What impact do your Reverse Logistics policies have on the customer experience? If you think it doesn't matter, then think again. I recently participated in round table discussion where I heard a Reverse Logistics professional talk about the challenges he faces with respect to managing the returns of defective tablet computers that are covered under warranty. The company where this individual works has an advanced exchange policy for defective units. However, the customer must provide their credit card number, even though it was used to purchase the product in the first place, prior to obtaining authorization for an advanced exchange unit to be sent out. The credit card charge is reversed, of course, if the unit is returned within the 14 day period as stated within the company’s return policy. The rationale for this practice is that it will prevent fraudulent claims. After all, customers who learn that they can get an advanced exchange may not return their defective unit. Even worse, the customer may simply try to take advantage of the policy by requesting a replacement unit; sort of a 2 (or more) for 1 deal.
The problem with this practice is the company has begun to receive numerous complaints from customers claiming they have been falsely charged for failure to return their unit. Some customers have even accused the company of charging them multiple times for the same return. The RL professional who expressed his concerns faces more challenges because many customers purchase their product with a pre-paid credit card or gift card which makes it difficult for the company to charge the return fee. Ironically, the RL professional told us that his company prides itself on providing a “great” customer experience.
There are many ways in which this company, who will remain nameless, could deal with their concerns to minimize the cost of returns and ensure high levels of customer satisfaction. In planning their returns program, they could have conducted a risk analysis to determine the level of fraud they could expect. They could then mitigate this risk by building the average dollar loss into the component cost of their warranty and subsequent market price of their product. This practice is a form of customer funded self-insurance. By this RL professional's own admission, the fraud rate is under 1% so the incremental cost to self-insure is low. However, what is most striking to me is not the return fraud itself but the fact that this company designed their policy to protect themselves from those who they distrust. In return, they have created a self-fulfilling prophecy where their customers distrust them. This is evidenced by complaints of false credit card charges.
This discussion really hit a nerve for me because I had just finished reading a great book titled Smart Trust by Stephen M.R. Covey and Greg Link. The premise of the book is that organizations who systematically and institutionally build an environment of trust find that their customers, employees, suppliers, and shareholders experience more energy, prosperity, and joy. Smart Trust takes the position that most people are trustworthy and will do the right thing. Instead of building systems to keep dishonest people out, they design processes that create loyal employees and raving fan customers. Sure there may be a few bad apples in every barrel but those who follow the principles of Smart Trust see these people as the exception rather than the norm. Furthermore, Smart Trust companies create systems and processes to discourage negative behavior and reward positive behavior. The authors of the book provide case studies of companies who are successful at building Smart Trust.
Zappos (www.zappos.com) is one of the companies profiled in this book and a model company for Reverse Logistics professionals. As many people know, Zappos has a 365 day return policy and their customer service desk is open 24/7. Furthermore, Zappos will send an advanced replacement before they receive the original unit back. The customer has up to 14 days to return the original product before their credit card (you know the one they used to place their original order) is charged. Zappos tries to avoid this situation from occurring and sends reminder emails if they don’t receive the product back within this timeframe. It is rare for them to charge a customer and when they do it usually occurs after multiple attempts over an extended period of time (i.e., several months). They follow this same policy even with pre-paid credit cards and gift cards.
Zappos grew from a start-up in 1999 that almost went bankrupt in 2002 to a company with over $1B in revenue. Tony Hsieh, founder of Zappos sold the company to Amazon in 2009 for $1.2 Billion. While many business analysts point to the Zappos’ customer service and employee friendly culture as its source of its success, it’s the founder’s commitment to Smart Trust that underpins everything. Zappos is truly a role model organization for RL professionals.
How can RL professionals build Smart Trust solutions? First, look at systems and policies in place today. Have they been designed to keep the “bad” people out instead of attracting the best customers? Assess the impact these policies have on sales, culture, and customer satisfaction. Next ask…what if we change our perspective and consistently encourage positive behavior in our employees and customers? Then determine how to design your systems and processes to achieve these results. I guarantee the answers to these questions will facilitate innovation and once implemented they will produce more fulfillment personally, professionally, and spiritually for all those involved.
I encourage you to read Smart Trust if you haven’t done so already. I also invite you to send me your thoughts and comments about how you’ve seen Smart Trust in action and the benefits it has created, in either your own company or those with whom you’ve done business. Please feel free to call me if you are still stuck and we can brainstorm ways to implement Smart Trust in your organization.
With the economy in a recovery, many organizations are now interested in growing their business by moving into new markets.
