Pre-Negotiate to reduce pain.
In my experience, it’s the work done prior to RGAs that make them go smoothly. I encourage lighting showrooms to pre-negotiate RGA handling with vendors.
Some things to negotiate for:
FIELD DESTROY: Ask that any item less than $1,000 is an automatic field-destroy. Agree to take and store a photo of the item prior to the destroy.
On items of $1,000 or more, agree to retrieve and keep the item in a bin for three months. If the local rep wants to come and inspect or send it back, great! Otherwise, after three months you are authorized to field destroy.
REGULAR PO’s + AUTOMATIC CREDIT: Negotiate ahead of time to send in a regular PO for RGA’s and that your A/P department can automatically have a credit applied when the bill arrives. This seems to speed up RGA processing and gets replacement items to you faster.
Create a PO template in your system that alerts the A/P department of a PO that is actually an RGA. It should automatically trigger them to create and apply a credit for the PO.
Get all this approved in writing. In a few cases a phone call is needed to remind of the written RGA terms, but after a few cycles that gets rare.
RGA CREDIT ALLOWANCE: For vendors you know well, consider asking for a flat 2% to 3% discount off all invoices to cover RGA’s. Then just order all RGA replacements on a regular (paid) PO. Field-destroy all defectives.
In most cases, you can negotiate a “ceiling” so that high-dollar items (more than $2500 for example) don’t apply and are handled as regular RGA’s.
Final Note: Some vendors don’t negotiate RGA policies. Try to avoid those as much as possible. It’s too much of a distraction to fight RGA’s all day. I find most vendors are willing to negotiate an RGA protocol as long as you’re trying to be fair to them too.
Jason Petersen owns Hansen Lighting Inc. a lighting company with multiple showrooms in Utah.
Jason acquired Hansen Lighting out of near-bankruptcy in 2004 and turned the company around by implementing outside-the-box systems and ideas. The company is now one of the fastest growing companies in America (#3087 on the Inc. 5000 Fastest Growing Companies list) and has been recognized as one of the most profitable privately-owned retailers in North America.
Jason is also the co-founder of XOLogic and Lit Living Inc.