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Excuse Me, Your Reverse Logistics Is Starting to Smell

Irv Grossman, VP of Supply Chain Operations in Chainalytics, wrote a very interesting article regarding the similarities between fishing and Reverse Logistics.  If you haven’t had a chance to read it, go ahead and take the time to read it first (here) and then come back.

What I’ve seen, as has much of the industry, is a growing focus on the Reverse Logistics side of the supply chain.  Reverse Logistics (RL) is the inverse of Forward Logistics (FL) where RL encompasses products from the consumer back upstream.  In contrast to FL, RL can embody much more complexity as it’s dependent on potential failures (think: general buyer’s remorse, warranty, insurance, etc.) in addition to the lead time associated after new product launches.  (FYI, there’s more reason it’s very complex — I’m being kind and simplifying to a couple main points.)

As Mr. Grossman points out, cycle times from receipt to disposition of assets once the assets have re-entered the supply chain are extremely critical.  In fishing, the longer you hold onto fish, the less valuable and stronger the scent.  Similarly, especially in high tech industries, product sitting in inventories start to lose value — and fast.  (In all my experience, I haven’t noticed these products starting to smell, yet.)  


Consider this: in the fast-paced world of cell phones, devices can lose at least 1% per week.  Let’s do some back-of-the-napkin math and extrapolate what this may mean… You accept 20,000 devices per week through your returns process.  The blended cost of a phone is roughly $350 (Nielsen estimates 2/3 of sales are smartphones with average smartphone COGS of $550, feature phones representing 1/3 of sales at $250 COGS) (see source 2).  Extrapolating, you can be losing $70K per week!  Aghast!  What can you do?!

Fear not!  There are ways to maximize value and create a leaner RL supply chain!

One of the most crucial areas companies are targeting is “simply” stopping returns from even occurring.  In the consumer electronics world, the key area of opportunity is tackling No Trouble Found (NTF), No Fault Found (NFF) or Cannot-Duplicate (CND) devices (NTF, NFF, and CND are by and large synonymous).  Accenture estimates 68% of returns are NTF (see source 3).  Indeed in my own experience, I’ve seen NTF rates reach as high as 60-65% including 30-35% purely software-related.  Addressing NTF devices not only reduces costs from the point-of-return and further up the supply chain, but it also increases customer satisfaction as he/ she is able to keep the device.  Happy customers make loyal customers, right?  Just watch the Genius Bar at any Apple store…

Once the product has entered the supply chain, however, companies are tackling the dispositioning problem. That is, how can we, the company, now maximize value recovery?  I know several companies (carrier, OEMs, retailers) are choosing one or a combination of the below solutions:

  • Speed up cycle times from receipt to disposition.  Depending on how many touchpoints of companies’ RL supply chain, companies can significantly inventory and maximize recovery by consolidating touch-points.
  • Maximize value recovery through optimal liquidation channels.  That sounds good, right?  What does that mean?  Optimal channel management is being able to select the RIGHT secondary channels to disposition through bulk sales, auctions, or otherwise.  Maximization of value includes the balance of capturing the most value per device while also clearing inventory of more obsolete products.  This may include the use of auctions and bulk sales.
  • Maximize value recovery through redeployment through channel/ program management.  Different from the preceding bullet as I wanted to highlight the liquidation aspect of cell phones above.  This solution is more related to redeploying returned assets into the company’s other programs (i.e. insurance, warranty, loaner phone, etc. programs).  If you’ve ever returned your computer for a warranty claim with an OEM, for example, you most likely received a refurbished unit back.  The key for the OEMs and companies performing the returns is, again, maximization of value.  Companies must understand the back-end value and determine necessary refurbishment costs to bring a returned asset to a quality level acceptable for redeployment.
This is not an exhaustive set of solutions.  However, these are a few prominent methods companies are employing to address their RL processes.  The Reverse Logistics supply chain can be one of the toughest areas of operations to tackle and a key cost-driver.  However, it can also by a key operational competitive advantage.  Luckily, there’s an evolution of technologies and solutions in today’s high-tech world, especially, to maximize value for not just the companies, but to end-consumers as well.  Triaging devices before returns and dispositioning those devices that do enter the RL supply chain with a sense of urgency and a bit of intelligence will ensure maximum value recovery and keep those returns from smelling fishy.