In a recent study that we conducted among service executives, over 70% of the respondents indicated that finding new service markets to enter is a top priority. We have found that service providers
are typically motivated to enter a new market when one or more of the following conditions exist:
- Service Revenues (and profits) have plateaued or declined in the heritage market
- Legacy products are replaced by new and emerging technologies
- Utilization levels are low but resources must remain fixed to support existing installed base; exapnsion into a new market improves resource utilization
- Shareholders desire a faster rate of growth.
For many companies, entering into a new service market is not as easy as it seems. A majority of firms fail miserably. This is because they don’t take the time to understand the dynamics, requirements, or competitive landscape of the new market. Quite often, they take a tactical approach to a strategic problem. In essence, they just market and sell their services without understanding whether a market exists or how to best serve it.
To succeed, companies must think and act strategically about entering a new market. The same level of due diligence must be given to entering a new market as investing in a start-up or acquiring a new business. So here are five (5) steps that you can follow to ensure successful entry and long-term growth within a new market:
- Gauge the market – You probably wouldn’t dive head first into a pool without knowing its depth or temperature. The same is true when it comes to entering a new market. You need to understand the size, dimensions, and direction of the market. What a stage of the lifecycle is this market in? Is it mature and declining or small but growing? By gauging the market, you will get a better idea of how much market share you can expect to capture and when to enter.
- Know your prospective buyer - You can’t close new sales without understanding the buyer’s needs and behavior. You will need to understand who the buyers are, what they buy, how frequently they buy, and how the buying process works. Equipped with this knowledge, you will be effective in winning and keeping business for the long term.
- Understand who else they buy from - Your prospective customer will likely have other options to choose from. You’ll need to know how your service compares to these choices and determine why they should buy from you versus brand X. Without a clear understanding of competition, it is difficult to develop a compelling value proposition and articulate how you are different so they will buy from you.
- Determine how you will go to market - You’ll need to determine your outcomes for the new market launch and what strategies and tactics you need to implement to reach these objectives. Most importantly, you need to figure out how your plan will be funded. Sometimes this involves an iterative process where you adjust strategy based on available budget and vice versa. The devil is in the details. You need to have a clear and precise plan for sales, marketing, and operations. Will you partner or go at it directly? How much will you spend on marketing and what type of marketing will you do? Will you need to hire more sales people? Will you need to invest in new tools and technology? Where will the investment come from, acquisitions, debt, equity raise? These are some of the questions your plan most answer to ensure long term success and viability.
- Manage your launch & measure success – You’ll need to have a structured and disciplined launch into your new market. Taking the “go get ‘um attitude” isn’t going to work. You need to educate your team on the market and train them on the offering, sales process, and value proposition. It is important that you have clear and process goals and objectives for your team that are calendar based. Obtain metrics on all the critical aspects of the sales and service delivery process. It will help you understand what’s working well and what needs to be improved.
To be successful at implementing these 5 steps you need access to good market data, be willing and able to think critically, and hold yourself accountable for results. This is no small task and it’s easy to get discouraged or frustrated. An experienced consultant or business coach can play a key role in keeping you on track and getting you to achieve your desire outcomes in the new market.
My thoughts of Reverse Logistics Association Conference & Exhibition Las Vegas 2013 were rekindled this week after reading my friend Jonathan Pine’s blog titled Fear and Loathing on the Reverse Logistics Trail. I can‘t believe that it has been a month since this event. Time sure does fly by. I know most of my colleagues and associates have spent the last couple of weeks absorbing what they have learned and following up on business situations they uncovered at the show.
The conference is a major Industry event for my firm and this year we were proud sponsors (Bronze). It has become a standard drill for me each year to lead workshops on the subjects of Sales & Marketing and Best Practices, and moderate a panel. This year’s panel was on the subject of “How OEMs are finding new sources of profits from their RL operations.” I had a distinguished group of individuals on my panel which included representatives from Renova Technology, RLA, Samsung, and CSDP Corporation who shared their views on automation, warranty management, outsourcing, and performance metrics.
Like many people attending the event, I was there to gain visibility, promote my cause, and conduct business. To be honest, I did not attend many of the conference sessions since I was there primarily to meet with friends, colleagues, customers, and business partners. For me, the show is about the people not the content. As such, it always produces an exceptional amount of value for me. However, I am always interested in what attendees have to say about the content they’ve seen and heard.
