CEO EXECUTIVE SERIES!
23 JULY 2012
REVERSE LOGISTICS THE OPPORTUNITIES OUTWEIGH THE CHALLENGES.....
NEWS & EVENTS
Complex and disjointed, but Reverse Logistics represents big opportunities for value creation writes Mark Mi#ar, Logistics Executive Group. Upcoming Event Logistics Executive is an official partner of the Asia Manufacturing Strategies Summit 2012. This exclusive event will take place in the Ritz-Carlton Hotel, Millenia, Singapore on 15th – 16th October 2012 and will provide the opportunity to discover the latest news and the best practices for optimizing your manufacturing and supply chain operations. The event is packed full of real life case studies, allowing you to benchmark your business against ‘best in class’ and ensure that you have the tools you need to form a coherent and logical strategy. To register please visit www.asiamanufacturingsummit.com/ register.
Logistics Executive Global News
Complex and disjointed, but Reverse Logistics represents big opportunities for value creation. Reverse Logistics includes the key processes involved in moving product back through the supply chain to accommodate overstocks, returns, defects and recalls and is defined by the Center for Logistics Management at University of Nevada as “the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal”. For product returns, Accenture report that on average it takes 12 times as many steps to process returns as it does to manage outbound logistics. The additional steps include activities such as assessing, repairing, repackaging, relabeling, restocking, reselling, recycling and refurbishing, which can result in the cost of reverse logistics being four to five times those of forward logistics. However, best-in-class practitioners can directly correlate their reverse logistics expertise and systems to positive impacts © 2012 LRS Group Pty. Ltd. All rights reserved!
Logistics Executive appoints Brian Cartwright as MD, Middle East Logistics Executive is pleased to announce the appointment of Brian Cartwright as Managing Director, Middle East and Africa. Brian has built a solid reputation in the region as a leading recruitment professional within the Supply Chain and Logistics Sector. He had previously worked for Logistics Executive when he moved to the region in 2008 and we are extremely pleased to be able to welcome him back on board as a member of our Senior Management team. Please feel free to contact Brian directly should you require any assistance from him and his team. Brian’s email address is: Brianc@LRS.ae
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CEO EXECUTIVE SERIES! o n Cu s to m e r S a t i s f a c t i o n , Brand Equity, Competitive Differentiation and Profitability. Re verse logistics is big business - in the USA it is estimated that manufacturers and retailers are now dealing with $100 billion of products goods being returned on an annual basis. Here in Asia, product returns are destined to expand exponentially, driven by two rapidly accelerating co n s u m e r t r e n d s – o n l i n e shopping and the proliferation of electronic gadgets. What types of goods are being returned? Product retur ns var y by industr y sector and ty pe of product, with some ty pical return percentages by product type summarized in graphic 1 (see right). Why are products being returned? According to the Reverse Logistics Association, products are returned for numerous reasons (as illustrated in graphic 2 below) What is interesting about these reasons for returns, is how by improving processes within
23 JULY 2012
Graphic 1: Product returns vary by industry sector and type of product, with some typical return percentages by product type.
the for ward supply chain, companies could surely eliminate many of these returns – for example Late Delivery, Missing Pa r t s , Damaged, No t Functioning – representing some 46% of returns. Fu r t h e r m o r e , o n e co u l d argue that additional diligence during the sales and customer service processes may further reduce the volume of products that are returned due to No Re a s o n , D i f f e r e n t t h a n Expected, Not Satisfied with Performance, Did not want Pr o d u c t a n d Fo u n d b e t t e r
competitive product – another 39% of all returns. Ho w e v e r, i n p r a c t i c e , companies do need to balance their acceptance of product returns in line with their philosophies and policies for their brand, warranties and customer service. The complexity of reverse logistics involves many more transactions than the forward supply chain and the various activities relating to product returns will span across many functional departments – sales, customer ser vice, finance, warehouse, repairs and transportation. For the majority of these functions, product Not#Func@oning# 23%# returns are likely seen as much 16%# Damaged# more of an annoyance rather Other# 14%# than a priority. However, with No#Reason# 9%# effective returns management providing tangible opportunities 9%# Different#than#Expected# for businesses to reduce costs, Not#Sa@sfied#with#Performance# 9%# reco ver value and impro ve Did#not#want#product# 8%# customer service, appointing Missing#Parts# 5%# one senior leader to be Found#be<er#compe@@ve#product# 4%# responsible for all aspects of Late#Delivery# 2%# product retur ns wil l focus 0%# 5%# 10%# 15%# 20%# 25%# attention and harness the resources to capitalize on the Graphic 2: According to the Reverse Logistics Association, products are returned for opportunities. numerous reasons. Source: Reverse Logistics Association.
© 2012 LRS Group Pty. Ltd. All rights reserved!