Sources and Research:
1. Grossman, Irv. (2012,  June 5). What Fishing Teaches Us about Reverse Logistics.  [Blog]  Retrieved from http://www.chainalytics.com/blog/service-supply-chain/what-fishing-teaches-us-about-reverse-logistics/
2. Two Thirds of New Mobile Buyers Now Opting For Smartphones. (2012, July). Retrieved from http://blog.nielsen.com/nielsenwire/online_mobile/two-thirds-of-new-mobile-buyers-now-opting-for-smartphones/
3. King, Joe. Carving Out a Path to Aftermarket Service Profitability Starts with the Basics. [PDF] Retrieved from  http://www.cscmpsfrt.org/resources/Documents/Value%20Recovery.pdf
4. AberdeenGroup. Industry Best Practices in Reverse Logistics. [PDF] Retrieved from http://www.ismsv.org/library/RevLogistics.pdf


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Leveraging Strategic Sourcing to Impact Your Bottom-Line Quickly

Jon Stegner’s famous article “Gloves on the Boardroom Table” is a classic example of not just leaders in denial (for my business school friends) but also the opportunity in procurement – specifically, strategic sourcing.  The article can be found here.  I’ll downplay the leaders in denial aspect in favor of the Supply Chain benefits in the article – Jon describes the opportunity in cost savings opportunities within his organization.  Convinced of significant savings opportunities, Jon tasked his summer intern to gather various gloves (yes, something so simple) across the factories in his organization, and what he found was staggering… FOUR HUNDRED TWENTY-FOUR different gloves were being used across the factories.  Many of the gloves were similar but their costs could vary greatly.  In one case, two gloves which were nearly identical were marked one for $3.22 and the other $10.55.  Jon Stegner proceeded to lay out all 424 gloves on the boardroom table for his peers to witness the opportunity at hand.  Jon didn’t share the cost savings his company was able to reap, instead citing a general “a great deal” but as you can imagine, strategic sourcing in this example can yield significant results.


And so this brings to light the very simple, yet impactful opportunity in strategic sourcing to your bottom line.  Synchronizing procurement efforts across an organization can have immediate effects to costs.  This should come as no surprise as you think about companies who do this extremely well including Wal-Mart (the epitome of operational excellence), UPS, The Home Depot, etc.  Strategic sourcing empowers your procurement organization reap the benefits of supplier competition.  And today, there are many ways to empower your company’s procurement strategy…
  • As a Consultant, I was part of a small team leading the transformation of the Procurement organization of a major IT outsourcing company with spend across global business units.  Over the next several years, the organization looked to reign overall Procurement spend with immediate savings through an e-Sourcing solution.  
    • The implementation of an e-Sourcing system enabled the company to leverage RFx templates and run auction events to drive down costs and enable supplier competition for its more than 1,000 vendors and more than a 100 internal procurement categories.
  • I spent a few years as a Procurement Analyst within a major third-party logistics company’s Procurement group within its Transportation organization.  Third-party logistics companies are the very shining examples of strategic sourcing.  I supported the management of largely truckload and less-than-truckload carriers on behalf of our customers analyzing transportation costs, rate changes, and provided lane-carrier recommendations.  At the end of the day, upper-tier carriers are very similar.  Yet, when you review RFP bids, some carriers bid with 30% premiums over their competitors.
    • Further benefits of strategic sourcing (and 3PLs) include “soft” benefits which at first are hard to quantify until service failures arise (in this example).  Aside from numbers, Procurement empowerment meant also assessing suppliers’ qualitative bid as well.  For example, being a low cost provider counts for naught should a carrier’s on-time performance be well below top-tier standards (99.8% oftentimes).
    • Other activities included the analysis of rate increase requests.  Our strategic goal here was mitigate costs as much as possible reducing rate increases, fuel surcharge increases, accessorials, etc.

