Leak 16 · Suppliers & Procurement - Unclaimed vendor returns
Many suppliers allow an annual return of slow stock, often a percentage of purchases. The window passes. The stock stays on the shelf.
Diagnostic note. Symptoms, the records to bring, and a practical first check with your team.
What is it?
Stock rotation rights, defective returns, and overstock returns are negotiated into supplier agreements and then forgotten. The return has to be requested in a window, packed, shipped, and credited. Each step can stall, and the credit can go unreconciled. Meanwhile the same items sit in the dead-stock report.
- Family
- Suppliers & Procurement
- Primary owner
- Purchasing Manager
- Secondary owners
- Warehouse Manager, Controller
- Primary impact
- Working capital
- Typical data source
- Return authorizations, supplier return policies, inventory records
- Detection difficulty
- 30-day measurability
Ask yourself
Do you know which suppliers allow annual stock returns, the allowance, and how much of it you used last year?
Yes, partially, no, or don’t know. “Don’t know” is the most useful answer, because it points at the test below.
What does it look like?
Look for these patterns, then use the check below to trace the issue in your own records.
- Supplier agreements with return allowances nobody has used.
- Return authorizations issued but never shipped, or shipped but never credited.
- Slow stock from suppliers who would take it back.
What data do I need?
The minimum viable set. Most of it is already in your ERP.
| Field |
|---|
| Supplier return terms: allowance, window, restocking fee, conditions |
| Purchases by supplier for the allowance basis |
| Slow and dead stock by supplier |
| Open return authorizations and their status |
The initial check
Start with a small sample. Ask the person who owns the records to gather the exports and agreements, then work through these steps together.
- 1List your ten largest suppliers and, for each, whether they allow stock returns and on what terms.
- 2Pull slow and dead stock for those suppliers at cost.
- 3Compare to the allowance available this year.
Recoverable stock = min(allowance, eligible slow stock at cost) − restocking fees
Then ask one question: Who owns the return calendar, and when is the next window?
How much could it be costing us?
A conservative range, not a headline. The goal is a number management can trust enough to investigate.
Σ over suppliers of unused return allowance applied to eligible stock × (1 − restocking fee), plus uncredited returns already shipped
Common root causes
Fixes fall into three layers. Not every problem needs software, and almost none needs AI first.
- Process
- No owner and no calendar for supplier returns.
- Data
- Return terms are not recorded against the supplier in the ERP.
- Technology
- Return authorizations are tracked in email, so open ones are not visible.
What should we do?
Start with the simplest intervention that could solve it. Move down the list only if the one above is not enough.
Level 1
Register
A return-terms register by supplier with windows and allowances, reviewed quarterly against slow stock.
Level 2
Process
A return calendar with an owner, and a reconciliation of every RA to a credit.
Level 3
Workflow
Generate candidate return lists from slow stock and supplier terms ahead of each window.
Where AI helps
- Extracting return terms from supplier agreements and correspondence.
Where AI probably doesn’t
A register and a calendar do most of the work.
Before you call it a leak
- Returns often require original packaging and a condition check. Eligible stock is less than slow stock.
Think this might be happening in your business?
Turn the finding into a next step.
If the numbers say there is something there, send us what you found and we will help you decide whether it is worth a full investigation. No transaction files needed for that conversation.
Related leaks
- Leak 20 · InventorySlow-moving inventoryStock that turns once every three years ties up cash, takes space, and eventually becomes dead. The ERP already knows which items. Nobody has asked it.
- Leak 21 · InventoryDead and obsolete inventoryInventory with no demand and no prospect of demand. It is on the balance sheet at cost, and it will never be worth that again.
- Leak 26 · InventoryReturns sitting unresolvedA pallet of returns in the corner of the warehouse. Some restockable, some for the supplier, some scrap. All of it counted as nothing, or as full value, depending on the day.
- Leak 14 · SuppliersMissed manufacturer rebatesRebate agreements live in a filing cabinet. Purchases live in the ERP. The money you earned but never claimed lives nowhere, and it is often the largest single leak on this list.
Let’s start with one thing.
Give your team more time for the work that needs them.
Show us the quoting, order-entry, or follow-up work that keeps piling up. We’ll map it with you and find a practical place to start.
Start with a free workflow conversation with Alex.