lessons in spare parts planning ... - reverse logistics · returns is the critical component of the...

Edition 24

LG Electronics Reverse Logistics Supports Retail Partners, Enhances Customer Experience - 6

Lessons in Spare Parts Planning- The Supreme Importance of

Avoiding a False StartPage 10

Donation as a Reverse Logistic Solution and Why Today’s Non-Profits Must

Operate Like a 3PLPage 22

Standards Committee - Standardizing Warranty Data

Page 34

Rubina Farooq – Director of Reverse Logistics for LG Electronics USAJames Nelles - VP of North America Supply Chain

Use your Voucher Code (worth $800) for the RLA Conference & Expo inLas Vegas

Register at www.RLAShows.orgJoin us for North America’s Premiere Reverse Logistics Event

On the Cover Articles

Features

Page 16

Technical Trends 46

Advertiser Index 48

Returning Thoughts 49

CONTENTS

Publisher – Gailen VickEditor - Lyndsey TurnerTechnical Director - Matt GwilliamCreative Design – Lyndsey TurnerDirector of Marketing - Jeff RobeRegistration Manager - Laura TeifelMembership Relations - Cynthia Talbot

Board of AdvisorsJack Allen – Cisco SystemsEdwin Heslinga – MicrosoftChuck Johnston – WAL-MARTChristopher Gant – Federal ExpressHartmut Liebel – Jabil Global ServicesDr. Dale Rogers – U. of Nevada, RenoBernie Schaeffer – MotorolaDoug Schmitt – DellTony Sciarrotta – Philips ConsumerElectronicsSusan Wackerman – Hewlett-PackardFor more information on the Board of Advisors, go to RLA.org Editorial and Circulation Office441 W. Main Suite DLehi, UT 84043-2024Phone: 801-331-8949Fax: [email protected] RL Magazine is BPA audited since 2010Printed in the U.S.A.

ISSUE 7 VOLUME 5REVERSE LOGISTICS MAGAZINE (ISSN 1934-3698) is published bi-monthly for $18.00/per year by Reverse Logistics Association located at 441 W. Main Suite D, Lehi, UT 84043-2024. Periodical Postage Paid at Lehi, UT 84043 and additional mailing offices.

POSTMASTER: Send address changes to 1040 N 1300 W Apt 48, St George, UT 84770.

Edition 24. published December 2010.

The information presented in this publication has been provided by corporations and is believed to be accurate; the publisher cannot assure its completeness or accuracy.

Issue 7 Volume 5

Copyright © 2010 by Reverse Logistics Association. All rights reserved. Reproduction in whole or part without permission is prohibited.

Page 28

Message from the 6 President & Editor

Site Visit

Page 22LG Electronics Reverse Logistics Solution Supports Retail Partners, Enhances Customer Experience

by Rubina Farooq, Director of Reverse Logistics for LG Electronics USA and Susan Kim, Director of Customer Advocacy

LG began questioning why customers were returning products at such a high rate. With the belief in flawless service and superior workmanship as tenets of the company’s brand, high return rates were deemed unacceptable by our CEO, who created the Reverse Logistics Department

Lessons in Spare Parts Planning-The Supreme Importance of Avoiding a False Start by Joseph Karcher

The implications of a spare parts false start can be disastrous by sub-optimizing the inventory investment, failing customer expectations during the critical stage of a product’s life, its birth and initial proliferation.

Utility, Supply Chain and Recycling Companies Collaborate to Reduce Carbon Footprint, Create Jobs and Increase Economic StabilityBy Robert Glenn Sims

Dominion East Ohio, a subsidiary of one of the nation’s largest producers and transporters of energy, is in the midst of the fourth year of a five-year program of installing automated meter reading equipment on 1.2 million customer meters. The project involves either replacing older meters or updating them with Encoder Receiver Transmitter devices, which transmit meter information via radio signals.

State-of-the-Art Reverse Logistics Systems Part I by Curtis Greve

Efficiently processing returned goods can literally be the difference between a company losing money or making money. The reverse logistics system (RMS) used to process returns is the critical component of the reverse logistics process. The returns system will determine if a company is going to maximize the value of returned assets or if they will needlessly throw money in the trash, literally.

Industry Events 39

Donation as a Reverse Logistic Solution and Why Today’s Non-Profits Must Operate Like a 3PLReverse Logistics Magazine talks with Pastor John Murphy, Founder and President of Harvest Time International

As product moves from its end-of-first use to its ”second” use, donors are very concerned about their product showing up at a flea market or on the internet. At Harvest Time International, donor’s brand is protected by contractual agreements with our ministry partners prohibiting resale of donated product.

Read the Press 13

Reverse Logistics Magazine welcomes articles and abstracts. Please send to: [email protected]

RL Magazine will publish 12 issues annually — 6 printed editions and

now with 6 new digital editions!

Page 10

Advisory Board 7

Industry Committees 8

Focus Committees 37

Technology Spotlight 42

Committee Survey

4

Page 40

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4 Reverse Logistics Magazine • Edition 24 Edition 24 • Reverse Logistics Magazine 5www.RLmagazine.com www.RLmagazine.com

Standards Committee - Standardizing Warranty DataThe Standards Committee is working to develop standardization in Reverse Logistics terms and practices. For a listing of many terms and to offer your thoughts about the terms we have defined so far, please visit our website: ReverseLogisticsWiki.com

Message from the Publisher A Board of Advisors comprised of industry experts has been set up to monitor and assist the Reverse Logistics Association management team in making informed decisions. Advisors include:

Board of Advisors

Jack Allen – Cisco

ack Allen currently serves as Director of Global Supply Chain Processes at Cisco. In his role, Jack is responsible for the

creation, development and performance of Cisco’s supply networks in the United States and internationally. His leadership and commitment to the recent success of several product and distribution center transfers, the development of a cross functional supply chain team and the development of an integrated forecasting/production planning/procurement supply chain planning process resulted in the improvements in Cisco’s supply chain and significant annual savings for Cisco.

