Direct answer
A return is a decision, not a receipt. Booking returned goods straight back to sellable stock is the most common mistake: some items are damaged, used, wrong or not yours. A good returns workflow authorises the return before it arrives, records what actually came back, inspects and grades it, decides what happens next (restock, repair, scrap or return to supplier) and only then updates stock and hands the outcome to whoever handles the refund.
This guide covers the decision process. It does not assume return-label, carrier or marketplace connectors; any such integration is scoped per project only where an API exists.
Authorisation
Start before the parcel arrives. A return authorisation ties the expected return to an original order, the items and quantities the customer says they are returning and a reason. Without it, warehouse staff face unidentified parcels and have to guess whose they are. Decide the rules: how long after delivery returns are accepted, which products are returnable, and who can approve exceptions. Those are business policies for you to set. The workflow simply makes sure that each return has a reference to check against.
Receipt
On arrival, scan the reference and record what is physically in the box, which may differ from what was authorised. Put the goods in a designated returns area, never straight into pick locations. Record differences: an item that was not expected, a missing item, an extra quantity. Unmatched returns go to a holding process with a named owner, so they do not accumulate on a shelf. Where returns come from a client of a 3PL, the stock still belongs to that client, and the record must say so.
Identification matters
If the product is tracked by batch, lot or serial number, capture that identifier at receipt so the returned unit can be matched to its history. Scanning mechanics are covered on the [barcode scanning workflow](/warehouse-barcode-scanning-workflow/) page.
Inspection and grades
Inspection turns a pile of returns into decisions. Define a small set of grades that map to actions, and write down what each looks like in your own products. An example of a scheme, to be adapted to your goods:
- Grade A: as new, sealed or unused, can go back to sellable stock
- Grade B: opened but complete, may be resold at a different status or after repackaging
- Grade C: repairable or refurbishable, sent to a repair step
- Grade D: damaged or unsafe, scrap or return to supplier where applicable
Record evidence
Where the condition is disputed, note the grade, who inspected it and, when useful, a photo. Disputes with customers, clients or suppliers are much easier with a record than without one.
Disposition: restock, repair or scrap
Each grade leads to a disposition, and each disposition has a stock consequence. Restock means the item returns to sellable stock in a specific location. Repair means it moves to a separate status or location while work is done. Scrap means it leaves stock with a reason code. Return to supplier means it is held pending a claim. Make the choice explicit in the system, because an item in the wrong status is invisible or, worse, sold when it should not be. Time-limit the holding areas, so items do not sit in limbo.
Stock updates
Stock should change only when the decision is made, not at first receipt. Received-but-not-inspected goods should appear in an on-hand-but-unavailable status, so they are counted for accountability but not offered to pick. When inspection completes, the disposition moves them to the correct status or location. That gives you correct available stock and a full history for each returned unit. Discrepancies between the authorised and received quantities follow the same discipline as other variances; see the warehouse inventory discrepancy workflow.
Client and 3PL reporting
If you handle returns for clients, they will want to know what came back, in what condition and what happened to it. Define a standard report: returns received, by reason and grade, and their disposition, over a period. Some warehouses show this to clients through a portal; see the 3PL client portal page for how that fits. Keep in mind that a portal only displays what the warehouse records, so consistent grades and reasons at intake matter more than the display.
Refund handoff
The warehouse decides the physical outcome; someone else usually decides the money. Define the handoff: when a return reaches a final grade, notify the party who handles refunds or credits with the reference, items, quantities and grade. The warehouse should not issue refunds itself unless that is your process. Which finance or shop system receives the notice, and how, is scoped per project, and no connector is assumed.
Our warehouse management system foundation covers returns among its capabilities; the exact scope is confirmed per engagement, which is implementation-led. The WMS readiness assessment is a quick way to check whether your returns process is ready to be systemised.
Questions
Should returns go straight back into stock?+
No. Hold them in a returns status, inspect and grade them, and only then move them to a sellable location or another disposition.
How many inspection grades should we use?+
A few that map directly to actions. If two grades lead to the same disposition, merge them.
Do you connect to carrier or marketplace return labels?+
No such connectors are claimed. Any integration is scoped per project only where an API exists.
Who issues the refund?+
Usually not the warehouse. Define the handoff so the responsible party receives the reference, items, quantities and grade once the decision is made.
What do we do with returns that match no order?+
Route them to a holding process with a named owner and a time limit, and record what is physically in the parcel.