Return of Merchandise to Vendor In EDI Cycle
Return of Merchandise from a retailer to a vendor can occur for two reasons: Faulty Merchandise or Overstock positions on merchandise.
Faulty Merchandise Returns
If merchandise is found to be faulty and must be returned to the vendor for credit, the process is simply to contact the vendor to receive authorization to return the merchandise. Upon receipt of the Return of Merchandise authority (RMA) number, the store packages the goods (sometimes the vendor will instruct to destroy the product and not send it back), and writes up a debit note. The store keeps one copy of the debit note, sends one with the product and sends one to a central entry office. The debit note will contain:
- Retailer Identification
- Vendor Identification
- Original Purchase Order (if known)
- Item Identification
- Quantity returned
- RMA Number
The central debit entry office of the retailer will enter in the debit into their accounts payable system. Once the debit note is received at the vendor, they will credit the retailer for the merchandise. The merchandise credit will be reconciled against the store-created debit note and applied to the correct store and merchandise group. This process is extremely time consuming and very difficult to maintain. Many retailers have centralized the transfer of goods into one area. This reduces key entry and increases auditability but centralization is very costly, as the goods must be shipped to a central site, and then re-shipped to the vendor.
There are applications to automate the process via EDI. The process is:
- Stores using distributive key entry systems, enter in RMA requests to vendors.
- Vendors receiving RMA’s in various fashions send (using various input options) RMA #s to stores
- Stores enter in Debit notes, which are transferred, to their head office and the vendor
- Vendor uses many methods to receive Debit Notes to update their system
- Central Head Office uses the store-created Debit Note to update Accounts Payable
The key is that costs and controls are improved by EDI applications, as all documents are developed and maintained by one central system.
Overstock Positions on Merchandise
In retailing, there are occasions when retailers need to reduce stock levels in stores. Typically, the requirement is to reduce stock prior to stocktaking. To accomplish this, buyers will negotiate with their vendor representatives to have the vendor take back stock. The buyer will contact the stores and have them package the goods and send them back to the vendor (Return of Merchandise).
There are applications to automate the process via EDI. The process is:
- Stores enter in Debit notes, which are transferred to their head office and the vendor.
- Vendor uses many methods to receive Debit Notes to update their system.
- Central Head Office uses the store-created Debit Note to update Accounts Payable.
- The key is that costs and controls are improved by this application, as all documents are developed and maintained by one central system.