Reverse Lifecycle Management (RLM) provides integrated, end-to-end functionality for the management and control and execution of reverse logistics transactions. The feature functionality in an RLM system enables the automation of key processes and tracking of critical data related to returns, warranty, inventory, transportation, shop floor control, etc. As the acronym implies, RLM supports the lifecycle of a reverse logistics transaction
An Reverse Logistics operartion can realize a number of quantifiable benefits by implementing an RLM solution. These benefits include but are not limited to:
- Cost reduction through better utilization and planning of assets and resources. This is brought about through visibility and planning tools.
- Administration consolidation through reduction of touch points which can be achieved through the integration capabilities, business rule work flows, and standardized management reports found within an RLM solution.
- Protected revenue and income recognized when companies better understand how much revenue and income associated with Aftermarket Service is at risk in the RLSC. This is achieved through the implementation of better controls found within end-to-end functionality and continuous monitoring of RL events (e.g., recall, returns, and warranty service).
- Liability protection: Many companies in diverse industries are susceptible and exposed to legal and regulatory action due to environmental and governmental regulations. The tracking and tracing features within an RLM provide up-to-date, real time information on the disposition of every item within the RLSC.
- Resource optimization: Inventory, transportation assets, employee allocation, and other resources are wasted on improper RL practices. Through business rules and better data, an RLM helps to conserve and manage a company’s resources.
- Productivity and efficiency gains: Poor RL processes take too much time resulting in poor customer satisfaction and wasted money. RLM streamlines and optimizes RL process time through standardized processes and procedures.
- Customer experience improvement: OEMs, 3PLs, Carriers, and Retailers can dramatically improve customer satisfaction through the implementation of self monitoring reverse logistics processes and systems. Refined business practices, such as issuing proper credit for returns, fast turnaround on sending products back to customers, balanced books, and issuing replacements are some crucial and improved processes that are automated by a state of the art RLM solution.
- IT resource reduction: By deploying an RLM on a SaaS platform, multiple instances and replication of expensive hardware and its maintenance are eliminated. The time to deploy the standardized SaaS RLM platform allows for any location to be ready in hours, not weeks or months.
These benefits help an RL operation achieve a best in class standard level of performance. The benefits can in turn be measured in terms of improved operational metrics such as:
- SLA compliance
- Repair Turnaround Time (TAT)
- Cycle Times
- Output Yield
- Quality Levels
- Repeat Failures
In turn, these improvements in operational performance can be monetized directly in the form of cost savings, productivity gains, revenue gains, and improved cash flow. Clearly, the implementation of an RLM will produce a significant ROI that justifies the business case and results in higher gross margins and reduced operating costs, not to mention improved quality levels and customer satisfaction. As such, RLM offers a strategic framework for transforming a Reverse Logistics operation jnto a strategic profit center.
To learn more about the benefits of RLM and how to acheive them in your organizations click here.
As many of you know, I recently authored a white paper titled Reverse Lifecycle Management: The Next Opportunity in Reverse Logistics. I received a lot of favorable comments from people who took the time to download and read the article. Thank’s so much . There were, or course, a few readers who expressed words of caution about the promise of the Reverse Life-cycle Management (RLM) concepts discussed in the paper. One person commented that an optimal RLM system based on best practices might be a good idea but without good project management and a willingness by the client to re-engineer some business processes the best solution can easily turn into a nightmare. Another person expressed concern about the quality of data being captured by the system. Their view was that a RLM solution may be world class but if it doesn’t collect that right data to improve operating effeciency and productivity or product performance, then it is useless.
Well, I couldn’t agree any stronger. Good project management and executive level buy-in are critical to a successful RLM implementation. I would say these components are important to any type of initiative that involves change. This is also true with respect to caputuring good, useful and reliable data as expressed by the old adage… “garbage in/garbage out”. RLM must consider the needs are all stakeholders, and that is an important distinction and decision that designers of a RLM solution need to take into account. Who are the stake-holders? Where do they fit in? What is their relationship? Where to they have an impact? These are are questions that must be answered when determining what type of data needs to be captured in the RLM solution.
