D365 | SCM | Basic Warehouse Management |Reverse Logistics - Customer Returns | Part 3

Hello Folks,

Hope you all are doing great!

The wait is over, I am back with Reverse Logistics Part 3 but this time for basic warehouse.

The biggest challenge in digital transformation is to change the way we think about business. Digital transformation will not add true value if you are rigid and stick with your existing business practices and customize the product for no good reason.

I would rather invest and spent my energies to reengineer the business process and map the solution in the standard system instead of customizing and killing the best practice. Trust me doing all this with controlled agressions is not easy.

Remember: A Bad Workman Always Blames His Tools.

Abstract

With reference to the Global survey conducted by Deloitte, online purchases are being returned three times more often than a purchase made in a brick-and-mortar store. This statistic means reverse logistics supply chain management needs to be top of mind for retailers who want to maintain a healthy inventory turn and operating expenses.

Forward logistics will make sure to bring the product from the manufacturer to the customer. In the case of reverse logistics, goods move from the customer to the distributor or to the manufacturer.

What is Logistics Flow?

The traditional logistics flow is defined by the?Council of Supply Chain Management Professionals glossary, as:

“The process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements”

Reverse Logistics Flow

“The process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.”

Who Initiates the Process?

The return process will be initiated by the customer. The return process starts in D365 by creating a return order in D365. There are two types of returns that can be generated in D365.

1- Physical Return

2- Credit Only

Scenarios

I will cover two scenarios in this blog

Scenario 1: Process Physical Return

• The return order authorizes the physical return of products
• The customer is credited the sales price minus any fees or charges. The inventory value is increased by the cost of the returned item. The item is returned and added back into inventory.

Scenario 2: Process Credit Note Only

• No product will be returned to the warehouse physically.

The below process flow will be mapped and configured for the two scenarios in Microsoft Dynamics 365 for Supply Chain.

Prerequisite Setups

Return Disposition Code

Create the return disposition code for the following Action

1. Credit: Items will be returned to the inventory and the customer will be credited.
2. Scrap: The returned items will be scraped and the customer will be credited.
3. Replace and credit: The returned items will be transferred to the inventory, create a replacement order for the returned items, and credit the customer.
4. Replace and scrap: Scrap the returned items, create a replacement order for the returned items, and credit the customer.
5. Return to the customer: Reject the returned item and return it to the customer.
6. Credit Only: This will credit the customer without a physical return.

Return Reason Codes

Create the return reason codes.

Scenario 1:Process Physical Return

In this scenario, we will process the customer return with disposition code "Credit". The inventory will be physically received in the warehouse.

The customer is credited the sales price minus any fees or charges. The inventory value is increased by the cost of the returned item. The item is returned and added back into inventory.

Create and Process a Return Order

Select the customer, warehouse, and reason code for the return order.

Print Return Order

Send and process the return order for the customer.

Creat Item Arrival Journal for Return Order

• Items arrive at the warehouse for inspection?- Complete an initial inspection and validation against the return order document. The return order also supports quarantine of the returned items for additional inspection and quality control.
• Determine disposition?- Finalize the inspection process and decide what should be done with the returned products. As part of this step, decide whether you will credit the customer, reject or accept the product return, scrap the product, and then send a replacement product to the customer.
• Create an item arrival journal as highlighted below screenshot, select the reference "Sales Order", select the warehouse, and the disposition code "Credit".

Post the Item Arrival Journal and Packing Slip

Once we post the item arrival journal, Inventory will be available in the warehouse(8000).

• In the warehouse, the standard process is used to perform a physical receipt. Ledger postings are generated if the inventory model group (Post physical inventory) and the Accounts receivable parameters (Post packing slip in a ledger) are set appropriately.

On Hand Inventory

The system has updated the on-hand inventory for the warehouse.

Post Product Receipt Return For the Item Arrival

Path: Item arrival>Functions>Post product receipt returned

• Generate a packing slip?- Generate a packing slip and commit to the disposition decision that you made. Finalize the logistics processes.

Return Order Status

The system has updated the return order status to Received, the inventory is now physically available in the system and in the warehouse.

Sales order status is Delivered

The sales order status was delivered as mentioned below screenshot. We get the physical date and physical cost for the item.

Process Invoice For the Sales Order

Generate and post the invoice for the return order. Once the invoice will be posted for the sales order, the system will update the financial data and financial cost for the item.

Once the sales order will be invoiced, the return order status will be "Invoiced" as well.

Scenario 2: Credit-only process

Credit only?- The customer has credited the sales price minus any fees or charges. Loss from scrapping the item is posted to the ledger. The item should not be returned. This disposition action is used for the following cases:

• There is enough trust among the parties.
• The cost of returning the defective item is prohibitive.
• The items can't be allowed back into inventory. Because of other conditions, a physical return isn't required.

Create the return order for the customer and select the disposition code "Credit only", the system will automatically select the return status "Received" as this item will not arrive in the warehouse.

The?Credit only?disposition code authorizes the decision to credit the customer without a physical return.

Generate and Post the Sales Order Invoice

Generate an invoice?- Generate the credit note and then close the return order

Once the invoice will be posted for the sales order we can validate the Invoice voucher.

The customer balance will be credited and the credit sales account will be debited.

Conclusion & Recommendations

• We have processed two return orders for the item, against two sales orders, but there is only one item "Available Physical" in the inventory.
• For the first scenario, we created the return order and selected the disposition code "Credit", we created and posted the item arrival journal, in this case, once the item arrived in the inventory we posted the item arrival journal and return order status will become received, we physically received the inventory in warehouse 8000.
• For the second scenario, we created the return order and selected the disposition code "Credit only", in this case, the return order status will become "Received". There will be no item arrival, Credit-only functionality will credit the customer and never receive the physical item in the warehouse. However, the system will keep track of the inventory transaction and record two transactions, one with "Receipt" status "Purchased" and at the same time record the corresponding transaction with "Issue" status "Sold". The overall impact in the inventory is "Zero"

• The reverse logistics process will be triggered by the customer. After the approval, the return order will be created in the system.
• The customer can request to generate a return order from multiple sources, it can be generated from the web portal, mobile app, call center, etc. After the return order is approved and confirmed only then the return request will be processed.
• It's possible to process the return order from the warehouse mobile device, for this we must enable the Warehouse management feature. The return orders will be registered at the inbound location. The initial quality check will be performed by the quality inspector. Based on location directive setups, the returned items will be moved to the customer return location.
• If required, we can add the miscellaneous charges to the return order. Miscellaneous charges can be added to the Header, lines, or both.
• It's possible to automatically add the Miscellaneous changes based on return reason code and disposition codes.

I hope you like the article, keep connected and?Walk the Talk.

Feel free to share your feedback in the comments section.?

Regards,

Ali Danish?

ERP Microsoft D365FO Solution Architect | Corporate Trainer

M: +971554912688