The response I received from many is that they need to hear something new from the speakers and panelists. They felt that they’ve heard much of this stuff about RMA, Returns, Asset Recovery, and Electronic Recycling before. Is the industry stagnating or is this a matter of there’s nothing new under the sun? Neither, I think the issue is that the Reverse Logistics Industry has matured. The last couple of years have seen an extensive amount of growth in both outsourcing of Reverse Logistics operations and consolidation of 3rd Party Service Providers. It had been a go-go time and companies became overconfident in their exuberance.
With industry consolidation and plateau in the growth of outsourcing, industry leaders must anticipate the future and make more committed choices when it comes to operating their businesses. They need to have laser sharp focus on results. The truth is doing more of the same is not going to work. In the past, it has been about what we need to do to manage Reverse Logistics and how to do it. Now we need to focus on why we do things, and continuously ask if there is a better way. We need to ask questions like: What business are we really in? Who is our customer? How do we continuously add value and create raving fans? These questions need to be asked by all participant, not just 3PSPs but OEMs, Retailers, and Distributors. By doing so, we can develop innovations and broaden our perspective of what’s possible. In essence, the discussion needs to change from a focus on tactics & operations to that of strategy and systems.
On that note, I wanted to highlight one of the sessions that I did attend. I was on the subject of Mobility and presented by Bryan Maguire of Jabil Aftermarket Service. The session titled “ Bring Your Own Device (BYOD) and Its Impact on Business Models” did a great job in identifying trends in mobility device proliferation and examining how the traditional service & support model may change in light of BYOD. I valued the fact that the presentation was strategic in nature and dealt with market facing issues impacting the Reverse Logistics Industry. It also raised the question about what type of systems & solutions would be required to support BYOD environments in the future.
I am grateful that Jabil was willing to share their perspective on the future of mobile devices since this is a topic that I am following very closely. I also admire the fact that Bryan did not claim that Jabil had all the answers. In fact, he encouraged discussion among the participants; many of whom were his direct competitors. Clearly, Jabil is an industry leader and understands the role and responsibility they have toward advancing knowledge about this industry. This presentation was not about Jabil or how great they think they are but about the industry, and where it’s headed.
Why am I lavishing so much praise on Jabil? I am sure many of you reading this think that I have an ulterior motive. You are right. I do and it’s not what you think! My motive is to provide guidance on how to advance the Reverse Logistics Industry. I personally think that all trade shows are a microcosm of the industry they serve. The Reverse Logistics Association Conference & Exhibition is no exception. If too many presentations seem stale, it’s because no one is willing to discuss advancements or innovations. If it seems like there are little contributions being made, it’s because everyone is there for themselves exemplified by the common theme of trying to get business. If sessions have low attendance, it’s because too few people are there to listen and learn. So how do we improve the culture within our industry and thus the RLA conference? We need to see ourselves and leaders and role models, and make our participation about professional growth and contribution. That’s how things will advance and change for the better.
Now it’s your turn. What was your experience at RLA like? Let me know where you think the Reverse Logistics Industry is headed. What do we need to do to ensure continuous improvement? Please share with me your perspectives.
One of the challenges that most companies face when it comes to selling Aftermarket & Reverse Logistics services is that they presume their prospects are ready and willing to buy at any given time. In reality a very small percentage (3%) of the population is ready to buy now and have often made their decision prior to reading or hearing your marketing message. The remaining population is either open to it, not thinking about it, think they are not interested, or definitely not interested in it. As such, a marketing program centered on your service capabilities, or the “what” and “how” of what you do, will have little or no impact in winning over new customers.
Source: The Ultimate Sales Machine; Chet Holmes 2007
The goal for your company then is to develop a strategy which grabs the interest and attention of those who are not ready to buy today and increase the chances that they will become buyers tomorrow. More importantly, your message most convey why you are in business. The best way to do this is through an Education Based Marketing program that focuses on market data rather than company information. The market data must be strategic in nature and deal with overall market trends your customers’ business in order for it to be effective. At the heart of the Education Based Marketing program is the “Meaningful Message”, also known as Unique Selling Proposition (USP) and headline. An example of a headline is "Uncovering hidden profits in Reverse Logistics” The elements (e.g., headline, message) within the Meaningful Message" focus on the challenges facing your customers’ business, and provide insight on how to overcome these challenges without ever pushing your own product or service. A great headline will grab the attention of your best buyers; a “Meaningful Message” will keep them engaged,
A well designed Meaningful Message meets the following objectives:
Provide an analysis of industry trends and business challenges in key market segments of interest
Identify and measure the impact of critical industry challenges on Reverse Logistics operations
Examine alternative strategies for resolving these challenges
Identify the optimal solution
Demonstrate benefits and advantages of optimal solution in quantifiable terms
Create market awareness for your service offering
Positions your company as the preferred solution provider
By incorporating your Meaningful Message into an Education Based marketing strategy you position yourself as an expert. This in turn provides buyers with a compelling reason to do business with you. Prospects believe they have found an ally who really understands their issues. Once this relationship is established, the Meaningful Message helps to define the buying criteria for your type of solution and demonstrates how your company meets or exceeds these standards. When they feel that you understand their problem they will listen, when they feel you have a solution they will buy.