One of the greatest benefits of RLM, and there are many, is that it provides a systemic platform for capturing, managing, analyzing and disseminating critical business intelligence necessary for optimizing an Reverse Logistics Operation regardless of the end-user's demographics (i.e., years in business, number of employees, market served, number of customers, type of business, etc.). Basically, RLM is a strategic framework for defining system functional requirements. Our view, which is supported by very extensive market research is that the current R.L. systemic infrastructures of most OEMs/3PSPs/Retailers/etc. are very fragmented and lack critical feature functionality for capturing critical data about the R.L. Supply Chain. Up until now, RL Supply Chain professionals have not had many available options for resolving systemic issues such as data accuracy, visibility, root cause analysis, etc. Instead, these professionals have had to either ignore the situation, create workarounds, or use brute force to resolve problems as they occurred. This in turn has had negative consequences on operating costs, personnel productivity, and the overall customer experience.
RLM is a new industry standard and will help entrenched management mitigate and avoid the above challenges by helping them to anticipate, plan, and monitor RL events. I hope you will see the value of the RLM concept. Please share with me you thoughts, comments, and criticisms so that we may continue to build awareness of the challenges and potential solutions to Reverse Life-cycle Management.
In my last blog post I discussed how Cloud Computing could have serious ramifications on the future of Aftermarket Service & Support. Currently, most service delivery paradigms are oriented toward an “old school” environment of very complex, installed base of networked technology. New advances in Cloud Computing (“New School”) now make it possible for everything from software applications, to operating platforms, to computer processing and storage (i.e., infrastructure) systems to be provided remotely through the internet. To access the clouds, all one needs to do is to plug in through their favorite digital device whether that is a Notebook, Netbook, Smart Phone, or some type of industry specific portable terminal (e.g., scanner, monitor, camera, dispenser, etc.)
While there is a high probability that cloud computing will become ubiquitous throughout the industry, there is a significant amount of “old school” technology out there that still needs to be maintained and supported. The challenge is to manage old school and new school environments on an optimal basis. Companies will, of course, still need to run aftermarket service as efficiently a possible using state of the art technology and best practices (e.g., Field Service Automation, Last Mile Delivery, Resource Optimization platforms, etc.). However, there are a number of current and emerging trends which need be considered when developing an optimal strategy to support “new school” computing advancements. These include:
1.
Variable Workforce & Installed Base Management- Service Providers need to be lean and mean while they transition from the old school to the new school. Cloud Computing is very disruptive to companies who maintain a large work force of field service and depot repair workers.
Variable force models provide a mechanism to convert high labor costs, which are fixed in the short term, into a truly variable, transaction based expense. Analytics about the frequency, cause, and corrective action associated with service events are even more critical than ever before toward optimal installed base management. Other applications like Remote Monitoring provide the online engine for collecting real-time data about installed base and offer a proactive tool for anticipating and even avoiding service events.
2.
New ways of monetizing services – Revenue streams associated with on site events such as SLAs, roll-outs, configuration management, etc. may no longer sustainable in the cloud computing environment. Service providers must monetize these types of services through a subscription based model as well as make the offering easily accessible through an “As a Service” model. Payment for front-end, start-up services like training, installation, etc. are now bundled into a transaction based, subscription model. This means that service providers will need to how to learn price services accordingly which may result in amortizing the costs over a period of time. Financial modeling and CAPEX management are among the skills that Service Managers need to succeed in this new school environment.
3.
Greater Demands on Reverse Logistics - The migration to cloud computing has a significant impact on reverse logistics because consumers will likely purchase more and more low-cost devices that plug into the clouds. This leads to greater requirements on the efficient disposal, repair, and recycling of used and unwanted products. The dominate support paradigm is also changing as well. Today, a virtual “firewall” exists between those who manage field service personnel and the customer relationship, and those who manage the reverse logistics supply chain.
Progressive companies are combining field service and reverse logistics under one roof as field service becomes more of a commodity service focused on the efficient movement of resources within the reverse logistics supply chain. Whereas the customer relationship is now transitioning to those who operate and maintain the cloud.