Christopher Gant – FedEx

Chris Gant is Director for FedEx Supply Chain Sales. He is responsible for all business development strategy and

execution for both the FedEx SupplyChain Systems and FedEx Emerging Products Sales teams.

A 20-year veteran of transportation, logistics and electronic commerce, Chris has extensive expertise in the development and delivery of complex supply chain solutions for some of the world’s largest corporations inclusive of both Forward and Reverse Logistics. He be-gan his career with FedEx Ground (formerly RPS) in 1989 as an operations coordinator before joining the company’s sales team in 1991. He quickly rose through the sales lead-ership ranks, holding the posts of area sales manager, district sales manager and senior national account manager for FedEx Ground.

Edwin Heslinga – Microsoft

Edwin is currently Director of Reverse Logistics Programs and Policies for Microsoft Devices. In his po-

sition Edwin is responsible for development and enforcement of policies surrounding re-turns and all related costs to the returns and is also involved in the Customer Satisfaction Continuous Improvement Council. Working with Microsoft Call Center and the Microsoft Manufacturing Operations Edwin is driving the improvement of consumer satisfaction through agent assisted support and on-line support while managing the costs. Prior to working for Microsoft Edwin worked for Jabil Global Services as the Director of IT Solutions, where he worked with various

teams on the proposal and implementation of reversed logistics services for various com-panies at the Jabil factories around the world.

Charles Johnston – WAL-MART Stores, Inc.

Charles Johnston is General Manager at the Bentonville Return Center, WAL-MART

Stores, Inc. Chuck has been with WAL-MART for the past 14 years and his responsibilities include Returns, Imports, Exports, Tires and Printing and Mailing Distribution.

Hartmut Liebel – Jabil Global Services

Hartmut Liebel was named President, Jabil Global Services (JGS), in October 2004. He joined Jabil as

Executive Vice President in July 2002 and was named Chief Operating Officer in October 2003.

Dr. Dale Rogers – Univ. of Nevada, Reno

Dale Rogers is the Director of the Center for Logistics Management and a Professor

of Supply Chain Management at the University of Nevada. Dr. Rogers is a frequent speaker, a consultant to several leading firms, has been published in several logistics journals and has published several books on logistics and re-verse logistics. His current research interests are focused on the following: reverse logistics and returns, supply chain technologies, e-busi-ness supply chain management, and supply chain management.

Bernie Schaeffer – Motorola

Bernie Schaeffer is corpo-rate vice president of Post Sales Support for Motorola

Mobility. His global organization is responsi-ble for providing both in- and out-of-warranty repair services to both consumers and car-riers, provides consumer support services through call center, web access and on-device solutions, is the fulfillment engine for val-ue-added services, manages asset recovery on equipment returns and is the source of information on product field reliability.

Doug Schmitt – Dell

Doug Schmitt serves as VP of Dell’s Global Field Delivery organization with

international responsibility for global break/fix field engineers, same day service deliv-ery, spare parts depots, parts planning, ser-vice logistics, repair, reverse logistics and Dell’s global command centers. In addition to Doug’s role as VP Global Field Delivery he has responsibility for Americas Support Services. Previously, Doug held executive and senior management positions in service and finance at Dell, Inc.

Doug came to Dell in 1997 from Sequent Computer Systems where he held various senior level finance positions. Before Sequent, Doug worked in the banking sector.

Tony Sciarrotta – Philips Consumer Electronics

Tony is Director of Returns Management at Philips Consumer Electronics North

America. In this position, Tony leads returns reduction and entitlement initiatives for mainstream consumer electronics, and is also currently concerned with further driving the implementation of electronic registration for Philips products at leading retailers. Working with Philips Sales, Service, Marketing, and the Philips Business Excellence Group, Tony is helping drive several teams to improve the consumer experience and subsequently reduce the high rates of products returned with no defect found.

Susan Wackerman – Hewlett-Packard Company

Susan Wackerman is cur-rently a Sr. Operations Manager in the Americas

Supply Chain for HP’s Imaging and Printing Group. In her position, Susan is responsible for the Recycling Operations for HP Americas and the Returns Operations / Remarketing for HP Americas Imaging and Printing Group. This includes supply chain development, re-verse logistics, disposition and processing, refurbishment, resale, channel management. For Recycling Operations her product re-sponsibilities cover all HP product categories including inkjet and laser printing, digital im-aging, supplies, scanners, shared printing, PCs, notebooks, desktops, servers.