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CEO EXECUTIVE SERIES! There are typically five key elements of a reverse logistics ecosystem, involving multiple functions within the organization as well as a number of outsourced service providers: Customer Service – point of sale outlets, service centre or call centre Pr o d u c t Mo v e m e n t – transportation providers managing the collection and return of products to a depot, outbound transportation and delivery of replacement products Warehousing – centralized depots for receiving, sorting, storing, picking and dispatching Decision – inspection of r e t u r n e d i te m s i n o r d e r to determine their disposition – ie what action is most appropriate to maximize asset recover y potential Disposition – processing the returned products, which could involve repair, return to stock, refurbish, upgrade, recondition, salvage components, sell to third party, recycle or discard Throughout this collaborative network of internal and external service providers, companies need to deploy integrated and synchronized processes, making reverse logistics a technology intensive business. However, effective deployment of technology can significantly improve efficiencies and reduce costs, thereby increasing profitability – one example being the Synchronized Swap. One of the leading best practices in returns management, the Synchronized Swap is where one visit by the transportation provider includes both collection and delivery. Leveraging the IT system, the
23 JULY 2012 transaction processing and physical product al locations are synchronized such that the replacement product is delivered at the same time as the return product is co l l e c te d . No t necessarily applicable to every application, but particularly relevant in the ecommerce and online shopping sectors, the synchronized swap can significantly reduce costs by eliminating one transportation leg, whilst also increasing customer satisfaction because the customer doesn’t have to wait for replacement to be delivered. Fi v e C r i t i c a l S u c c e s s Factors For best in class reverse logistics, recommendation is for businesses to concentrate on these five key aspects that will enable success in capitalizing on the opportunities: 1.Vi s i b i l i t y – l e v e r a g e a common technology platform across and throughout your reverse logistics ecosystem, providing one single view of each r e t u r n e d p r o d u c t ’s j o u r n e y throughout the whole process. Adopt the Control Tower model to facilitate centralized information management that enables end to end visibility. Collaboration involves an open approach to information sharing 2.O w n e rs h i p – e n s u r e responsibility for all aspects of
© 2012 LRS Group Pty. Ltd. All rights reserved!
reverse logistics is concentrated within one clearly defined point of leadership, which has the authority to manage across all the internal silos within your organization and who is the central control point for all the external partners in the reverse logistics eco system. 3.Va l u e – c o n t i n u a l l y s e e k opportunities for value creation – both for your customers and for your company. Well managed reverse logistics operations, with disciplined processes and committed customer service, will engender customer loyalty and s t r e n g t h e n b r a n d e q u i t y. Effective and efficient reverse logistics operations, together with a diligent approach to asset reco ver y wil l capture value within your organization that can drive profitability and competitive advantage. 4.Customer Ser vice – the trigger that activates reverse logistics activities is when the customer experiences a problem with your product. Ensure you
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CEO EXECUTIVE SERIES! have well trained customer service personnel and robust complaints handling processes in order to minimize pain and inconvenience for the customer. Furthermore, persistent but polite probing of the problem early during the customer complaint interface can often result in successful resolution, without needing to return the product – minimising down time, enhancing customer experience and reducing the amount of costly returns that are no-fault-found. 5.For ward Fundamentals – consistently be aware that meticulous attention to detail across key activities in the forward suppl y chain can reduce the burden on reverse logistics by substantially reducing unnecessary returns. Customer Service As both a key element and a c r i t i c a l s u c c e s s f a c t o r, t h e Customer Service component can often become the ke y differentiator within your reverse logistics ecosystem. Customer s e r v i c e c a n m a ke - o r- b r e a k successful value creation and hence companies must deploy due diligence to the human capital dimension. This results in
23 JULY 2012 increasing demand for traditional customer service personnel to have increased breadth and depth of knowledge about the supply chain and logistics functions – combining technical expertise with soft skills. Organizations therefore need to adjust their talent acquisition and retention strategies accordingly, to ensure they are attracting candidates with the appropriate soft skills, in many cases from other industry sectors, and then rapidly training them on the technical aspects of reverse logistics. Conclusion: Reverse Logistics may indeed be complex, but the opportunities outweigh the challenges – persevere with overcoming the challenges! Concentrated efforts on developing the soft skills in parallel with enabling the infrastructure, transportation and technology platforms will empower value creation through customer satisfaction and financial results. Learn more about Reverse Logistics at the RLA Conference & Expo in Singapore this 25-27 September – contact markm@LogisticsExecutive.com or visit www.rla.org.
Logistics Executive www.logisticsexecutive.com Australia Sydney Phone: +61 2 8262 9800 Melbourne Phone: +61 3 9863 9488 Asia Shanghai Phone: +86 21 6427 6697 Singapore Phone: +65 6692 9202 Hong Kong Phone +852 3125 7654 India Phone +91 22 4090 7053 Middle East United Arab Emirates - Dubai Phone: +971 4 361 6275 New Zealand Wellington Phone: +64 4 496 6730
For a copy of the 2012 Logistics Executive Global Employment Report email: darrylj@logisticsexecutive.com or kimw@logisticsexecutive.com
AUTHOR PROFILE: MARK MILLAR 马克 Mark Millar leverages 25 years global business experience to develop and deliver enlightening and informative Keynote Presentations and to provide Consulting, Education and Advisory services - creating value for clients by empowering superior performance in their supply chain ecosystems. Acknowledged as an industry thought leader, Mark has been engaged by clients as Keynote Speaker, Moderator or Conference Chairman at more than 230 events in 20 countries. Recognised by the Global Institute of Logistics as “One of the most Progressive People in World Logistics”, Mark serves as a Director of Logistics Executive: markm@logisticsexecutive.com
© 2012 LRS Group Pty. Ltd. All rights reserved!
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