The Meaningful Message also provides education for your sales team to be more effective in winning new business. In essence, you can educate your staff on the key issues facing the market you serve and on the solutions available to sovle the problem. You staff now understands why the company is in business and the role that is is playing in solving customers problems. Furthermore, the information in the Meaningful Message forms the basis of an integrated marketing communications strategy. In essence, it provides the content for brochures, white-papers, web conferences, presentations, press releases, etc.
How effective are you in selling Reverse Logistics services? Let us know what strategies and tactics you've employed to increase sales.
In our last blog post we identified that No Fault Found (NFF) is one of the most challenging and costly issues facing the Reverse Logistics Industry. We pointed out that NFF rates are typically higher when dealing with high volume, low margin products such as Consumer Electronics (CE) than with low volume, high margin equipment like Network Infrastructure technology.
The reason for this variance is that technical problems associated CE products are typically handled through a telephone support strategy. Quite often Consumers lack the technical sophistication necessary to trouble shoot and resolve a problem over the telephone. Many times the support organization cannot get to the cause of the problem in a timely manner and in the spirit of expediency issue an RMA. This practice tends to be most dominant when the product is sold and supported by channel partners. In many instances the channel partner lacks the training, documentation, or processes to resolve the problem remotely. Sometimes, the channel partner finds it more expedient to return the product to the manufacturer and avoid the costs associated with lengthy product support. The truth is the returned product may have nothing wrong with it. However, the service provider bears the cost associated with supporting the returned products.
Manufacturers often deal with this issue of high NFF rates from the channel by using either the “carrot or the stick” strategy. The carrot approach involves implementing programs that upgrade the skills and proficiency of channel providers in their attempt to diagnose and troubleshoot problems remotely. This could range from training courses, to documentation, to Knowledge Management and Problem Resolution tools. Some manufacturers provide private label technical support programs that channel partners can resell to their customers. The stick approach involves charging channel partners a penalty/diagnostic fee for any products that are returned NFF. Manufacturers must evaluate the impact of these “carrot or stick” strategies on future product purchases, customer satisfaction, market share, channel loyalty, and return on investment prior to implementing anyone of them. The optimal decision involves consideration of many variables.
NFF can be just as high when the product is supported directly by the Manufacturer. Best practices in service management suggest that NFF is impacted by the ability of the support organization to properly trouble shoot and diagnose the problem. The best strategy involves implementation of effective call screening and avoidance procedures prior to the dispatch of a Field Engineer or issuance of an RMA. Ideally, the process should identify the problem-symptom-cause and corrective action. The use of advanced technology such as Knowledge Management Systems can help automate and facilitate this problem.
High rates of NFF may also be the result of a practice known as parts "polling". This occurs when a Field Engineer (FE) tries to resolve a problem by swapping parts. When one part doesn’t work, the FE will try another part, and another part until the problem is resolved. At issue, the FE may assume that all the parts that didn’t work the first time are defective and send all back to the depot repair organization. These parts are deemed NFF, of course. This issue can of course be resolved through better training and improved diagnostics prior to dispatch and while at the point of service.
In a majority of cases, NFF can be reduced through systemic or procedural issues described above. However, there are instances when NFF is due to chronic failures or rogue parts. Intermittent failures are the most common form of chronic failures and dependent on the condition of the machine or network. Service providers are advised to invest in test equipment or develop a laboratory environment where they can recreate the condition causing the intermittent problem in the first place. For example, a service provider can conduct a vibration analysis test to determine if the failure is the result of the machine movement. Chronic failures may also be the result of variances in manufacturing or software enhancements to the original product. As such, it is important to capture and track as much data as possible about machine performance and service history. This will facilitate and expedite effective root cause analysis.
As discussed above, high NFF rates can be very costly to service organizations. While the symptoms behind NFF may be varied, the resolutions are similar. By capturing and analyzing service performance benchmarks on a periodic basis, a service provider can reduce costs and make continuous improvements in service quality. Ultimately, the majority of NFF issues can be resolved through the implementation of process improvements and state of the art management systems.
