E-commerce leaders such as Amazon and Warby Parker have created competitive advantage with advanced logistics, shipping, and returns processes, building fanatically loyal and high value customers. The trends in consumer e-commerce are penetrating into B2B, where customers expect the same flexible service, ease of use, and multitude of delivery and return options.
Without a strong vision and plan to meet these expectations, manufacturers and distributors risk rapid loss in market share to their more innovative competitors.
The battle for the customer is a given. We will explore the five areas that implementing a modern, cloud-based reverse logistics solution can provide.
Speed Cycle Times
Handling returns is often the step-child in the supply chain. Lack of visibility to what is coming in, multiple fragmented parties involved, including external repair, salvage vendors. Whether the flow includes a straight return, a return for product exchange, or advanced replacement/swap process, having an automated flow can cut down on overall cycle time, and provide much better visibility into each step and party in the process.
With complete end-to-end supply chain visibility, it is easier to pinpoint the bottlenecks, both internal and external. One global industrial customer MPO worked with had a 26-day target to get the spare part back, through their repair vendor, which they consistently had trouble meeting. However, the repair depot had a standard 12 day cycle which was a “black hole”, with no visibility. Any delays to the repair could not be foreseen, and blew out the target, resulting in cascading impact on plans to use the part downstream. By getting more granular visibility into the repair process, they could identify and address any issues earlier in the process, resulting in a 21% improvement in meeting their cycle time targets.
Cutting cycle times and getting predictable performance is key to customer satisfaction, and lays the groundwork for all the other benefits.
Grow Customer Revenue & Profit
Whether your customers need spare parts critical to their operation, or they are returning older products and components to repair/resale, providing a streamlined process, with visibility and accurate ETAs, are the foundation of a long and profitable relationship. In some cases, delays in spare part deliveries can result in penalties and fines, due to strict service level agreements. For one customer we worked with, the penalties were in the millions of dollars.
Knowing where all the inventory is in the reverse supply chain flow, across all product revisions, their condition, items in transit, in repair, at the local or central depot, allows customers to be much more agile and ensure they serve their customers as required.
Cut External Costs
Spare parts and reverse logistics cannot be run like forward logistics. The demand is not as predictable, and the product list proliferates across all supported product families. With increased outsourcing of repair, refurbish, and re-cycle, the visibility to costs and extra transportation legs can be significant. Selection of repair depot, is often based on legacy decisions, and with additional acquisitions or product launches, this becomes less optimized.
With optimized reverse flows, which can factor in transportation costs, compare external and internal operations costs/choices, and capacity, enterprises can reduce costs by 12-30%.
Reduce Supply Chain Inventory
Balancing inventory across depots, and ensuring visibility to incoming parts, items in repair is typically a challenge. Additionally, some operations also leverage customer consigned inventory, as well as supplier-managed items. There is always a pull between meeting customer service levels, lowering inventory and minimizing transportation costs from central warehouse locations.
The first step to ensuring the right inventory levels is getting end-to-end visibility. This goes beyond simply ensuring multi-tier visibility within your own operation, and must include inventory located at customers, in transit, at the repair depot, and with suppliers. Once this visibility is in place, more dynamic and automated rules can be applied to replenishment, customer fulfillment, and the reverse logistics process. For example, one MPO customer now routinely ships refurbished parts directly from their repair provider due to precise visibility of their partner’s operations and when the parts will be available.
With a robust reverse logistics program and granular visibility, MPO customers have reduced inventory between 6-13%.
Increase Operational Performance
With increased visibility, and more automated reverse logistics automation, the operations team can focus on more value-added tasks. Typically, MPO sees two functional areas that benefit from streamlined reverse logistics software: (1) customer call centers (2) planners. With proactive alerts, and tools to extend visibility to customers, the call center typically reduced calls by between 10-20%. Furthermore, with end-to-end visibility, when a customer does have questions, they can respond in a much more efficient fashion. Planners who are managing the order flow, spend less time on tactical activities (tracking, routing decisions, etc.) and more time analyzing factors like delivery performance, partner management, etc.
Where Should You Start
Typically when MPO starts speaking to customers, 2 or 3 of these benefits rise to the top. A lot depends on the current environment and past activities. Some companies are using a single provider (outsourcing everything) and are looking to diversify. Others have been through acquisitions, and they want to standardize their processes. The following are the steps to assess your situation:
- Determine a scope that is feasible to manage and achieve an ROI within 12 months. Should this be domestic or international? What set of products or business lines? etc.
- Review your existing spare parts and reverse logistics process to assess gaps, and areas of improvement.
- Stack rank the above benefits based on which ones could have the most impact.
- Review all internal and external parties in the reverse logistics flow.
- Assess technology and its ability to connect and orchestrate across internal and external partners.
With cloud technology and new Supply Chain Orchestration solutions available, now is the time to start improving your customer experience and creating the competitive advantage you need.