4.
I.T. Department requirements of the Individual Consumer – The proliferation of portable, smart digital devices which can download applications and plug into the clouds requires that the individual consumer become more tech savvy. In essence, every consumer will become their own I.T. department and will need options for support. We have already begun to see the emergence of B2C service providers who can answer questions occur about interoperability, compatibility, collaboration, service quality, and supportability.
Obviously, there is a lot to think about and even more to do to succeed in this new school environment. Blumberg Advisory Group is and has always been on the forward cutting edge in terms of working with clients to pioneer new advances in Aftermarket Service. A phrase we often heard during the early years of the internet was “act now or become road kill on the information super highway”. This statement rings true today so please act now and avoid becoming road kill.
A decade ago I wrote an article titled “Can Field Service Survive?” At that time, I made the prognosis that the business of High-Tech Field Service was alive and well, and would continue for some time. This prediction was made in light of industry trends (e.g., remote support) that were bringing the viability of Field Service into question. My belief that Field Service would remain viable was based on several observations namely 1) a marketplace characterized by a very complex installed base of networked technology, 2) increased customers requirements and willingness to pay for onsite service on a timely basis 3) requirement for a vast array of resources (e.g., parts, labor, data) needed to support customer requirements, 4) availability of commercially available off the shelf technology (e.g., Field Service Automation, Dynamic Scheduling, Mobility, Service Parts Optimization) to manage service on an efficient basis.
Basically, my article was written in the days before cloud computing.
Sure, we had the internet with all its hope and promise; a few innovative companies were even turning to hosted internet solutions to operate enterprise systems. However, all the heavy computing and network connectivity was performed on the customer’s premise. The idea of outsourced Applications (Software), Platforms, Infrastructure made available through internet “as a service” technology (e.g., SaaS, PaaS, and IaaS) was just a glimmer in the eyes of many futurists. I doubt that most Service Executives or Service Strategy consultants fathomed the extent that cloud computing would have on Aftermarket Service & Support.
Now that a full decade has passed, I have revisited my assumptions. To tell you the truth, I am not so sure that I can say the same about the future of field service as I once did. To quote Will Rogers…”The future isn’t what it used to be”. While many of the observations I made back in 2000 still exist today, the biggest difference is the installed base of technology has changed significantly. Instead of a large installed base of powerful machines cobbled together through a patchwork of Local Area and Wide Area Networks, everything from software applications, to operating platforms, to computing processing and storage can be provided remotely through the internet. Furthermore, operating platforms are open instead of proprietary which means more interoperability between devices and users. End-users can plug into the cloud from anywhere using any device (e.g., mobile phone, Netbook, Notebook, Set-Top Box, Game Console, etc.). The devices themselves are becoming smaller and smarter, and can sense the condition of the environment in which they operate. More importantly, virtualization and miniaturization has resulted in devices which contain standard components that are more affordable to purchase and easier to repair. And because they are more affordable, they are easier to replace resulting in a greater need to recycle and/or dispose of obsolete technology.
Indeed, we now live on a planet that is smarter, greener, more intelligent, and more dynamic than ever before. This paradigm shift is not specific to just computers. Everything that once relied on big iron and/or electrical or electromechanical processing on premise can now be performed at a centralized, remote location.
It applies to electricity, healthcare, telecommunications, transportation systems, building controls, you name it. Take Healthcare for example, telemedicine creates an environment where nurse practitioners can use intelligent instrumentation to perform a brain scan from a rural healthcare facility, the image is then processed by an MRI machine in another country, and read by a doctor in yet another country.
This new paradigm brings into question what type of service and support needs be performed, when, by whom, and for how much.
Are Service Level Agreements still relevant in this new world? Do we need a large field service workforce? How do we account for assets and manage customer relationships? We will explore this and attempt to bring some high level answers in our next blog post.
Stay tuned…
I have been following a number of discussions on LinkedIn related to the definition of exceptional service within the Aftermarket. Most of the comments take the view that front line service personnel are the key to exceptional service and that these people should be trained to delivery service with a smile, have concern for the customer, and have authority and responsibility for front line decision making. These comments suggest to me that a “warm and fuzzy” disposition is all that is needed to ensure exceptional service.