Are your Company’s Reverse Logistics practices positioned competitively with other companies in your industry? Could there be room for improvement? What are your pain points? Are you addressing the right Reverse Logistics and Aftermarket service processes?
According to the respondents in a recent benchmarking study within the Telecommunications and Consumer Electronics industries the two of their main pain points of Reverse Logistics professionals included No Fault Found and the overall length of the depot repair cycle.
Blumberg Advisory Group found that No Fault Found (NFF) remains one of the most cost prohibitive issues for manufacturers. 80% of respondents stated that they are looking for alternative solutions to combat high levels of NFF. All of the respondents stated that they are looking into new processes to implement in 2013 to bring down the number of NFF’s. NFF rates typically range from 5-11% within the Telecom sector while NFF’s ranged from 10-95% for Consumer Electronics Devices.
As stated above, the overall length of the depot repair cycle is of vital importance to respondents for two basic reasons: first, timely depot repair is essential to operational readiness and sustainability, and repair is typically the most responsive and least-costly option for supporting customer requirements. Second, because of the high unit cost, significant inventory investment results from the length of the depot repair cycle time. A number of best practices apply to many Depot centers. According to respondents the vendor compliance program goes hand in hand with advanced shipping notification. You want notification of repairs ahead of time, and you also want to communicate with 3rd party vendors exactly how the products should be handled. This may include specific labeling requirements, and standard case quantities for each individual item. Manufacturers also require real-time visibility into the return and repair processes of their 3rd Party Repair vendors. This enables to them to monitor performance and obtain inputs needed for planning of other logistical process related to depot repair such as inventory availability and warranty reimbursement. Best practices Depot Centers integrate operations with their vendors and suppliers. This way, suppliers help them achieve maximum throughput and maximum efficiency, in a minimum amount of time.
These are only two of the pain points discussed during this study. For additional information on Best Practices, Third Party Vendors, Reverse Logistics or email@example.com or call Michael Blumberg directly at 855-643-9060 Ext. 703.
It is part of our human nature to compare ourselves to others. In business this practice is known as benchmarking. A good criterion of an effective benchmark project is that it provides objective data to answer specific questions about a company’s performance relative to others in their industry. It is important to have a clear outcome and purpose in order to get good data. Here are some guidelines to help you achieve the best results:
- Benchmarking is a means to an end – it is not an end unto itself. Quite often, managers and executives want to use the data to prove a point. Benchmarks are nothing more than a measurement. Like most measurements we need to do something with the information. Often times the benchmark results raise new questions, usually about strategy or operations that must be answered and acted upon. Have a clear objective of what you are measuring and be even more clear about what you are prepared to do once you review the results.
- Improvement not validation - Don’t go into benchmarking with false expectations. The results will do far more than validate how you are doing; it will provide insight on where you can improve. Rarely does a company engage in a benchmark study only to learn that everything is fine and dandy with the current status quo. Don’t for a moment think that there is nothing new to learn either. I’ve worked with many companies who commissioned benchmark studies to validate the need to make a change in one area only to learn that the perceived issue was only a symptom associated with a different problem.
- Scratch below the surface - Thoroughness is the name of the game when it comes to benchmarking. Often times the answers are hidden well below the surface. It is the job of the benchmark analyst to be an agent of change. This requires that they dig deep and go wide. Performance in one area may be directly related to performance in another. There are a number of factors that impact performance. Quite often these factors are the root cause of the problem and/or a function of the underlying systems and processes being measured.
- Look for relationships – You must understand relationships in the data if you are going to interpret it correctly. You also need to be good at spotting patterns. The goal of benchmarking is to get to the root cause of the problem and identify where improvements need to be made. Quite often only one or two corrective actions are needed to make significant performance improvements in multiple areas. This is only possible if you can effectively observe patterns and relationships in data.
- Seek advice of an expert - Let’s face it, benchmarking can be a complex task. Work with someone who has been there before. Find someone who has understands your business and the industry you are in. More importantly, make sure you find someone who understands what’s possible within the realm of reason so that you can innovate. Ideally, you’ll want to compare you company not only to direct competitors in your market but to best practice companies in any industry or market place with similar characteristics. After all, your customers will do this. Why shouldn’t you? It is likely you will want to hire or retain an experienced industry expert to help you with this analysis.