It’s a no wonder during the Great Recession, opportunities in Procurement were (and are still) the fad.   Not many strategies can be implemented so quickly with such significant impact straight to your bottom dollar.  Strategic sourcing, e-Sourcing solutions, and intelligent deployment of 3PLs can be a powerful advantage against your competitors.  So the question is: how many gloves are on your table?

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How’s the health of your company?

What is the state of your business?  If I were to ask you how are your operations faring, would you hesitate?  What about the trends?  Has operations been reducing no-trouble found/ cannot-duplicate rates?  Is your call center not asking the right questions when triaging customer complaints thereby letting through costly non-warrantable devices?  Has your days of stock inventory levels been trending positively or negatively?  Are you hitting your targets?

Successful companies know how operations are running daily.  Not just the leaders of the company but from the ground-level up.  Paramount to understanding the state of your business is relevant, actionable reporting.  Call them KPIs – that’s Key Performance Indicators for those of you who don’t know. 

In today’s business, analysts, managers, and executives alike are inundated with loads of data.  However, it’s not always a sure thing that stakeholders know not only what to look for but how.  I’ve been lucky enough to have consulted at several clients where reporting has been on all sides of the extremes, though no one having the ideal/ best practices.  Let me share a few thoughts…
  • Work smarter, not harder.  I’ve seen clients who had excellent cadences for metric reviews (simply put) but the way they created the reports was overly complex.  Analysts pulled reports together during the week and once the weekly report was completed, the analysts started working on the following week’s!
  • Rationalize your dashboards and metrics.  Too often leaders think they’re doing a good job because their managers and analysts are creating a plethora of reports.  They could show you reports for every piece of the business.  But as leaders, there are only a handful of metrics you really should be focused on.  Don’t waste your time and everyone else’s in your meeting sifting through which metrics are key to driving your business.
  • Reports should be easily digestible.  Okay, so maybe if you’re staring at a report showing your customer churn is skyrocketing and so you may be reluctant to swallow that bitter pill.  However, metrics should be easily recognizable/ read.  In reviews with other Leadership, who really has the time to stare at a data table to understand what’s happening?  Like back in elementary school, communicate through pictures (i.e. graphs) to tell stories of the trends, the current state, and the future.  Make reports easily understood and read.
  • Keep a cadence.  Reviews of metrics and dashboards should be done intermittently.  How often depends on your business.  Someone once told me you need to review everyday (in a short meeting) citing a day of not knowing is death.  I hardly think missing a day would mean death in most industries… perhaps in healthcare (company-wise and literally for patients) which is where he worked.  Reviews should be done on a regular basis so that metrics have a baseline for trends and are a part of company life.
  • Make your metrics actionable.  What is the purpose of creating metrics illustrating your business is not faring well if you’re not going to do anything about it?  Metrics, like x-rays at the doctor, tell you the situation and gives you clues as to how to repair or improve your business.  
  • Assign accountability and responsibility.  Hold your people accountable to address concerns.  To the point directly above, metrics should be actionable so that the state of the business lies with your people.  If no one takes accountability and responsibility, then how can change happen?

It’s easy to say, “oh yes, we have metrics.  They’re…” and then you rattle off a dozen, but are those metrics really important to you?  Or maybe you’re really creating metrics and dashboards just to have them.  Paramount to reporting and the whole purpose of reporting is not to have a status meeting daily, weekly, or whenever and leave the room feeling good but nothing was really accomplished.  Instead, reports should be ACTIONABLE and ACCOUNTABLE.  Metrics should be directed and focused on specific operations so that before the meeting adjourns, every stakeholder knows what’s spiraling out of control, what metrics are off target, what are the corrective actions, and of course, who has ownership.  It’s too commonplace to just create reports just for the sake of having them without the necessity to truly understand the business and act upon them.

Treat status reviews and meetings of reports as a tool to check the health of your company.  If you monitor with the right frequency, check key components to your company’s health, and address the bad habits (negative trends or otherwise) through accountability, it will be far easier to keep your company fit for the foreseeable future… and perhaps prevent a few heart attacks both for the company and you.
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A nice post

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Ninjas and Jedis Wanted!

