Every nickel counts. So does every square foot of warehouse space.
That’s what a manufacturer will tell you. It doesn’t matter if you’re talking about fabricated metals, textiles or jewelry. It doesn’t matter if you’re producing rugs, or rings or toaster ovens.
Mark S. Mesrobian, of Narragansett, knows this.
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In fact, the margins for small and mid-size manufacturers have become so narrow, Mesrobian started his own company just over a year ago to help them stay away from what can be a crippling dilemma – returned goods.
Returned or discontinued goods take up space and time – and money.
The VirtualReturns Corporation, says Mesrobian, offers a solution. Instead of retailer or consumer shipping returns back to the manufacturer, they send them to a VirtualReturns warehouse.
“We’re helping manufacturers rid their warehouses of discontinued goods,” he says. “In a down economy, we’re turning trash into cash.”
The numbers add up, says Mesrobian.
For example, he says, about 8 to 10 percent of all consumer goods sold come back to the manufacturer in returns. Apparel, says Mesrobian, has an especially high return rate. As do most goods sold via the Internet.
So VirtualReturns is targeting the source: the kinds of companies that may have celebrated when they landed that big contract with Wal-Mart or Target, only to cringe a few months later when a truck pulls up and drops crates full of boxed returns.
“If you have been in the retail markets for years, you build into your costs the costs of returns,” says Mesrobian. “But buyers remorse — and other intangibles — are hard to predict.”
Those intangibles include more than the defective product. Bring home the wrong color bedspread – and it’s going back. Those stereo speakers don’t quite hook up with your existing system? They’re going back, too.
So Mesrobian has stepped in with a company designed to distance manufacturers from those tight margins.
His VirtualReturns, in looking to help manufacturers, found a partner of sorts in one of Rhode Island’s most successful manufacturing operations.
Uncas Manufacturing has long been a shining light in the state’s jewelry industry. The company did not find success by standing still. Uncas has tapped into technology, has broadened its markets. And it has always explored ways to put the skills of its workforce to use.
So when Uncas Executive Vice President Christopher Corsini got a call from his long-time friend Mesrobian, he listened carefully. And the result has been a burgeoning partnership that has VirtualReturns utilizing warehouse space – and also a highly skilled labor force at Uncas.
“We have an organizational structure in place,” says Corsini. “We have a purchasing department. We have a manufacturing department. We can handle engineering. This as an opportunity for us to spread our wings, while we maintain our skilled workforce.”
When Mesrobian struck a deal with Honeywell International, all the pieces of the puzzle seemed to fit.
Uncas receives returned Honeywell thermostats directly. A couple of weeks ago, Uncas had about 1,000 of them in place. Uncas re-tests and re-packages them to strict Honeywell standards — and then hands them off to VirtualReturns where they are distributed to secondary markets.
Mesrobian works closely with the manufacturer to make sure the marketing of the now recycled products is done as efficiently as possible.
“We sit down with the sales side to make sure that we don’t re-market products in their primary channels,” he says.
Corsini sees many benefits in the arrangement for the manufacturer.
“This is a good opportunity for all manufacturers,” says Corsini. “Anytime you can use your skilled work force to diversify, it’s a win-win situation. Anytime you can move discontinued or inactive goods, you’re putting yourself in a good position.”
Corsini knows about returns. He learned quickly that when returned goods are taking up valuable warehouse space, they are not profitable.
“Returns are a big thing and a lot of people overlook them,” he says. “If you don’t have an exit plan, then your profit is sitting there in your inventory. It’s a hidden cost that comes through the back door.”
And manufacturers can do without the hidden costs.
At a Southern New England Economic Summit and Outlook earlier this month at the Foxwoods Casino, Gary Ciminero, an economist and acting director of the House Policy Office, discussed how Rhode Island handled the recent recession. In most industrial sectors, the state held its own, he said, and even fared better than Massachusetts and Connecticut.
But the notable exception – the dark cloud in the mostly clearing sky – was the manufacturing sector. In the first quarter of 2002, it lost 7 percent of its employment base. It is a trend that started 20 years ago, and hasn’t stopped or slowed since.
“Manufacturing employment has been trending downward about 7 percent for the last several months, and the last time it’s been that weak was in the midst of the recession in 1991,” Ciminero told the audience at Foxwoods.
That’s a sobering analysis. But also a reminder that every nickel counts.
“In a tight economy, you have to find every nickel you can,” says Corsini.