Complete biographies of Advisory Board Members are available from the RLA site

at:

www.ReverseLogisticsAssociation.org/company_advisory.php

This has been another great year at RLA, we launched our first global Conference & Expo in Brazil while having the largest single seminar in our history! On a personal note my 23rd grandchild was announced! Something is always changing around RLA and me personally. For some companies, this hasn’t been the best year financially, while others have found it very profitable. For those that have followed our editorial direction and invested into the Reverse Logistics Process, I’m sure you have seen great return on your investment. Change, EMBRACE IT! The one certainty in life is change. At least that is what everyone says. We should embrace it, even prepare for it, we should have courses on preparing for the unknown changes that you know are right around the corner. Then why do we resist it so much? History shows that change is inevitable. Because it is hard to accept change, we have worked to perpetuate what we have been taught. Yes, we have to improve it and feel ownership of the new and improved “old way.” So who would ever want to give up the very principle that your business plan, marketing

objectives, operational/RL processes are based upon? Edition 24 of Reverse Logistics Magazine is all about making changes (well, most of our editions are, but this one in particular). Please note the cover story on page 16 and see how the CEO of LG created a Reverse Logistics Department. This must have been very uncomfortable to senior management for a good while, but look at LG today, quality and customer satisfaction is second to none, that is real change.…Bottom line, don’t get caught-up in fighting a losing battle trying to protect the policy or process that has outlived its usefulness.

Gailen VickRLA Executive Directorwww.RLA.org

As the new Editor of Reverse Logistics Magazine I want to say thanks Mrs. Christine Morrow who served as our founding editor since 2006. I would like to thank everyone of our contributors, advertisers, along with the staff members who have helped and you, our readers for the success of this publication. It has made this professional transition a snap! Our circulation has grown to over 90,000.

With that said I would like to make a call for contributors and advertisers, please don’t hesitate to contact me even if just to pass along an idea or to introduce yourself.Lyndsey TurnerEditor - [email protected]

Our mission is to educate and inform Reverse Logistics

professionals around the world. RLA focuses on the reverse logistics processes across all industries. No matter the industry — High Tech, Consumer Electronics, Automotive, Medical/Pharmaceutical, Food and Beverage, Apparel, or other — our goal is to provide RL process knowledge to all industries. We want to educate everyone about the Reverse Logistics processes that are common to all industries and to

be a catalyst for innovation in developing and implementing new RL processes. We have been and will continue to provide our services to the industry at a moderate price.

Managing the latest information in services such as

repair, customer service, parts management, end-of-life manufacturing, service logistics, field service, returns processing and order fulfillment (just to name a few) can be a little intimidating, to say the least. Yet that is exactly

what the Reverse Logistics Association provides through our membership services. We serve manufacturers and retailers in a variety of settings while offering ongoing updates on market trends, research, mergers and acquisitions and potential outsourcing opportunities to 3PSPs. We have gained the attention of 3PLs like FedEx, DHL, USPS and UPS. 3PSPs like Teleplan, Foxconn, Flextronics, Canon, Sony and Jabil, along with small- and medium-sized service providers have found that RLA resources help

advertise their services to a regional and global audience. OEMs like Microsoft, HP, RIM, and Sony, along with Retailers like Wal-Mart, Canadian Tire, Tesco and Best Buy all participate at our events. Through RLA Events, RLA Connect services and our publications – RL Magazine and the Weekly News Clippings email – we help OEMs, ODMs, Branded and Retail companies find service partners and solutions providers that were previously unknown to them.OU

R M

ISSI

ON


Reverse Logistics Association Industry Committees

Focus Committees & Regional Focus continued on to page 37

AutomotiveChairman Needed

• Austin Rappe, Inmar• Charles Chappell, DEX• Dave Vikartofsky, A.T.S.

AviationChairperson - Bernie Gagnon, Kuehne + Nagel, Inc.

Consumer ElectronicsPresident - Chris Tejeda, InmarCo-Chair - Maryellen Daniels, Itran

Co-Chair - Charles Dunton, Genco-ATC Committee Members:• Chad Burke, Ryder• Jack DeButts, Dell (Past

Chair)• Brian Eddy, SubCon

Industries• Christopher Fabian,

Professional Service Solutions, LLC (Founding Chair)

• Todd Fenix, Ozark • Elaine Gasser, HP • Matt Gwilliam, Reverse

Logistics Association • Joel Jacobs, The Recon

Group • Dave Keltner, Cerqa • David Liscom, Hyper

Microsystems Inc.• Pedro Mauricio, CellBras • John McGurk, Globalware• Jeff Robe, RLA • Paul Rupnow, Andlor

Logistics Systems Inc • Bita Salimian, National

Electronics Service Dealer Association

• Jordan Sielaff, Ace Wireless • Steve Vertun, Segue

Corporation • Javier Villarreal, Ace

Wireless

Data StorageChairperson - NeededCommittee Members:

• Ed Inal, Western Digital• David Lick, Seagate• Gary Gear, Toshiba

• Glenn Grube, Moduslink• Wes Stott, DEX• Doug Pratt, Iomega• Kevin Arra, Onelife

Digital• Vladermir Gatti, Pandisc• Herman Goemans,

Sprague• John McGurk,

GlobalWare Solutions

Retail & Dot ComChairperson - Craig Sultan, The Home DepotCo-Chair - Pat Sullivan, Inmar - CLS Reverse Logistics.

WirelessChairperson - Doug Zody, MicrosoftCommittee Members:

• Will Blomqvist, The Kane Company

• Dennis Cain, DEX • Gary Cullen, 4PRL LLC • Bob Hathaway, TeleCycle,

LLC • Gailen Vick, Reverse

Logistics Association• Glen West, Celestica, Inc.

TelecomChairperson - Gary Cullen of 4PRL

• Glen West, Celestica• Dennis Cain, DEX• Bob Hathaway, Telecycle• Will Blomqvist, Kane

Company

Food & BeverageChairperson - Bruce Stevenson, RMS IncCo Chair – Mike Rawlins, IndependentCommittee Members:

• Tad Anderson, CH Robinson

• Matt Gwilliam, Reverse Logistics Association

• Oliver Hedgepeth, Hedgepeth Transport, LLC

• Misty Hicks, Americold Logistics

• Elyse Lyons, Ocean Spray Cranberries, Inc.