The cold and hard truth is that exceptional service involves so much more. There is no doubt in my mind that all employees, from the CEO to the front line worker, are critical to the success of any business and that customers love it when service is provided to them by someone with a smile, a warm heart, and empathic ear. However, I can think of countless times when I've seen businesses who offered horrible service in terms of timeliness, accuracy, consistency, etc. while losing money hand over first even though they empowered their front-line employees and trained them with good people skills.
To me, exceptional service means to know what the customer wants and deliver it on time, every time on a consistent, predictable, and repetitive basis. It is the role of a Service Executive to understand and deliver extra-ordinary services. The key to extra-ordinary service is to define the tangible aspects of service from the customers' perspective (That's Market Research 101). In essence, define what the customer’s expectation is in terms of time, accuracy, and availability. Obviously this may differ from industry to industry and/or segment to segment. That’s why market research is so important.
Next, have a system and processes in place to deliver service on a consistent and repetitive basis. Obviously, we will want to train all employees on these processes. Exceptional service also requires you establish a problem-resolution process to account for mistakes/error as they will happen; we are only human and nothing is “fail safe”. Last but not least, measure performance and improve where needed. Make sure everyone from the CEO to the front line worker knows what the metrics are. Continuously ask the customers for feedback on how to better meet their needs and proactively offer solutions which you've identified through your knowledge management process.
In summary, the cold, hard truth is that exceptional service is not only about people and communication, but about data, technology, and processes. State of the art service management solutions, collaborative computing platforms, mobility solutions, analytics and other related technology make it possible for any company to create an environment where every employee, from the CEO to front-line, can deliver exceptional services.
To learn more about the cold, hard truth of exceptional service and how your company can deliver it too visit our website www.blumberg-advisor.com or contact us at 215-643-9060.
The last 18 months have seen an up tick in M & A activity within the IT After Market Services Industry. Most notable transactions include but are not limited to:
- Pomeroy IT Solutions by Platinum Equity Holdings
- Anacomp Multivendor Services by Decision One (Cerberus Capital)
- National Support Services (NSS) by Global Equity Capital
- Halifax Corporation of Virginia by Global Equity Capital
- PTS Electronics by Moduslink Global Solutions (May 2008)
Despite this fact, the Aftermarket Services Industry is currently viewed as a buyer's market from the standpoint of acquisition opportunities. This is a valid description if one were to define aftermarket services as either Electronic Repair Services (Depot Repair), Hardware Break Fix, and Installation services . It is true that this segment of the market is faced with declining revenues and low profit margins.
The demand for Hardware Break Fix services will continue to decrease as the installed based of technology declines with the the adoption of SaaS, Cloud Computing, and Server Virtualization. Remote Support and Variable Workforce service models are putting hardware maintenance companies at further risk. As result, acquisition multiples for these types of companies are not very high, typically in the range of 3 to 5 times EBITDA. However, Break Fix companies provide a predictable and defensible income stream which makes them very attractive to Private Equity/Buy-Out Firms.
An entirely different market dynamic exists for Depot Repair companies who operate within the large and growing Reverse Logistics Services Industry. A Depot repair infrastructure is needed by any company who provides Warranty Services, Returns Management, Asset Recovery & IT Disposal, Liquidation, and/or Refurbishment. In addition, Depot Repair often pulls through additional profitable, service revenue streams such as inventory management, spare parts logistics, and warehousing services for RL providers. Furthermore, customers of RL Service Providers increasingly want to turn to a single point of contact for a bundled package of RL Services. Since ERS requires a significant investment in infrastructure, many 3rd Party Services Providers, particularly those who are publicly held, are looking at acquisitions as a strategy for aggressive growth. As such, it is possible that Depot Repair companies can realize a higher valuation multiples if positioned properly and targeted to strategic buyers within the RL Industry.
