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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Eye For Transport AmsterdamSeptember 27th, 2007

WorkshopReverse Logisticsin the hi-tech & electronics

industry

www.vil.be

© Flanders Institute for LogisticsJordaenskaai 25

B-2000 AntwerpenBelgium

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Flanders Institute for Logistics (VIL)

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

What is reverse logistics?

� The reverse logistics process covers the return flow of materialsfrom end customer towards manufacturing site:

� Physical flow

� Admin flow

� Financial flow

� Reverse flows are characterized by their extremely variable nature:

� Volume

� Quality

� Quantity

� Value

� Throughput times

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

RL trends in hi-tech/electronics

� Time is money: very fast devaluation of products

� Trend towards pan-European or global service networks

� Huge potential for 3PL’s

� Use of RMA (capture each return asap in the process)

� High importance of ICT for sorting /routing / SLA management

/ customer contact

� High percentage “no trouble found” (up to 40%)

� Return policy is essential (gatekeeping/filter the influx)

� Technical product knowledge needed from 3PL (e.g. I-Pod)

� B2B: credit check is important part of the process

� Reverse logistics and after sales are becoming profit centers

� Etc…

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Is this your company?

� Our customers are returning too many products!

� Our “no fault found” rate is 40%!

� We have too many intercompany returns!

� We neve see any credit from our OEM suppliers!

� Our salesforce isn’t playing by the rules!

� There is no transparency - We have no information or reports!

� Our returns situation is an accounting nightmare!

� Our returns process will always be out of

control – Let’s accept this as a fact of life…?

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Methodology: DMAIC (Six Sigma)

1) Define

2) Measure

3) Analyse

4) Improve

5) Control

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Define: perception of unimportance

(no process owner)

“The returned-goods dock of a warehouse is a window

to mistakes in engineering, sales, manufacturing and logistics.”

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Measure: returns from end customers

2.42%

4.77% 4.77%

1.92%

1.17%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

CI GS IN HE NDT

BG

% o

f tu

rno

ve

r

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

BE60 NL60 LU60 BENELUX GB60 DK60 IT60 ES60 PT60 IBERIA NO60 SE60 FI60 NORDIC

CI

GS

HE

TOT

End customers are returning 3-6 % of total turnover and orderlines

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Measure: return reasons

0

10

20

30

40

50

60

Transport

damage

Not happy

with product

Delivery error Quality defect Cancellation

of sale

No reason Late delivery Bad FC &

overstock

Return after

use

Commercial

Return reason

% o

f c

om

pa

nie

s

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Analyse: return value as % of turnover

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ReverseLogistics

Workshop

VIL © 2007

Analyse: share of RL in total logistics workload

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Analyse: detailed process map (IDEF0)

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Analyse: returns pipeline (Pareto)Pareto Analysis of Return Orders

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

100,00%

Cum. % of Return Orders

Cu

m.

Re

turn

Va

lue

Exactly 20% of return orders

account for 80% of total

return value

80% of return orders account

for 20% of total return value

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Analyse: time-stamp analysis

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ReverseLogistics

Workshop

VIL © 2007

Analyse: root causes (Ishikawa)

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Improve: take action

� Combat “no fault found”

� Separate RC from DC

� Select and measure necessary KPI’s

� Publish monthly return reports

� Educate salesforce and customers

� Gatekeeping / reduce the influx (return policy - RMA)

� Document returns (photos)

� Interface different ICT systems

� Correct master + data (I/C pricing)

� Automatic accounting procedures (write-off)

� Organizational discipline: prevent problems at the source

� It’s not rocket science! (e.g call center headsets)

� Etc…

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Control: elements of a total RL make-over

company/

product

infrastructure

legislation/

rules

process/

flows

product

HR/skills

systems/

KPIcost model

partners

transport

packaging

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Checklist product� High value density

� Serrato category

� Volume & weight

� Warehouse space needed (#pallet places)

� Seasonality (Christmas) -> forecasting?

� Statistics (MTBF)

� LT service contracts: B2B slow movers/spare parts needed (often >10 years)

� Top-5 return reasons (incl. no fault found!)

� Technical porduct knowledge needed

� High specialisation: “lock-in” of customer

� Inventarize 2nd hand/grey channels

� Play the recycling market (gold, silver)

� Risk management:

� Theft

� Environment (e.g. batteries)

� Fast product depreciation

� Cannibalisation (e.g. ink cartridges)

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Checklist infrastructure (warehouse)

� Keep “clean” and “dirty” flows separate: brownfield or greenfield ERC?

� # inbound docks > # outbound docks

� Automation potential is low

� Low and wide racks (manual picking, lots of buffer inventory)

� Use mezzanines (lots of slow movers/high value density/spare parts)

� Large reception area: FIFO per country/product

� Repackaging area

� Scattered desks & PC-islands (inspection/testing)

� Separate inventory areas for phase-outs & spare parts (slow movers), packaging, refurbished items, swap stock

� Separate guarded area for scrapping/shredding (containers)

� Theft risk: fencing, badge access, CCTV, night guards, “Fort Knox” area for refurbished items

� ERC economies of scale/consolidation potential: high

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Checklist ICT/KPI’s/reporting

� Identify KPI’s and collect historical data:

� # returns/product

� # returns/return reason

� # returns/customer

� Return rate/country

� Credit note amount

� Re-return rate

� # returns processed/day

� Cost/returned item

� Document throughput times (time stamps/SLA’s)

� Visibility of flows (web-enabled tracking & tracing)

� Open systems: interface/integrate with customer ERP (B2B)

� Call center: SLA contract management software needed

� Develop in-house ICT competente <-> find an ICT partner

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Checklist HR/skills

� Seasonality/peak loads: enable flex work

� Product training & technical skills (e.g. I-Pod)

� FTE admin/floor ratio: ca. 1/3

� Responsibility & accuracy (sorting/routing/scrap decisions)

� Knowledge of languages (RMA - English, French, German)

� ICT skills (SAP, Excel, Outlook)

� Procedural accuracy

� Dexterity, concentration, sharp eyesight

� Routine activities: socially beneficial employment (e.g. scrapping of ink cartridges)

� Job enrichment for outbound warehouse employees

� “Is reverse logistics female ?”

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Checklist rules/legislation

� WEEE

� Recupel: volumes reporting

� Vlarem II: limits the volume of “scrap inventory” allowed

� Shredding: OVAM + tax certification

� Sarbanes-Oxley: valuation of refurbished inventory

� ISO14001 (environmental compliance)

� TL9000 (B2B telecom)

� ISO 18000: health & safety (dangerous compounds)

� Customs and export (crossing EU borders)

� Pallet fumigation (USA/ASPAC)

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

VIL maturity model for RL: where are you?

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

Questions?

sven.verstrepen@vil.be

A complete VIL research report with

3PL roadmap for action

will be available in the fall of 2007.

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www.vil.be

ReverseLogistics

Workshop

VIL © 2007

www.vil.be

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Flanders Institute for Logistics (VIL)Jordaenskaai 25

B-2000 Antwerpen (Belgium)T: +32 (0) 3 229 05 00F: +32 (0) 3 229 05 10