It seems everyone’s looking for Ninjas and the like these days… shout out to Irv Grossman for sharing and dubbing me the SC Ninja.  This, of course, is the stroke of genius that is this (my) blog!  Check out the WSJ’s article below!

Wall Street Journal – Ninjas and Jedis Wanted

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To be an effective consultant (part 2)

I wanted to continue my first post on being an effective consultant with this — the sequel.  What I mentioned before greatly hinges on the ability to quickly learn but adaptation and becoming a SC Ninja is more than learning.  Another attribute and key ingredient to being an effective consultant is blending in, too.  I mentioned “blending in” earlier but want to touch on this a bit more.


Clients and stakeholders typically aren’t likely to care much for your fancy clothes, fancy cars, whatever.  In fact, fancy clothing and fancy cars (rental or otherwise) can actually be a strong turn off and even lead clients to believe they’re paying too much.  The Great Recession has reignited the need for clients to cut costs.  Sometimes, clients need consultants to help identify those costs, but they aren’t willing to net zero when the costs for consultants are so much more.  So when entering any project, be sure to know what the dress code is like at the client site.  Don’t overdress.  I’ve heard before to dress no more than a half-step above.  So if the client wears jeans and polos, you can typically wear the same; however, it can be advisable to wear a pair of slacks and a button-up.  If the client wears ties, wear a tie… with a blazer if you so choose.  And if the rental car company upgrades you to a BMW or other high-end brand, opt for a less-fancy vehicle.  

Along with blending in, you’ll need to also understand and mimic the culture.  When I say culture, I don’t necessarily mean dietary habits.  Instead, I’m referring to being able to also act and speak the same language.  Being an effective consultant, SC Ninja, or even a secret agent, you need you blend in as if you’re one with the crowd.  You don’t see James Bond rapping when he walks into a ballroom full of rich villains, right?  Same with being a consultant, you need to be able to match the intellect and language of the clients.  Or at least, act like them.  If you’re a consultant, you’re probably bright.  Don’t outshine the client.    You always want to portray yourself as intelligent — that’s why they paid for your services.  However, you don’t want that intelligence to be off-putting and make clients feel “stupid” or “inferior.  If the client is conservative or highly professional, likewise, don’t walk in boisterous and start cussing.  In fact, it’s best you don’t cuss unless the client is pretty expletive-friendly, too, and you’ve developed a good rapport with the client.

In short, to be an effective consultant, think of what a Supply Chain Ninja would do or a secret agent.  Blend in.  Don’t stand out.  These keys are essential, especially when you’re in an environment when you know the client is not as up-to-speed as yourself or your team.  Be the Ninja.
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To be an effective consultant

To be an effective consultant, supply chain or otherwise, you have to be able to adapt.  As a Supply Chain Ninja, I have to be a chameleon… to be able to blend into my surroundings and new engagements.  Otherwise, you end up sticking out like a sore thumb and you don’t pick up new projects quickly.  You must be able to adapt and to learn on-the-fly.  This… this is the key to being an effective Supply Chain Ninja.

One example of this: 
I had one project with a Major Steel Tube Producer and Manufacturer.  The client was looking for operational and systemic improvements in the warehouse co-located within its steel mill.  However, I had limited experience in the steel industry.  As a project team, we were completely transparent with the Client’s Executive Team in our relative limited experience in the steel industry; however, we had a plethora of experience and qualifications in warehouse operations.  

To be effective and deliver exceptional results, we utilized our past experiences to relay warehousing’s core concepts.  Nuances always exist that differentiate client to client and project to project.  In the end, in warehouses and other business processes, core concepts are the same and “portable”… a pick’s a pick, a bin’s a bin, and picking strategies are crucial to the operations.  

As effective Supply Chain Ninjas, each team member was able to pick up the critical elements of the steel company and industry while marrying key warehouse concepts to identify the areas of opportunities in a relatively short time frame.  In the end, we partnered with the key stakeholders to deliver recommendations for bundling (picking and loading) strategies and  integration points for a warehouse management system implementation.  

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