Regardless of which part of the Aftermarket Service Industry you reside in, it is still a good time for M & A among Depot Repair and Hardware Break Fix companies. For companies in the Break Fix market who lack an innovative growth strategy and/or access to capital, this maybe a good time to sell. Given the trends described above, we may even be seeing the top of the market for break fix companies. The time is also right for Depot Repair companies supporting the Reverse Logistics Market to sell as the trends suggest that only large, full service, and well capitalized service providers are those that will succeed in the future. The keys to successful M & A transactions is to "let the trend be your friend" and work with advisers & intermediaries who truly understand the market.
“A day will come when customers will evaluate our service business based on the capabilities of our Service Management System”. I remember this statement as clear as day. It was from a participant, a VP of Service & Support, in a focus group that I moderated for a client over 15 years ago. We were working with them to launch what was at the time considered to be cutting edge technology…a Field Service Mobility solution. This executive’s statement helped to validate our assessment of the market opportunity for our client. It also represented a mind-shift in the conventional wisdom toward the use of technology in delivering aftermarket services. Up until this point, service businesses were valued based on the technical expertise of the service personnel. Now it was becoming clear that technology was going to be key driver in the customer’s decision to select one service provider over the other.
Fast forward almost two (2) decades later and we can see how critical and pervasive technology is to the Reverse Logistics & Aftermarket Services industry. From ERP & SCM solutions to mobility, to planning & forecasting, to remote monitoring, it is hard to fathom a service business without technology. Indeed, even customers of service providers evaluate their vendors based on the vendor’s adoption of advanced technology. In the past, IT systems were utilized primarily as a control mechanism to store and retrieve data related to costs. Now they are used to enhance the customer experience. Case in point, business travelers, such as myself, who prefer to use Hertz for car rental due to ease of check in/out enabled through the use of advanced technology solutions such as electronic signage and handheld mobile devices.
Yet, it still amazes me that there are many companies in the Aftermarket Service Industry who still don’t understand this point. Even though industry research shows that IT System functionality is a key criterion in evaluating and selecting service providers, many service providers are still laggards in their use of advanced technology.
Despite the fact that many of these companies are losing business or not getting their fair share of new business due to gaps in their systemic infrastructure, many are in denial that this is even a problem at all. Instead they chalk up their lost sale to a more aggressive competitor or a Not Invented Here (N-I-H) syndrome of the customer. Worse still are those companies who realize they need new system functionality but postpone the decision to invest their own capital preferring instead to find a customer who can generate enough cash flow to fund this project. Not likely!
The fact of the matter is that Reverse Logistics and Aftermarket Service of today has become a technology intensive business as we had prognosticated a long time ago. Most people would think it ludicrous if an OEM did not invest in new technology to design and build better products, or to retool its manufacturing plants. A manufacturer would lose market share or eventually go out of business if this were the case. So why should this be any different for service providers? It is critical for service providers to understand that system functionality is part of the value proposition and mix of capabilities that customers require in a vendor. Customers are smart and can quickly judge a service providers capabilities based on assessment of the provider’s IT infrastructure. Service providers need to think of IT as an extension of their service offering.
Let’s make 2010 the year of advanced technology deployments in the Reverse Logistics & Aftermarket Service Industry. My goal in future blog posts will be to provide you with the expertise and know-how to evaluate, select, and deploy new technology to take your service business to the next level.
"This feels like déjà vu all over again!" This is a comment that my late father and business mentor used to say to me whenever we observed a situation with a client in which history seemed to have repeated. Indeed, this current recession has brought about some interesting industry trends which for me are like déjà vu all over again and again. What am I talking about? Basically, with the decline in product sales many original equipment manufacturers (OEMs) are looking to make up margins through a more aggressive attempt at developing new service business in the the aftermarket. However, some manufacturers are surprised to learn that they do not have a captive market fro service and must compete with Third Party Maintenance (TPM) and Independent Service Organizations (ISO) for business. ISO competition is often very troubling to OEMs because ISOs usually don't have the same overhead cost structures as OEMs. As such, they can often provide service at a much lower price. Since the natural instinct is one of survival, the OEM begins to investigate strategies and tactics to eliminate competition by implementing barriers such as denying ISOs access to parts, documentation, or diagnostics.
