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.
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.
Date line: February 16, 2010 Reverse Logistics Association (RLA) Las Vegas 2010 Conference & Exhibition was held from February 7-10. I have had the long President's Holiday Weekend to reflect on what I found to be the key highlights of this conference. RLA Las Vegas is one of the key industry events of the year for Reverse Logistics and After Market Service Professionals. Chock full of workshops, presentations, exhibitors. It is a great forum to learn about industry trends and conduct commerce.
I look forward to attending RLA LV every year. It gives me a chance to network with long time business associates, make new contacts, and even conduct business. Each year that I have attended, the organization has asked me to conduct workshops on "Service Marketing" and "Best Practices & Benchmarks in Reverse Logistics". It gives me a great sense of fulfillment to share my knowledge with others, and this year, I noticed that the workshop participants were taking more copious notes then I ever before. I also moderated a panel with key executives for Motorola, Comtek, LTX-Credence, and Applied Materials on the subject of supply challenges and opportunities in managing high value, long lifecylce requirements. A "Lunch & Learn" workshop on Reverse Logistics Management Systems co-presented with Pat Anderson of Take Supply Chain Solutions was also a key highlight for me.
The most important aspect of going to RLA is that it provides me with a venue where I can conduct field research in order to validate current market trends and identify new opportunities. It allows me to roll-up my sleeves and get down in the trenches with RL professionals. The key take-aways for me this year were that RL professionals are resilient and last year (2009) was not such a bad year for most 3rd Party Service Providers. The observations and anecdotal evidence I collected lined up nicely with the issues I have been blogging about. Here's a quick run down of what I've found:
- Many 3rd Party Services providers followed their Strategic Business Model to increase top line revenue and/or improve profits.One CEO told me that he added 6 new customer accounts by outsourcing lead generation.
- Remember my blog about 2010 being the year of the Reverse Logistics Management System (RLMS)? Absolutely !! I met a number of software vendors for the first time who have developed state of the art RLMS and have flagship customer accounts to prove it. Expect a lot more interest and implementations in the future !!
- There is an increased interest among the financial community in the Reverse Logistics Market Space. I ran into 4 private equity groups who are interested in learning more about this market and searching for transactions. Obviously, companies will need growth capital to implement their new RLMS.
- Many of the larger 3rd Party Service Providers are pursuing acquisitive growth strategies to increase top line revenue and profits. This was eye opening for me as many of the other "analysts" have been predicting that 2010 will be about organic growth. Can we expect higher price valuations given the increasd competition for acquisitions? Will we soon see conditions where M & A in th RL space becomes a seller's market?
My analysis and prognosis is that RL is alive and well. The next three quarters of 2010 should be very interesting. RLA has given me a lot to think about. I can't wait unitil next year to see how things panned out. Please do not hesitate to contact me if any of these issues sparked your interest.
“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.
Innovation
and optimization; these are two (2) buzz words that have received increased
attention within the business world in general and the Aftermarket Service Industry
in particular. We are told by management gurus that the key to achieving long
terms growth and sustainable profits are twofold: 1) continuously develop new
and innovative solutions 2) continuously find ways to deliver these solutions
through the optimization of business processes and systems. I have given a lot of thought to these ideas
and have tried to look at ways to apply them to the Aftermarket & Reverse
Logistics Industry.
One area
where I believe OEMs can find ways to innovate and optimize their business is
through the integration and merger of Reverse Logistics and Product Support
activities into a single functional unit.
Currently, there is a bifurcation between Reverse Logistics and Product
Support activities in most OEM organizations especially those with long tail, field
service requirements. Reverse logistics
activities such as spare parts management, depot repair, and returns management
are often part of the supply chain function while customer facing activities
such as Technical Support, and Field Service Dispatch are
either part of either the Marketing, Customer Service, or a standalone Service function.
As a result of this bifurcation, we constantly see companies making sub-optimal
decisions about their business; focusing on one aspect over the other or by
not focusing on either because it is difficult to justify or rationalize the investment.
Conventional
wisdom has built a case against integration of these functions. While there is a growing recognition of the
strategic value of reverse logistics within OEMs and a push to carve this
function out from the broader supply function, Field Services which at one time
was believed to have high strategic value as a standalone function are now
being merged and morphed into the professional services function within many
OEMs in the High Technology Industry. It
appears that this is being done more for practical purposes in that field
service personnel can take on basic professional service tasks when business is
slow or utilization levels are down.
While this
approach may have positive benefits in the short run, it can have negative
impact in the long run. The skill set, labor rate, and cost structure associated
with Field Service is significantly different than professional services. Although a field service operation has higher
overhead costs than professional services, the margins on field service can
actually be higher when remote support functions are used to avoid a field service
dispatch entirely. On the other hand,
margins associated with professional services can only be realized when the
service is delivered.
It would appear
that innovation and optimization is a lot easier to achieve with field service than
professional service. So why integrate field service with reverse
logistics? Why not treat them as separate
functions? The practical answer is for the synergies that can be created. Optimization
of Field Service and Reverse Logistics functions can be achieved through the implementation
of structured business process and state of the art infrastructure. The systems and processes required to deliver
Field Service on an optimal basis are often dependent on those required for
Reverse Logistics and vice versa. When these systems and processes are aligned
and integrated, a company can achieve optimum level of efficiency and
productivity throughout their entire Service Supply Chain on a closed loop basis.
Furthermore, a company improves the chances of innovation when it understands
the dependencies and inter-relationships between business and processes. The presence of a closed loop, integrated
reverse logistics supply chain can ensure this outcome.
Case in
point, remote diagnostics can eliminate a field service dispatch or ensure the field
service engineer arrives with the right skills and spare parts, using mobile
communications technology an FSE can open an RMA, in turn a decision can be
made in real time as to where to route the returned part. Furthermore, this real
time information can be used to plan and forecast depot repair staffing and
spare parts stocking requirements. Given
the current trends, changes in technology, and emerging business practices it would
appear to make sense to treat Field Service as an extension of the Reverse
Logistics function. This may be easier said
than done as diligent planning and execution is required to ensure optimal
success.
Obviously, this the opinion of one man. Please share your thoughts with me on this topic. Does the convergence of field service and reverse logistics seem practical? Could it lead to greater optimization and innovation than if treated as standalone or seperate functions? Please comment.