- The answers are within you – There are times when their will be anomalies in your data and sometimes these anomalies contain tons of answers as to why things are the way they are. The only person who can explain this is you. Also, one thing for certain is that even the greatest expert in the world can’t make decisions for you. Only you can do this. You’ve completed your benchmarking efforts, now it is time to make real change. Whether you use a consultant to help you make this change is up to you. It is all about being resourceful and we all have this capacity within us.
Takeaways - Benchmarking is a strategic endeavor that must be part of every executive’s tool kit. As the old adage goes, that which gets measured gets improved. This is the primary objective of any benchmarking effort. The ability to effectively analyze patterns and relationships in data is critical since the root cause of performance is often systemic or procedural in nature. The experience and perspective of an objective third party advisor can ensure quality results and an efficient process. While experts can’t make decisions for your company, they can serve as a valuable guide in helping you find answers.
As part of aftermarket services, reverse logistics seldom receives much attention unless something goes wrong. This is especially surprising because:
- The average manufacturer spends 9% to 15% of total revenue on returns, according to a 2010 Aberdeen Group study.
- Improving reverse logistics can help firms increase revenue up to 5% of total sales.
- Additionally, 95% of customers will not buy from a company if they have a bad returns experience.
Source: Recovering Lost Profits by Improving Reverse Logistics 2011-2012
Given the substantial positive effect reverse logistics can have on your business, why do so many ignore this found money that can be mined from improving operational cost cutting and increasing sales, while securing customer loyalty.
It appears that the answer lies in the result of a poor planning process. This is sheer insanity. Companies fail because they don’t understand:
- Market opportunity & dynamics
- Customer requirements
- Competitive approaches
- Go to market execution
- Service delivery
And the insanity of it all Albert Einstein said it best, “Insanity is doing the same thing over and over and expecting a different result”
So how do we stop acting and going insane.
It’s really very simple, Effective Planning = Excellent Outcomes. We know one thing for sure the current way of thinking is not providing a competitive advantage.
Source: Patrick Burnson, Executive Editor. Logistics Management. Strip the risk out of reverse logistics. June 2012
From the chart above we see that 43% of hi-tech companies view aftermarket services and reverse logistics as a cost center supporting product sales and creating competitive differentiation. Obviously many companies are passing up significant opportunities for cost savings, profit growth and the ability to build loyal customers. Aftermarket services and reverse logistics must be recognized as competitive differentiators and proﬁt centers.
Now let’s take a look at the pain of this insanity of nonexistent or ineffective planning is having on OEM’s. OEM’s currently spent up to 4% of cost of goods sold [COGS] on non-value-add distribution functions like returns and reverse logistics.
Effectively managed, reverse logistics can enable organizations to increase profits, minimize liabilities and improve customer satisfaction. The key is to manage supply chains at the strategic level. This is an imperative why? Because…
- An average of 4% to 6% of all retail purchases are returned, costing the industry about $40 billion per year
- Up to 7% of an enterprise’s gross sales are consumed by return costs.
Customers returning electronics products will cost U.S. consumer electronics manufacturers and retailers nearly $17 billion this year, an increase of 21% since 2007.
Source: A "Returning Problem" - ProQuest.
So what’s the solution?1. A properly integrated and efficient Reverse logistics system is the golden ticket to success.
In a recent survey of over 160 companies in computer, consumer electronics, telecom, aerospace and manufacturing, those using best-in-class reverse logistics processes report:
- 93% average customer satisfaction rate (vs. 86% industry average)
- 4.4 average days parts return times (vs.14.5 days industry average)
- 21% decrease in cost per return materials authorization over a 12-month period (vs. 6% industry average)
Source: “Reverse Logistics: Driving Improved Returns Directly to the Bottom Line;” Aberdeen Group (February 2010).2. Making the strategic commitment to move from reverse logistics as a cost center to a revenue generator.
- Electronics giant Cisco partnered with a third-party provider to revamp its reverse logistics processes.
- What was an $8-million loss for Cisco in 2005 became a $147-million revenue generator by 2009.
Source: Medical Electronics Manufacturing Trends 2012
3. Increased recognition of service as a new revenue stream
Aberdeen's State of Service Management: Forecast for 2012 revealed organizations are transitioning their service businesses from cost centers to profit centers.
- 68% of 215 organizations polled by Aberdeen Group in 2012 indicated they were operating service as a profit center, compared to 61% the previous year.
- 72% indicated that they will run service as a profit center in 2012, highlighting the continuation of the business transformation trend.
Source: Aberdeen Group. State of Service Management: An Industry Perspective. March 19, 2012.4. Closing the collaboration gap is a win-win for both manufactures and distributors
- Shippers need to be more open to collaborating with 3PLs to address their top challenges.