Quite frankly, I am not sure why some OEMs want to take an adversarial stance against ISOs. Sure, it is within the legal rights of an OEM to withhold intellectual property but this can be counterproductive to the market. First, customers want choices when it comes to purchase of the equipment as well as purchase of aftermarket services. By trying to squash competition through adversarial tactics, the OEM eliminates choice. Second, a landmark Supreme Court Case in the 1990s between Eastman Kodak (Defendant) and Image Technical Services (Plaintiff) ruled that an OEM can have monopoly control over the After Market even it doesn’t have control of the Product market. AS a result, certain competitive practices like tying in the purchase of parts or diagnostics software with service contracts is a violation of Sherman Anti-Trust Laws.
Rather than erecting competitive barriers, OEMs are advised to consider how Companies like IBM, Siemens, HP, Comcast, and Philips, etc. effectively use ISOs to deliver field service on an efficient, productive, and quality basis. Over the years, a number of OEMs have acquired ISOs to not only augment and expand service capabilities but also to develop multivendor service skill sets in order to better service customers who require a single point of contact, total service solution. The fact of the matter is that independents provide value to manufacturers by the mere fact that they force manufacturers to be proactive and innovative in serving their customers. Let’s face it; implementing strategies and tactics to squash compettion is the act of desperate company. Most companies win market share and create sustainable, profitable revenue growth through a business model built upon a committment to customer satistaction, quality processes, highly effecient systems, and well trained people. Furthermore, these companies view compeitition as a healthy thing. Why not use the same standard when it comes to the Aftermarket?
To learn more about strategies and tactics for winning business in the Aftermarket contact us at 215-643-9060 or visit us at www.blumberg-advisor.com
"What is the primary aim of our business?" This is a quesition that a colleague of mine, a turnaround expert, used to ask the client management team on every new assignment. The Management team's answers were predictable ranging from make a profit, to increase sales and customer satisfaction, to maximize shareholder value. "No", my friend would tell them, "the primary aim is to survive".
As companies ride out this recession and prepare for a recovery, the focus will continue to be on survival. In survival mode we need to remember the effectiveness of basic block and tackle moves. The "Strategic Business Model" provides such a framework. Basic tenants of the model are that the internal operating infrastructure and external sales & marketing function must work smoothly, effectively, and in tandem in order to fullfill the company's basic strategic service direction and achieve optimal levels of service performance. This means implementation Service Marketing and Sales programs to increase density of the customer base or installed base and implementation of state of the art service management systems like Field Service Automation, Service Parts Optimization, and Dynamic Scheduling solutions to improve service quality levels. Density is the key to profits in the Aftermarket Service Industry since it results in a lot of customers with similar needs and enables a company to leverage its infrastructure to drive effecinecy and effeciency.
Just as the company needs to work diligently and effectively in building a customer base to generate revenue, it must continously find ways to drive productivity and effeciency through its service delivery infrastructure. Benchmarks measurements such as Turnaround Time, FSE Utilization Rates, No Fault Found provide an assessment the productivity and effeciency of internal service management systems while Customer Satisfaction measures the external perspective on the service peformance. These measurements should be viewed in parrallel to determine if the internal infrastructure (e.g., Reverse Logistics, Field Service, Depot Repair) is capable of fullfilling the marketing promise and vice versa to determine if the marketing promise is capable of being delivered through the internal infrastructure. The Aftermarket Serivce organizations "Strategic Service direction" is achevied to the extent these facets of the business work effectively.
In laymen's terms, operating a Aftermarket Service operation is a little like driving a car in a cross country race. While it is important to keep an eye on the road (the market), sponsors (customers), and other drivers (competitors), it is also just as important to look under the hood to make sure the engine gets us where we need to go. The primary aim of companies in the Aftermarket Service world can be best achieved through continous measurement and calibration of the internal systems and external programs. This becomes even more important when the focus is on basic survival. This is the time when Aftermarket Service executivs and managers can not afford not to give careful attentino to their company's strategic direction and business model.