• Mike Rawlins, Independent • Jeff Robe, RLA • Bruce Stevenson, Return

Management Services, Inc.

Medical/PharmaceuticalChairperson - Needed

• Michael Blumberg, Blumberg Advisory Group

• Robert Ticknor, Services Innovations Group

• Dan Gardner, ATC Logistics & Electronics

• John McGurk, GlobalWare Solutions

Medical/Electronics Best PracticesChairperson - Needed

• Eric Miller, Agnitio Management Consultants

Want to make a difference? The following committees need members:

• Apparel• Appliances - White

Goods• Aviation• Household/Small

Appliances• Home Improvement• Marine Electronic

Equipment• Notebook/PC• Office Equipment• Photographic & Optical

Equipment• Televisions & Display

Devices – Brown GoodsJoin today at www.RLA.org

Industry Committees are set up to provide a standing forum for Reverse Logistics Professionals to meet on a regional and global basis and discuss common Reverse Logistics issues at the RLA Conferences & Expos. Industry Committees educate the industry on reverse logistics:

• “Best Practices”• Consumer Satisfaction

Issues• Regulations on a

Worldwide & Regional Basis

• Processes that can Reduce Costs


In an Olympic sprinting contest, a false start is not just measured by simply “jumping the gun;” according to the International Association of Athletics Federations (IAAF), strict rules govern the start of the race and powers are granted to the starting team to disqualify an athlete [1]. Practically speaking, the error occurs when the athlete attempts at guessing rather than waiting for the proper signal. Any athlete who commences their starting motion within 0.099 seconds after the starter’s pistol is fired, is deliberately estimating the start of the race.

There are vital principles to be learned and applied to inventory planning as we examine this starting process. The problems associated with over or under-buying at the beginning of the product’s life cycle are essentially a false start. The implications of

which can be disastrous by sub-optimizing the inventory investment, failing customer expectations during the critical stage of a product’s life. Consequently, a healthy start can be rewarding and lead to high margin

revenues if inventory is properly positioned.

This article examines the factors influencing the initial parts order process, provides insights in how

to best use the data available and explores the affects of a false start. As you view the examples provided, the reader is encouraged to reflect on their initial parts ordering (IPO) process and ask important questions:

• How do you anticipate the start of a new model?

• Are planners/buyers guessing or calculating, collaborating, aware of the severe consequences?

• What data factors enter into the calculus of your initial purchase decision?

• What distractions or emotions are limiting your ability to start according to your optimization strategies?

• What adjustments are being made for sales, forward stock locations, repair and part substitutions?

UNDERStANDiNG thE L imitS of REACt ioN t imE“On your marks, set…BOOM”. Resembling the sprinter anticipating the start of the race, your planning professionals have a narrow reaction window. The preparation of a new

IPO is a fundamental skill to be mastered. Aquino and O’Marah lists new product develop and launch (NPDL) skills as foundational for supply chain professionals [2]. Is your supply chain organizational strategy fundamentally focused on sourcing, delivery, and execution and post sales? Are you obsessed with governance, performance

and technology and perhaps missing the opportunity to develop reaction time? If the answer is yes then read on. A treasure awaits you. Lessons in Spare Parts Planning-The Supreme

Importance of Avoiding a False Start

ARTIC

LE

by Joseph Karcher

10 Reverse Logistics Magazine • Edition 24 www.RLmagazine.com

PREPARiNG foR thE RACEWe can get a clear idea of the entire race in the life of a spare part by first perceiving the context of the field where we are running. I have modified a reliability bathtub curve [3] to demonstrate the effect of normal failure on a service part. The graph below shows a typical consumer product. Events are less predictable at first as we run down hill and experience the initial quality of a product. Manufacturing errors are captured though burn in and various testing. During this time a planner needs to make predictions about what is required to support the product during its birth, adolescent period. After the phase, a pattern emerges and stays constant through the life of the warranty period. The product proceeds to wear out over time due to mechanical rather than electronic failure, and the uphill failure continues until the product is retired.

thE iPo tAbLE- GEtt iNG oUt of thE bLoCkSOur exercise begins by gathering failure data based on a commodity sort, (figure number 1). In this example, I have included vital laptop computer parts. Data is aligned in relative months so that only the first 90 days of the life cycle are assumed. The expected warranty period for these products is 12 months with 45

day lead times. It can be aggregated up to a model family level and expressed as a weighted failure percentage of the cumulative install base.

The next step is to group the failure into a view that allows the supply chain professional to examine best-worst performers in the initial 90 days and make assumptions. The failure rate assumption table (Figure 2), is formed from the initial data. Min/max numbers and average failure rates are then calculated. Additional formulas are inserted based on 20% and 90% of the max failure to provide a realistic guard rail range. It should be evident that it is very easy to be unduly influenced by either the best or worst models. Such sentiments will lead to larger problems down the road. Unnatural failure rates get noticed and escalated far too often. Returning to our sprinter once again, keep emotions in check at the start of the race and don’t dwell on past performances.