- 3PLs must do a better job of selling the quality and value of their capabilities to electronics customers.
Source: 2012 THIRD-PARTY LOGISTICS STUDY. The State of Logistics Outsourcing. 2012 16Th Annual THIRD-PARTY LOGISTICS STUDY.
Effectively managed, reverse logistics can enable organizations to increase profits, minimize liabilities and improve customer satisfaction. While the cost of processing returns is less than 4% of total logistics costs, high-tech companies can average a recovery value of 28% on returned assets and enjoy a 12% competitive advantage in overall customer satisfaction with best-in-class reverse logistics.
We can help you design a methodology to assess ROI and create a model to justify investment and deliver profits contact us now!
What are the best strategic options for reverse logistics firms to sustain or grow sales and profits in the teeth of an economic slowdown? Given the slow rate of growth for the overall economy, what are your strategic options to not only survive but hopefully grow in this economic business cycle?
Here are some strategic options for reverse logistic firms to grow top line and bottom line revenue.
Cut Costs without Cutting Value
While the first reaction to every economic slowdown is to cut costs in the economic environment that we find ourselves in today, it is quite likely you have already executed significant cost cutting at the beginning of this recession and now into years of agonizing slow growth there isn’t more to cut. Or is there?
Your first cost cuts were likely broad and sweeping. Now is the time for a more thoughtful and careful dissection of your business processes and operations to find strategic cuts or reorganization. This approach will position your company to sustain a longer term recovery and be position to grow faster than the economy when the economic picture brightens. A small investment to build a burning platform could trigger a significant contribution to weathering this storm. Be wary of those that say we can’t cut more. On the other hand, there could be areas where you need to make an investment by re-allocating existing resources. Most importantly you need to understand your current financial and operational performance as it relates industry standards and best practices. Turn to a neutral observer like a strategic consultant that can objectively assess your situation and advice and guidance on where to make change.
Grow Revenue Organically
This is what everyone wants to do, but given the economic realities this is the biggest challenge. First, revenue growth must be achieved in spite of the overall economic climate, but how? The life blood of organic growth is repeat business from satisfied customers. You may want to conduct some independent market research such as a customer experience assessment to quickly understand your strengths and weaknesses from your most satisfied customers.
Equally as important is to survey those companies who you are not working with today or who may have once been your customer to gain a new perspective on what you need to focus on to win them back or keep them. This is based done by an independent third party in order to avoid bias and obtain completely objective results. As you know, quality control and customer service are critical growth components so focus you research methodology on these twin pillars for growing revenue.
Another key aspect of organic growth is to actively manage your market perception. You have likely cut your advertising budget but now you may want to reorder marketing communications priorities. Focus on your public perception and execute more inbound marketing activities that are more cost effective and qualify new customers faster. Beef up your PR effort in terms of communications messages; use your website and social media to drive positive company perception about how your firm is helping its customer’s through this difficult economic time. Remember to test, test, and retest these assumptions through customer interviews and discussion with other industry participants (e.g., vendors, suppliers, competitors, etc.)
Grow (or Exit) Through Merger or Acquisition
Mergers and Acquisitions are a logical way to increase revenue and market share on a profitable basis. Indeed, there has been a surge of acquisitions lately in the reverse logistics and aftermarket service industry. High profile strategic buyers include Arrow Electronics, Avnet, Liquidity Services, and Ingram Micro all who have make acquisition of companies with capabilities in Reverse Logistics and Aftermarket Services. Divestiture to a strategic or financial buyer also represents an optimal exit strategy for the seller. The majority of the acquisitions we have observed in the last year were completed not because the owners wanted to retire with a big pay day but because they recognized they strategic value, growth opportunities, and scalability made possible by becoming part of a larger organization with access to more operational and financial resources.
What strategic value or services add could your firm benefit from? Improving customer value and service will position your company to benefit immediately and grow faster when the economy improves.
Improve Service Mix
The first step in improving your service mix is to understand your current situation and evaluate your sales relative to the industry. Service mix is often something that just evolves as opposed to being forged from careful planning and analysis. This often results in not being able to maximize profits.
The best way to do that is to conduct a neutral assessment your service mix examining each service in terms of these attributes:
- Sales Volume
- Gross Profit
- Sales Costs
- Net margin
This may shed some valuable insights into which services are really the most profitable and those that are less profitable. Armed with a blueprint of where you stand are now and where you want to be will allow you to execute a rationalization of you service mix that could lead to reduced sales volume but increases in profitability.
