Damaged, Returned and Quarantined Goods: Count and Report

Almost every warehouse has a corner. In it stand cartons with crushed edges, items that came back from a customer, and pallets that someone put aside "until it is decided". These are not usable stock, yet they are often either still in the books at full value or nowhere in the records at all. Either way the balance is distorted: the first overstates what can be sold, the second makes goods that exist look like a shortage. The remedy is to give such goods a clear status, a clear place and a line of their own in the report.

Three different statuses

• Damaged: goods that cannot be sold as they are. Some can be repaired or repacked, some can be sold at a reduced price, some are scrap.
• Returned: goods that came back from a customer, a shop or an online marketplace and are waiting for inspection. After checking they may return to stock, be repaired or be written off.
• Quarantined or on hold: goods kept apart for a quality question, a doubt about expiry, a dispute with the supplier, an insurance claim or an official hold. They may not leave without an authorisation.

The three differ in who may decide their fate and in what happens next, so they should never be lumped together under one word such as "defective".

Separate zones and clear labels

Give each status its own marked area, away from sellable stock, with floor markings if possible. Fix a label to every pallet or carton showing the status, the date it was set aside, the reason and the name of the person who decided. Use a colour code agreed in advance and written down, so that anyone can read it. Put quarantined goods behind a lock or at least a rope, with access limited to named people. Finally, keep a simple log for each zone, with the item, the quantity, the date in, the reason, the decision and the date out. Online sellers often receive many returns every week, and for them this log is not optional. Write down, too, who may release goods from each zone: the manager for scrap, a named inspector for returns, and the owner or a person he authorises for anything on hold. A zone without a named decision-maker fills up and never empties.

Count them separately

During a count, go zone by zone and record each status on its own. Never net damaged goods against sellable goods on the same line, and do not leave them out because "they are not ours to sell". Photograph each zone, with the date visible, and write the reason against each lot. As for value, such goods should not be carried at full cost. Show the quantity and its book cost on one side and an estimate of what can be recovered on the other, clearly marked as an estimate. How a write-down enters the accounts is a question for your accountant.

An example (conditional figures)

The books show 1,000 pieces of one item. The count finds 940 sellable pieces on the shelves, 25 damaged in a corner, 30 returns awaiting inspection and 5 on hold pending a supplier claim. Without separate zones the count is read as 940 against 1,000, a shortage of 60. With status lines the report reads: sellable 940, damaged 25, returned 30, on hold 5, total 1,000, equal to the books. Nothing is missing. The real news is different: only 940 of the 1,000 can actually be sold, so the books overstate sellable stock by 60 pieces.

Rules for the report

• Give each status its own line, with the quantity, the reason and the age.
• Show how long returns have been waiting. Returns that sit for more than a month usually mean nobody owns the decision.
• Move goods close to their expiry date into the hold zone, and say so in the report.
• Note patterns, such as the same item returned repeatedly for the same reason, because they point to a cause outside the warehouse.

In short

Goods in a corner are still your goods, and they deserve a status, a place and a line. WarehouseDepo counts damaged, returned and quarantined goods by status and shows them separately in the report, so that the balance you read is the balance you can actually sell.