A further step is required in order to keep the IPO process manageable; it is called ranking (Figure 3). A class and sub-class grouping is suggested and assigned (A-E). More groupings may be created to include very low cost items that are less essential but nevertheless may have a customer impact. When creating a rank for a

particular commodity, they should be grouped based upon failure versus the install base. A further element of the IPO table is volume related class to the new product that is being planned. The first 90 days of the product life cycle is used in this instance, ten classes based on ranges of 5000 whole units but the amount of variation and class size is limitless. If the range is too large however, the plan will be less precise and cause inefficiencies in the form of under/over buying of parts.

foRwARD StoCk ADjUStmENtS foR SALES DEmAND NEtwoRk CUStomizAt ioN The combination of warranty failures and sales demand are the main drivers of usage during the initial period. Customer perception may be unduly influenced by either the best or worst models and this may inflate or limit customer preorder sales, fueling the burn rate of the IPO and a separate method for sales may be required. Other adjustments are needed for forward stock locations (FSL) that will place the initial buy in a higher ranking. I recommend evaluating sophisticated planning tools such as Baxter Planning Systems when considering FSL network planning. For purposes of argument, assume we are distributing from one

How to Get Value Out of Your Returns15 December 2010-As businesses gear up for the holiday shopping season, the focus is squarely on stocking shelves. Right now every business is scrambling to meet increased demand and maximize sales. But focusing purely on sales ignores what’s just around the corner – the returns season. http://www.softwareadvice.com/articles/scm/how-to-get-value-out-of-your-returns1121510/

ShopJimmy Achieves ISO 9001 and 14001 Certifications in USBloomington, MN—14 December 2010—ShopJimmy, a leader in TV replacement parts, has achieved the International Organization for Standardization’s (ISO) 9001:2008 and 14001:2004 certifications for its effective business processes and environmental standards at its US headquarters in Minnesota. http://www.shopjimmy.com/blog/?p=2349

CEA To Push For National E-Waste Policy14 December 2010-The Consumer Electronics Association plans to push Congress to develop a national policy on recycling of electronic waste. During a luncheon with reporters Tuesday, CEA President and CEO Gary Shapiro said the group is still working on what that policy should look like but said his group has managed to get industry-wide agreement on the need for a national policy on the issue instead of the piecemeal approach taking place at the state level. http://techdailydose.nationaljournal.com/2010/12/cea-to-push-for-national-ewast.php

Forecasting focus key for brands expanding in Asia13 December 2010-Foreign companies are flocking to Asia in general and

China in particular to boost sales in the hope of offsetting soft demand at home. But while potentially lucrative, such a move is not without its challenges, especially when it comes to forecasting and managing shopper demand across the supply chain. http://www.just-style.com/analysis/forecasting-focus-key-for-brands-expanding-in-asia_id109798.aspx

Ogden’s Hershey’s distribution center recognizedPittsburgh, PA—13 December 2010—GENCO ATC, the leader in product life cycle logistics and North America’s second largest third-party logistics provider, today announced that the company has selected the West Coast distribution center for Hershey’s Chocolate in Ogden, Utah as its “2010 Contract Logistics Facility of the Year”. http://www.standard.net/topics/business/2010/12/13/ogdens-hersheys-distribution-center-recognized

Reverse logistics company iForce launches returns refurbishment and remarketing arm10 December 2010-iForce has added value to its returns processing service by launching a refurbishment and remarking arm that will deliver an increase in financial returns back to the client. http://www.mhwmagazine.co.uk/LatestNews/Reverse_logistics_company_iForce_launches_returns_refurbishment_and_remarketing_arm-8100.html

Big bucks in boxes10 December 2010-To see one of the ways America has changed so far in the 21st century, look at the delivery trucks in your neighborhood. Christmas is arriving in a box, or more precisely, lots of boxes. Shipping companies carry more packages every year, for which they can thank two

different industries: Internet retailers and the airlines. http://www.post-gazette.com/pg/10344/1109634-28.stm

Stephanie Marques Joins ExpressPoint Technology Services as Director of MarketingMinneapolis, MN—23 November 2010—ExpressPoint Technology Services, Inc., an industry leader in global supply chain services and high quality multi-vendor depot repair services, today announced that Stephanie Marques has joined the company as Director of Marketing. http://www.expresspoint.com/About-Us/News.aspx

Sims Recycling Solutions Announces Expansion into New Jersey6 December 2010-Sims Recycling Solutions, the world’s largest electronics recycler has announced the location of their newest electronics recycling facility in Edison, New Jersey, with formal operations scheduled to begin in January of 2011. Sims will be offering electronics recycling services to residents and business in New York, New Jersey and the Philadelphia Metro Area. The new 93,000 sq-ft facility will be located on 401 Mill Road, Edison, NJ approximately 30 miles from New York City and 60 miles from Philadelphia. http://www.reverselogisticstrends.com/shownews.php?id=8268

Technology Conservation Group de Mexico Receives AwardLecanto, FL–-9 December 2010—Technology Conservation Group de Mexico in Guadalajara has received the Clean Industry Certification from PROFEPA, the Federal Environmental Protection agency of the Government of Mexico. http://www.tcgrecycling.com/news.html

Read the Press


customized front end forward stock coverage

• Further adjustments are made for repair loop and substitution considerations on high cost or critical parts

• IPO rates should be revisited quarterly or seasonally driven by the new model launch schedule

PREPARiNG foR thE NExt RACE A productive and timely start is critical for success. Some leeway may be granted for one false start or a field fault, but never two. The sprinter may risk throwing away years of preparation by his/her execution of a second false start. The failure forces the runner to leave the competitive area. The scratch damages his or her team’s success and future. An IPO false start may feel the same way. The disastrous effects on the customer base and financial resources are often overlooked.

