production is 0.6%. My company is liable for compensation if yield loss is higher than pre-agreed level.

Production Qty: ~12,000 units per reel of finished goods
.
Outgoing Quality Inspection in my company: 800 random units.
Reel is accepted and proceed for delivery if <= 4 defective units are detected
Incoming Quality Inspection @ customer: 100% inspection

As there is no pre-agreement on the number of defective units acceptable by customer, my sales team has tasked upon me to work out on a protocol to determine if customer should return the defective materials and officially claim for compensation.

I am lost in this assignment as according to my understanding, Outgoing Quality Inspection is usually aligned to the Incoming Quality Inspection (AQL - LTPD). Is anyone able to provide advise on the defective rate for me to authorise the defective materials be returned and compensated? Should this defective rate be worked out by Sales or Finance team of Quality team?

Many thanks in advance. :thanx:
Your problem is clearly due to ambiguity in your contract.Now you cannot find a one sided solution for this. You have to sit with your customer and revise your contract eliminating all ambiguity
V.J.Brahmaiah:agree:
 
P

Polly Pure Bread

#3
i agree with brahmaiah

establish two-sided approach…

the customer talks…the supplier listens….
the customer gets upset….. and the supplier changes in response to the customer's reaction….

so sad…
 

harry

Super Moderator
#4
In this connection, Wes had a good post here and in this thread: Procedure on RMA (Return Material Authorisation)

I am sorry I don't have a sample Procedure for you, but I can tell you that you need to have a process in place to delineate valid reasons for allowing a customer to return goods.

For example:
Allow instant return if your own records show you shipped wrong goods (identity or overshipment, or in some other way violated the terms of the contract with the customer - like shipping too late or too early if the contract says goods may be returned or refused under those conditions.)

Defer authorization if the nonconformance is a minor correctable (missing documents, short count) to see if customer will hold goods until you correct error.

Defer authorization until you can confirm major nonconformance in form, fit, or function of the product, which may mean emailed photos of damaged goods, or air expressed samples of nonconforming products (i.e. customer's incoming inspection is at variance with your outgoing inspection), or sending an employee or agent to examine the goods at customer's, giving the agent power to issue RMA if the nonconformance is confirmed.

Contract Review
The topic of RMA should be addressed in ALL contracts with customers. Typically, a well-run organization lists reasons to issue an immediate RMA and reasons to defer issuance until the nonconformance can be confirmed by the producer or his agent. In my own organization, a request for an RMA is routed through our Material Review Board (MRB), comprised of a multi-discipline team (Quality, Production, Administration, Purchasing, Engineering, Sales) who are empowered to use any and all resources necessary to resolve the question of nonconformance. Since they are multi-discipline, they are also empowered to expedite a request (for reasons including, but not limited to, "sucking up to a good customer") for an instant RMA.

The one thing we do not do is leave the matter in the hands of a shipping clerk. A request to return goods is a serious matter which may signal a major breakdown in the production process which may trigger a shutdown of processes to prevent producing scrap. Incidentally, the back and forth freight costs of an RMA (usually borne by the seller) can affect profit pictures substantially. One option our MRB may use is to authorize a confirmed nonconforming (form, fit, function) shipment to be scrapped by customer rather than waste money shipping it. Obviously, you may want to confirm the destruction of the nonconforming material or determine and recoup any salvage value.

The bottom line:
An RMA should be considered an important topic and treated with due regard for ramifications throughout the organization.
Things to consider:
Is there a possibility other shipments to same or other customers are affected?
Is there a serious glitch in the seller's production or inspection procedures?
Are seller and customer in true agreement about the product specifications?
Is there a possibility customer's inspection is in error?
Is there a possibility there is a factor other than nonconformance which is the reason for customer's request for RMA? (desire to get out from under an overpurchase situation?)
 
L

Lyregi - 2010

#5
hi all, thanks for the advise provided. yes, there was some ambiguity in the contract, which we are trying to sort out now.

Problem lies that customer also has no idea what to expect therefore they are requesting for a proposal on my side for authorizing any returns. It is a big headache for me since there are quite a number of discrepancies we have identified in terms of inspection criteria and now on the RMA.

:thanks:
 
P

Polly Pure Bread

#6
Problem lies that customer also has no idea what to expect therefore they are requesting for a proposal on my side for authorizing any returns.
customer should set expectations…
supplier needs the expectations before providing services…

supplier should know your participation… ask feedbacks…

supplier and customer,
ask yourself: what does supplier-customer partnership mean to you?
 
L

Lyregi - 2010

#7
customer should set expectations…
supplier needs the expectations before providing services…

supplier should know your participation… ask feedbacks…

supplier and customer,
ask yourself: what does supplier-customer partnership mean to you?
Yes, this should be the ideal scenario.

Problem is that my customer does not have any in-house assembly. All their production activities are out-sourced, therefore after we have assembled the consigned materials, these finished goods from my company will be shipped to another sub-contractor for next phase of assembly. Incoming inspection is carried out at my customer's sub-contractor site. My customer will not see any of the assembled parts at any stage of the supply chain unless they specifically conducts an audit. To me, this is basically a form of business dealing to thrash out the commercial terms and conditions. Not so much of a quality issue. As far as I am concern, I, as a quality guy in the company should be filtering out all possible rejects based on the quality control plan established.

:thanx:
 
P

Polly Pure Bread

#8
Yes, this should be the ideal scenario.

Problem is that my customer does not have any in-house assembly.
no in-process, final inspection and testing activities to ensure quality while being processed outside the company... no control plan...

All their production activities are out-sourced, therefore after we have assembled the consigned materials, these finished goods from my company will be shipped to another sub-contractor for next phase of assembly.
Incoming inspection is carried out at my customer's sub-contractor site.
There are a number of suppliers but not all of them are performing well.
If things went wrong and even if it’s someone else’s fault, you are part to be blame.

My customer will not see any of the assembled parts at any stage of the supply chain unless they specifically conducts an audit.
What’s the result of the previous second party audit? What’s the frequency?
 
L

Lyregi - 2010

#9
no in-process, final inspection and testing activities to ensure quality while being processed outside the company... no control plan...



There are a number of suppliers but not all of them are performing well.
If things went wrong and even if it’s someone else’s fault, you are part to be blame.



What’s the result of the previous second party audit? What’s the frequency?
:rolleyes:

Can you believe it? No audit was conducted prior to any commencement of commercial orders.
 
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