Selling returned product as 'New'

[RosieA]

Selling returned product as new

Occasionally a customer returns product for a defect, sends a debit, and tells us they don't want replacement. If we are unable to validate the defect, or if it is easily fixed, it has been our practice to return that product to stock and reship it to the customer as new in their next order. (these are unique products shipped to only one customer)

Management suspects that in some cases, the customer is simply dumping their excess inventory on us, and sees no reason to take a scrap hit. In other cases, we do find a defect and rework the product. There's no way to tell if the same product is repeatedly rejected because the products are not serialized.

My position is that we should never sell returned product to the customer as new. It's been handled, subjected to shipping and the environment, in ways a new product is not. And in some cases, it's been reworked.

I'd like to hear your thoughts on this situation. Does anyone else do this?

 

[Al Rosen]

Occasionally a customer returns product for a defect, sends a debit, and tells us they don't want replacement. If we are unable to validate the defect, or if it is easily fixed, it has been our practice to return that product to stock and reship it to the customer as new in their next order. (these are unique products shipped to only one customer)

Management suspects that in some cases, the customer is simply dumping their excess inventory on us, and sees no reason to take a scrap hit. In other cases, we do find a defect and rework the product. There's no way to tell if the same product is repeatedly rejected because the products are not serialized.

My position is that we should never sell returned product to the customer as new. It's been handled, subjected to shipping and the environment, in ways a new product is not. And in some cases, it's been reworked.

I'd like to hear your thoughts on this situation. Does anyone else do this?

Rosie:

I worked at a place where customers from time to time ordered too many items and returned them for credit. The items were serialized and I was usually able to tell if they were "used". Our policy was to take them back without question. We would re-ship them if they were in "new" condition. I, like you, had some reservations about this originally.

I don't know what kind of product you have and what the effects of shipping it are. I don't recall ever having a situation where we shipped one of these "returned" parts and a customer thought it had been in anything but a "new" condition. Has your customer ever questioned you? You stated that sometimes the parts required to be reworked. "Rework" implies the parts meet all the specs and should be in a condition that is "new". I assume if you had detected the defect before the part left your facility, you would have reworked it and the shipped it. It is unfortunate that your customer discovered the defect.

 

[RosieA]

Al, thanks. No one has questioned us in the time that I've been here, but we do have customer contracts that forbid us from sending them used product. I guess the $60,000. question is what constitutes used product.

 

[Wes Bucey]

Al, thanks. No one has questioned us in the time that I've been here, but we do have customer contracts that forbid us from sending them used product. I guess the $60,000. question is what constitutes used product.

I guess I have a different position.
We have never accepted return of a product without a corresponding "return authorization" (RA).

To get the RA, customer has to be specific for the cause of the return. We examine product upon return. If we cannot confirm nonconformance, the issue is escalated up to the suits for resolution.

Sometimes, confirming nonconformance triggers internal Corrective/Preventive Action regardless of whether Customer requests one.

Sometimes our nonconfirming the nonconformance triggers referral to a third party agreed between us and customer for arbitration.

Every returned item gets a final disposition report (rework, restock as is, scrap, replace, reship) with a copy to customer.
(In the case of products subject to FAA regulation, there is a required process for scrapping which requires certification the product has been rendered completely unfit for re-use, which sometimes means crushing or cutting into pieces.)

 

[Al Rosen]

I guess I have a different position.
We have never accepted return of a product without a corresponding "return authorization" (RA).

To get the RA, customer has to be specific for the cause of the return. We examine product upon return. If we cannot confirm nonconformance, the issue is escalated up to the suits for resolution.

Sometimes, confirming nonconformance triggers internal Corrective/Preventive Action regardless of whether Customer requests one.

Sometimes our nonconfirming the nonconformance triggers referral to a third party agreed between us and customer for arbitration.

Every returned item gets a final disposition report (rework, restock as is, scrap, replace, reship) with a copy to customer.
(In the case of products subject to FAA regulation, there is a required process for scrapping which requires certification the product has been rendered completely unfit for re-use, which sometimes means crushing or cutting into pieces.)

Wes:
The company's policy was to always issue an RA and evaluate the situation when the parts were returned. But if the customer didn't call the parts were still evaluated.