ExCESS iNVENtoRy AND CUStomER PERCEPt ioNThe financial implications of overbuying at the time of IPO will drive unrecoverable excess inventory, this is especially true for more expensive, repairable items. If the overbuy is acute and exceeds the peak demand at the time the service part reaches maturity, the losses will widen because the inventory cannot be absorbed through future demand, “burn off”.

Under-planning at the time of

IPO immediately creates scarcity, backorders, lengthy service repairs, complaints and drives customer perceptions that the product is inferior. Evidence is available within the first few weeks of the new model launch. It is common for scarcity to fuel further buying as customers take a more conservative posture to avoid stock out. The brand will suffer and out-of warranty revenue will be lost.

CoNCLUSioN-LookiNG foRwARDThe critical milliseconds at the start of a sprint may ultimately determine the outcome. The supply chain organization can learn this principle by giving renewed attention to the granularity of the IPO process and understanding how it fits into the products’ reliability bathtub curve. With detailed care, preparation, and ample concentration, a competitive advantage can be obtained. The development of an IPO table that considers rank, class and preset conditions with flexible suppliers is one proven way to enable inventory optimization.

Finally, by rationalizing and eliminating the emotions from product launches, process improvements are available on subsequent model launches. Inwardly, an IPO team should be assembled to gauge the tools and conjecture that individual buyer/planner specialists are using. Key job factors and job influencers need to be considered questioning how much organizational governance exists over the IPO process. From

an outward perspective, what level of delivery flexibility do suppliers provide? What level of collaboration exists with suppliers to standardize and reduce new model cycle times?

It is never too late to lead through service. Increased customer recovery and significant cost savings are possible.To breakthrough, the IPO calculation must reach past a rational level based on simple averages and consider assertive corrections. If leaders are willing to take the steps necessary to resolve it, they will dart out of the blocks and win the race.

Joseph Karcher is the Director of Business Development at UPS

Supply Chain Services and former Director of Reverse Logistics at Toshiba America I n f o r m a t i o n Systems in Irvine California. He

has had over 20 years of extensive leadership experience in Supply Chain and Reverse Logistics and recognizes the forces shaping the market today: globalization, social responsibility, and strategic information systems. He holds a Masters Degree in Organizational Leadership from Gonzaga University.

[1] IAAF STARTING GUIDELINES – April 2009. Retrieved from IAAF

athletics. December 26, 2009.[2] Aquino D., O’Marah K. (2009). What makes a Modern Supply Chain Professional? Supply Chain Management Review May, 2009.[3] Muradyan A., (2007) Reliability Bathtub Curve Theoretical & Visual Representation– December 4, 2009.

main distribution center and only minor stocking and sales usage adjustments are made.

CREAt iNG A bASEL iNE foR USAGESo now we are in position in the starting blocks and ready to launch a new model. We are forecasting sales of 28,500 consumer products in the first 90 days and minor adjustments have been made for special front end demand considerations. The completed table (figure 4), represents the gross purchase required to meet demand during the initial period of the products life cycle. The planner/buyer should not stop here because further amendments are necessary for the repair loop and substitution parts.thE ADjUStED iPo- AN ASSERt iVE

APPRoAChOne of the critical failures made in planning the IPO is missing the opportunities for substitution and repairable items. Suppose that the “A” ranked items have common substitutes and are fully repairable with an 85% yield. By taking this assertive step, we can reduce purchases by 60%-65% for the most expensive class items. The chart below compares an emotional IPO posture versus a rational and assertive approach.

Buying to 90% of the highest failure rate is emotional. If similar model failure curves are rationalized through average failure and then demand adjusted, the purchase is rational. If

further fine-tuning is made for repair loop and substitution parts, I like to call it assertive. The savings are clear and the goal is to create an assertive plan. Let’s now enumerate the steps that are required to complete the assertive approach to guarantee the most benefit during the IPO period:• Individual parts are sorted and

grouped into part families• Commodities are ranked by

commodity type (A-E)• Failure rates are calculated by

average, min, max per family• Volumes are placed in ranges and

assigned a class (1-10)• Adjustments are made for sales

demand• Adjustments are made for

f iGURE 5 - iPo QUANt ity by CLASS


RLM

COVE

R ART

ICLE

The story of LG’s Return Reduction program began at Home -- The Home Depot, that is, and the major expansion in LG’s appliance business in the United States. In late 2005, LG Electronics took a hard look at product returns and the impact they had on consumers and the company’s retail partners. Already known for our strong product lineup, LG began questioning why customers were returning products at such a high rate. With the belief in flawless service

and superior workmanship as tenets of the company’s brand, high return rates were deemed unacceptable by our CEO, who created the Reverse Logistics Department (RLD).

The initial process was led by the LG supply chain management, and a team that included individuals from logistics, sales and marketing, order management, factory engineers, customer service and training. Today, the RLD spans the entire LG value

chain, comprising sales, marketing, design, research and development, customer service, and LG’s distribution partners. The department takes an end-to-end look at the delivery system in place, determines why the returns are happening, and finds solutions that satisfy LG’s discerning customer base.

The process began with the primary objective of working seamlessly with a specific distribution partner

to determine the cause of the “return problem.” It grew into something much more. Working with The Home Depot sales and installation teams members of the cross-functional RLD group began a detailed research phase which included the following:

Surveying end-users to determine the reason for the return,

• Examining delivery and installation,

• Riding with delivery and installation teams,

• Auditing inbound and warehouse SOPs,

• Reviewing product handling procedures,

• Studying installation procedures, and

• Examining product packaging.

