RTS — Return to Supplier (Beginner's Guide)

RTS — Return to Supplier is a common logistics and procurement process used when goods received into a warehouse or fulfillment center must be returned to the vendor rather than accepted into inventory. For beginners, think of RTS as the official path an organization takes to move unwanted, damaged, or nonconforming items back upstream to the party that sold them. This protects your stock accuracy, prevents customer complaints, and preserves contractual or warranty rights.

Why RTS matters: Returning items to the supplier helps control costs and maintain inventory integrity. If defective items sit on shelves or are mistakenly shipped to customers, the business faces rework, additional shipping, reputational damage, and potential chargebacks. An organized RTS process makes it easier to recover costs through credits, replacements, or repairs.

When RTS is used (common scenarios):

• Incoming Quality Inspection fails — items are damaged, missing parts, or don’t meet specifications.
• Incorrect shipments — supplier sent wrong SKU, wrong quantity, or wrong revision.
• Overstock situations — contractual clauses allow returning unsold or seasonal items.
• Warranty returns — defective units covered by supplier warranty.
• Regulatory noncompliance — items fail to meet standards or certifications and must be removed.

Basic RTS workflow (step-by-step for beginners):

1. Identification: Warehouse or QA identifies items to return during goods receipt or inventory checks.
2. Documentation: Create an RTS authorization or return merchandise authorization (RMA). This documents why items are returning, numbers, and who authorizes the return.
3. Segregation: Move the items to a designated returns or quarantine area to prevent accidental sale or shipping.
4. Inspection & Evidence: Record photos, inspection notes, and any test results supporting the return claim.
5. Communication: Notify supplier with RMA documents, photos, and requested remedy (credit, replacement, or repair).
6. Approval & Shipping: Once the supplier approves, schedule carrier pickup, prepare shipping paperwork, and mark the inventory as returned.
7. Reconciliation: Update inventory records, accounts payable, and purchase orders to reflect credits, replacements, or adjustments.

Key documents and data to capture for RTS:

• RMA number or RTS authorization reference
• Purchase order number and supplier details
• SKU/serial numbers and quantities
• Inspection evidence (photos, test reports)
• Requested remedy (credit, replacement, repair)
• Carrier tracking and proof of delivery back to supplier

Best practices for effective RTS management:

• Use a formal RMA/RTA (Return to Author) process so returns require approvals and proper tracking.
• Segment returned items physically to avoid accidental use or shipment.
• Integrate RTS into your Warehouse Management System (WMS) so inventory, finance, and procurement records stay aligned.
• Capture clear evidence — photos and inspection notes speed up supplier dispute resolution.
• Negotiate supplier SLAs for returns — specify timelines, credit terms, and responsibilities for return shipping costs.
• Train staff on return criteria and documentation to reduce subjective decisions that lead to disputes.

Common mistakes to avoid:

• Failing to obtain an RMA before shipping — suppliers often refuse unapproved returns.
• Not updating inventory promptly, leading to stock count errors and accidental sales.
• Poor documentation — weak evidence makes it hard to obtain credit or replacement.
• Ignoring the total cost of return — return freight, handling, and restocking may exceed the item value.

Real-world example (simple): A retail fulfillment center receives a pallet of shirts where several boxes are water-damaged. The receiving team raises an RTS with photos and references the original purchase order. The supplier issues an RMA and arranges pickup. Credits are posted to accounts payable after the supplier confirms receipt at their facility.

Metrics to monitor for RTS performance:

• RTS rate (percentage of receipts returned)
• Average days to resolution (time from identification to credit or replacement)
• Return shipping cost per unit
• Supplier return acceptance rate

Software and system tips: A WMS or ERP that supports return workflows will automate RMA numbers, update inventory status, and route approvals. For small operations, simple templates and centralized spreadsheets work but plan to move to an integrated system as return volumes grow.

In short, RTS (Return to Supplier) is a crucial control point in supply chains that protects inventory accuracy, reduces losses, and enforces supplier accountability. For beginners, focus on clear documentation, segregation of returned items, and timely communication with suppliers — these basics prevent small return events from becoming costly disruptions.