Create More Value
When new sales are hard to come by in slow economic times you may want to turn to adding value to the services you currently offer. They can be standalone services or they can incorporate existing features of your current services. Examples of creating more value might be offering:
- extended warranties to existing products
- adding service contracts to new purchases
- e-waste recycling
- advanced exchange
- bundling services together in a contract
Any way you can provide an add services or convenience to your services for your customers adds value. Adding value to your clients can help differentiate you from your competition to increase sales.
There are many ways to increase sales and profits in a tough economy. The most important action you can take is to develop a strategic plan that may incorporate some or all of these strategic options. Enlisting a professional strategic management consultant expert in reverse logistics with the depth of experience and available relevant databases can minimize cost and maximize result, contact us.
Many business people respond with a knee-jerk reaction to the suggestion of hiring a strategic management consultant
. Resistance to “not invented here” is common and expected. But when the strategic plan is: “it worked before it will work again,” it may be time to rethink hiring a strategic management consultant.
Consider if you were a company who needs to increase their revenue and would like to do that by expanding into a new market with existing services or by offering a new service to their existing customers, what would you need to know? You would need to know a lot and yet, many companies move forward without strategic planning just because they think it is a good idea or because a competitor is doing it and therefore they need to do it too.
The risks of moving forward without a strategic plan are many. Here are a few problems not having a strategic plan would result in:
- Not knowing where you are going.
- No responsibility or accountability.
- Not having sufficient resources available and not knowing what resources will be needed to meet your goals.
- Insufficient marketplace and competitive information to plan and make smart strategic and tactical decisions.
Without a strategic plan for your company’s new venture, everything that could go wrong likely will.
- Lack of goal setting and failing to set benchmark standards will result in execution chaos and cost escalations leading to project failure.
- Lack of leadership means no responsibility and accountability and would result in a lot of peopled fired and could jeopardize the core business.
- Lack of a resource plan will result in project completion delays, cost overruns and reduced or non-existent ROI contribution.
- Lack of marketplace and competitive information will result in your company introducing the new buggy whip for the 21st century.
Change in most organizations is the least important activity on the minds of the organization. In fact, change is rarely embraced let alone integrated into the daily operation of the organization.
Though 79% of today’s top executives say responding quickly to change is the only way to survive our current economic challenges, only 1 in 3 of executives are even able to identify the threats before they strike.
Progress Software/Economist Intelligence Unit, 2012
So, if you want to make changes in your organization you may want a fresh perspective with the professional discipline to manage that change, someone who can, “see the forest for the trees” and commands the experience and knowledge in planning organizational change in your industry. A strategic management consultant will help you identify and manage successful change.
- How is the market changing?
- What are the performance gaps in the industry we can capitalize on?
- Are we changing to meet market needs and wants?
- What are the internal changes we need to make to compete and win?
If you want to create sustainable revenue growth and profits it is imperative to manage the business for today and be prepared for tomorrow. This means having the best information possible to make smarter business decisions.So what’s the best way to identify a strategic management consultant?
Set up criteria of what to look for in an expert consultant in reverse logistics specializing in strategic management of aftermarket services operations like depot repair, field services, returns, e-waste, and distressed old inventory management. That can offer the above essentials.
Demand a comprehensive solution provider that can service after your initial success of dealing with reverse logistics such as:
- Strategic Business Planning, including development of growth strategies, mergers and acquisitions, identification, and plan implementation
- Market Research, including market surveys, customer satisfaction audits, market structure analysis and evaluation
- Productivity & Efficiency Improvement, focusing on improving organization, operational, and systems productivity and efficiency
- Service management systems design, development, and implementation
Partnering with the right expert can turn reverse logistics headaches into gold.
Many consultants specialize on marketing of electronic products or the operational aspects of reverse logistics, and are limited to one technology area such as computers or channel segment like retailing computers – but it’s more productive and cost efficient to find an expert like Blumberg Advisory Group that specializes in the whole picture for success.
Those that only specialize in certain areas force you to get another consultant or expert to fill in the gaps, or worse yet, make guesstimates of the right answers – costing you more time and money. By integrating all these areas into a single point of contact that understands the whole industry and knows every part to optimize you can save significant money.
Hiring a strategic management consultant makes the most sense to help you manage change. As change agents, they can help you with the most critical aspect to manage and orchestrate business success. If you would like to get and stay ahead of change in your business contact us now.
Service Market Audit
Strategic Market Analysis - Uncovering the Performance Gap