What did they find? Frequently, the cause of the returns was less about the product itself than issues related to things like product packaging and guidelines for handling. Further, LG realized that by implementing a more effective reverse logistics process across all of its product categories, the company would ultimately save money, improve its profitability, become a better partner with its retailers and, most importantly, provide a better customer experience to end-users.

t imE to tEAR DowN AND REbUiLD

After significant information and data collection, team members felt they truly understood why many products were being returned, and the RLD team implemented a comprehensive “Tear Down and Rebuild” program. Working

closely with The Home Depot and internally across multiple channels within the LG supply chain, the RLD addressed and devised solutions for the “real reason” for the return. The RLD team created a multi-phase initiative touching every part of the LG organization and it continues to grow and evolve with new products as they are developed.

For example, in the case of LG dryers, the team found that many returns were due to the fact that when placing the order, customers did not know whether they had gas or electric connections. The dryer would arrive at the home of the customer and be unboxed before being brought into the house; once inside, the installer would realize it was not the right unit and would be forced to return it for the appropriate model. The solution was simple: attach stickers to the boxes reminding the installers to check the hook-ups before un-boxing. Today,

the permanent solution has been in place where the factory altered the label to clearly state if the machine is gas or electric, not just the model number.

New processes go beyond dryers and were adopted by different home appliance and consumer electronic products. The information and analysis led to a series of changes, refinements, and enhancements to LG’s delivery logistics system and process. Small changes and initiatives led to significant improvements:

• Training Programs: LG partnered with the customer to enhance delivery training programs already in place to be more frequent and informative.

• Measuring Pamphlets: Working with The Home Depot, LG placed pamphlets in stores to teach customers how to correctly

LG Electronics Reverse Logistics Solution Supports Retail Partners, Enhances Customer Experience

by Rubina Farooq, Director of Reverse Logistics for LG Electronics USA and Susan Kim, Director of Customer Advocacy


measure for their new appliances – not only teaching customers how to measure for the space that the appliance will fit into, but reminding them to also measure halls and doorways that the appliance will need to fit through upon arrival.

• Delivery Aids: Dents and scratches on appliances were minimized by counseling and encouraging the delivery agents to make better use of appliance blankets when moving units from the delivery truck to the dolly, and then into the home.

• Online Information: Consumer insights from research and surveys showed LG that people do a considerable amount of research in advance of a purchase. A more detailed “Measure First” appliance pamphlet was posted on the website to aid consumers in making savvy decisions from the start.

• Order Confirmation: In the case of any delivery, a new automated call campaign was instituted that would notify the customer in advance of their delivery and confirm the shipment to make sure it is correct. This was thought to be a safeguard to minimize errors in order fulfillment.

• Information Service: LG’s parts and service operations based in Huntsville, Ala., established online help centers for customers to ask questions about their product or service. This was an upgrade to traditional call centers that could only administer to one customer at a time. By shifting online (LG still has a traditional help line), more questions could be answered and more customers helped in the same amount of time. LG estimates that it receives approximately 10,000 live calls to its help lines each month, with each one having to be handled individually. Being online not

only allows agents to handle multiple inquiries at once – based on the nature of the inquiry – but also directs them online to find appropriate information, such as help manuals.

• Reverse Logistics: A key element of this transformative process was LG’s re-evaluation of its logistics procedures for shipping returned merchandise. Instead of using multiple shipping companies, the company selected FedEx to handle all returns. This consolidation of carriers combined with the overall return volume saved LG almost 50 percent in returns logistics costs. RL team worked with the warehouse personnel to refine SOP’s for handling returns which streamlined the processes and reduced the returns receiving lead time from over 30 days to less than 14 days -- a success story that reduced open return authorizations from the balance sheet and improved customer experience.

The successful program, which started with appliances, was eventually applied across other LG divisions, such as home entertainment or TV products. In some cases, tailored solutions were developed, looking at each distributor holistically, and by applying the body of information gathered by the RLD, potentially solve a problem or minimize returns.

Mass merchants and warehouse clubs are one of the largest sellers for televisions and the company wanted to address how to prevent television returns, which greatly eroded not only LG’s margins but the big-box retailer’s as well. After employing the insights and learning from its previous experiences, LG determined that several measures needed to be instituted including an easier installation process for purchasers

(which meant working with product design), creating a dedicated 1-800 number to answer installation and service questions, and upgrading the packaging used since mass-merchants sold televisions that are kept on the floor of their stores and carried out by individuals, not professional delivery services.

CoLLAboRAt ioN iS kEy

For LG, the key to success for reverse logistics has been the collaborative efforts of multiple divisions across the country, together with heavy involvement by our strong retail partners, such as The Home Depot. The process may have been championed by the CEO of LG Electronics North America, but it was embraced by every department. From 2006 to 2009, LG was able to reduce appliance returns by 50 percent, a huge stride in few years of astronomical growth. For last fiscal year LG enjoyed an overall return

reduction of 32 percent from previous year. Although that is a start, LG’s ultimate measure of success will be to attain industry-best status in all of its major product categories.

And while LG has experienced a significant savings from reducing returns, the consumer electronics innovator also wanted to change the way consumers and distributors felt about its products and support. Improved customer service, changes to logistics management and reducing damages to products, translated into an improved perception not only of LG products but the company as well. Distributors also appreciated the assistance because fewer returns meant a reduction lost revenue or sales.

