Return Merchandise Authorization (RMA): The Daily Definition

 In Inventory Management, The Daily Definition


What is an RMA?

A return merchandise authorization (RMA) is an authorization provided by a vendor that permits the return of a product. Most businesses have a return policy, and an RMA serves as the gateway for initiating the return process. Use return merchandise authorizations to validate returns in advance. When the return arrives at your warehouse, you know exactly what action to take.

An example:

Say one of your customers placed an order for 50 sets of home theater speakers. You ship out 50 sets, but unfortunately, when the customer receives them, they discover that four sets show signs of damage. This damage prevents them from selling the speakers to their customers, so they want to make an exchange for four undamaged sets.

In order for your customer to receive an RMA and replacement items, a few things need to happen:

  • The customer must provide proof of damage, either with photos or a detailed written explanation
  • You need to evaluate the evidence to see if they have a valid reason for returning goods
  • You determine that the four units in question were indeed defective, so you issue an RMA
  • After granting an RMA, you send your customer four replacement speaker sets

Once the replacements have been sent out and the original damaged items have been received, the RMA process is complete.

Our two cents:

Having an RMA makes reverse logistics significantly easier — using them makes it much simpler to track returns as they move through your facility.

When you receive return shipments that include an authorization number, you know exactly what to do with the item, and how to proceed with the next steps. Should you inspect the item before it’s resold, or does the damage prevent all resale? Do you need credit from your supplier for this item? Why was it returned in the first place?

Returns are costly as it is, but using a system to manage them well will help keep these costs under control. RMAs are an integral part of doing so.

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