As I recall, FAA regulations don't allow selling "used" parts as "new". They would be considered "unapproved" and what would constitute a used part would require it being installed on the aircraft and then having "flight hours" by the operator. These parts were returned from our distributor with complete traceability and affadavit that they had not been installed. I believe some aircraft mfrs had their own definitions of a used part in their system. It could have a fixed amount of time on it and they still considered it "New". They considered test time not part of the condition for a part being labeled as "used". Aircraft are flown and tested and are still considered "New" until they leave the Certificate Holders Quality System.

 

[Wes Bucey]

Wes:
The company's policy was to always issue an RA and evaluate the situation when the parts were returned. But if the customer didn't call the parts were still evaluated.

Yes, Al. You and I seem to be on the same page on this issue.

What I was primarily responding to was

Occasionally a customer returns product for a defect, sends a debit, and tells us they don't want replacement. If we are unable to validate the defect, or if it is easily fixed, it has been our practice to return that product to stock and reship it to the customer as new in their next order. (these are unique products shipped to only one customer)

Management suspects that in some cases, the customer is simply dumping their excess inventory on us, and sees no reason to take a scrap hit. In other cases, we do find a defect and rework the product. There's no way to tell if the same product is repeatedly rejected because the products are not serialized.

"unable to validate defect" just cries out in my soul for some sort of resolution.

Similarly,
"There's no way to tell if the same product is repeatedly rejected because the products are not serialized."
would give me many sleepless nights. I just HAVE to know whether there is a true nonconformance in the part or whether there is a disparity between customer's inspection technique and ours which needs to be resolved.

Anybody else as obsessive as I on this issue?

 

[Claes Gefvenberg]

Management suspects that in some cases, the customer is simply dumping their excess inventory on us, and sees no reason to take a scrap hit. In other cases, we do find a defect and rework the product. There's no way to tell if the same product is repeatedly rejected because the products are not serialized.

My position is that we should never sell returned product to the customer as new. It's been handled, subjected to shipping and the environment, in ways a new product is not. And in some cases, it's been reworked.

As for selling a reworked product as new: If it is acc. to spec. and in a condition indistinguishable from a "true" new product... maybe it truly is new after all? The trouble is that you have to be so very sure...

I worked at a place where customers from time to time ordered too many items and returned them for credit. The items were serialized and I was usually able to tell if they were "used". Our policy was to take them back without question. We would re-ship them if they were in "new" condition. I, like you, had some reservations about this originally.

We had a similar discussion (concerning customers dumping their excess inventory or even used parts on the supplier) a while back in the thread Buying Customer Scrap.

/Claes

 

[Al Rosen]

What I was primarily responding to was
"unable to validate defect" just cries out in my soul for some sort of resolution.

I agree.

Similarly,
"There's no way to tell if the same product is repeatedly rejected because the products are not serialized."
would give me many sleepless nights. I just HAVE to know whether there is a true nonconformance in the part or whether there is a disparity between customer's inspection technique and ours which needs to be resolved.

Ditto.

Maybe the returned parts can be stamped inconspicuously with UV sensitive ink. All parts returned could be viewed under a black light to determine if they have been previously returned.

All of this is speculative without knowing what the type of parts are and the nature of the "defects". Perhaps Rosie can add some more details.

 

[RosieA]

All of this is speculative without knowing what the type of parts are and the nature of the "defects". Perhaps Rosie can add some more details.

These are cable assemblies. There can be problems validating defects because sometimes the problem is with the customer's installation and use of the cables, vs a problem with the cable.

Although we have run into test issues between us and the customer, and we do try to work those through as part of the corrective action process.

Wes, we follow a similar process to the one you outlined. The difference is that we are not in a regulated industry.

I guess what I'm hearing so far is that if the cable was not actually used in the field, and it can be restored to it's original spec, it can be considered new.

 

[SteelWoman]

I guess I'm having a hard time understanding why something that is returned is necessarily considered "used"? I've had a lot of experience with "customer service" inside the industry I work for AND outside of it, and if there's one thing I DO know it's that - sorry - the customer ISN'T always right. We too have customers who return material because they ordered more than they really needed and they manage to find some bogus "defect" reason to claim it. More often than not our Mgmt group takes the claim in the interest of "customer service," bogus or not. Is that material either used or defective? Nope. So it's not unheard of for us to re-send it to the customer later. This isn't one of those black and white issues - lot's o' gray here.