ExCELLENt CUStomER SERV iCE bU iLDS LoyALty

The RLD continues to work hand-

in-hand with LG’s Customer Service Division, making refinements to its process and procedures, even after the blueprint to improve returns and service was created. The service team works across all divisions of LG Electronics to understand customer issues and resolve them in a timely fashion. Lately, the service team has increased collaboration with LG’s sales department to gain an even greater understanding of what customers are feeling about the buying and service process, and improve purchasing “pain points.” By collaborating with dealers and installers, some of the more notable outcomes were the establishment of a Dealer Exchange and damage allowance program.

In cooperation with the RLD, the Customer Service Division is now investing more time proactively listening to the market and monitoring customer feedback. The focus of this effort has been further expanded

SUSAN k im - D iRECtoR of CUStomER ADVoCACy

Edition 24 • Reverse Logistics Magazine 19www.RLmagazine.com

through LG’s “Voice of the Customer” initiative, which gathers data from various channels and sources to gain a better understanding of customers’ requirements and to drive innovative programs and support.

Experience has proven that challenges invariably arise when introducing new products with cutting-edge technology. What were previously thought to be problems are now considered as opportunities to incorporate customers’ feedback to our product development, marketing and service to enhance customers overall experience.

Along the way, LG uncovered a few surprises in its research, particularly about consumers. Customers are far more technology savvy and therefore interested and willing to work with us on product development. People also care greatly about having the latest technology and want to feel they are

getting their money’s worth in a new device or application.

PARt of thE PRoCESS

In cooperation with our customers, the LG Electronics USA Reverse Logistics Department continues to be an integral part of the organization’s sales and distribution process, while the Customer Service Division plays a vital role in establishing customer trust and maintaining brand loyalty. The RLD remains a dynamic group inside LG, continuously evolving and adapting its processes and procedures. Of course, we’ll never attain zero return status, but the improvements will no doubt lead to enhanced buyer affinity when purchasing, or recommending LG products.

Successful reverse logistics operations are not just one person’s job or one department’s responsibility.

This starts at the factory, through the retailers to after-sale support. It spans product design to the service division. By sharing experiences and having open communications, it improves the overall customer experience.

Rubina Farooq is head of the Reverse Logistics Department for LG Electronics USA.

Susan Kim is head of Customer Service, LG E l e c t r o n i c s Alabama Inc.


ReveRse Logistics cofeRence & expo

singapoRe, 2010 Recap

Reverse Logistics Association held its 7th annual Conference & Expo September 27-29th in Singapore at the Concorde Hotel Singapore. The event was a success with over 240 registered

participants and over 100 companies.

Companies like Dell, Microsoft, TNT, DHL, LG, Spring, Hewlett Packard and Teleplan were represented at the event. There was a great exchange of ideas, challenges, and issues in the reverse logistics industry.

The event opened with a pre-conference evening racing party on

Sunday, September 26th, followed by workshops on Monday with a

Welcome Address by RLA President Gailen Vick and a keynote address by Didier Chenneveau of LG on Tuesday.

Industry specific issues were discussed Tuesday afternoon and

all day Wednseday in conference sessions and panel discussions. Sunday evening registrants enjoyed a Racing Networking Event where Fernando Alonso for Ferrari won the race. Wednseday concluded with closing remarks by Gailen Vick and a “Lucky Draw.”

We had a great event, and as always, thank

those that attended. We look forward to Singapore

2011.

Keynote Address:Didier ChenneveauChief Supply Chain OfficerA Transformation Story of LG Electronics

thAnK you to our exhibitors &

sponsors

RLM

SITE

VISI

T

Reverse Logistics Magazine talks with Pastor John Murphy, Founder and President of Harvest Time International

Donation as a Reverse Logistic Solution and Why Today’s Non-Profits Must Operate Like a 3PL

RLM: Good afternoon Pastor John. To get started, what would you like our readers to know about Harvest Time International?

JM: My wife, Mary, and I started Harvest Time International 19 years ago in our garage, where we distributed donated food to local hunger victims. Today, we occupy a 100,000 square foot Global Mission Center and distribute many categories of product including food, clothing, household goods, kitchen wares, furniture, hygiene, dental, and

medical supplies to over 500 local, national and international ministries and Non-Profit organizations. We accept new, used, out of package, discontinued, scratched, dented, surplus, out-of-date, as well as, product that might ordinarily be labeled for disposal. Every 24 hours, we provide disaster and hunger relief to over 7,000 families. In addition, Harvest Time International is one of the largest outlets for volunteerism in Central Florida. In the last 12 months, over 6,000 people have volunteered 50,000 hours to help sort, stock and

distribute donated product. Recently, Harvest Time International received the “Best in America” seal from the Independent Charities of America, the Seminole County Chamber of Commerce Non-Profit of the year award, the Jefferson Award for the top Non-Profit of the year, as well as, other recognitions for community service and disaster relief.

RLM: Why do you think Harvest Time International has experienced such rapid growth?

JM: One reason is that we have established great donor alliances. Harvest Time International’s Unsalesables Management and Execution Logistics programs have saved our donors millions of dollars in reverse logistics expenses. In response, our donors have blessed us so that we can bless those in need. Another reason for our rapid growth is that we accept and repurpose all kinds of grocery and non-grocery product.

RLM: So you think today’s Non-Profits must operate like a 3PL?

JM: Absolutely. Just like a 3PL, a Non-Profit must listen to its donors and focus on their needs and how those needs can best be addressed. For example, Brand Protection, Environmental Sustainability and Execution Logistics are just a few of the major concerns associated with donating unsaleable product. Donors also want to be able to provide a mix of grocery and non-grocery unsaleable products without incurring the handling risk inherent with segregating the product prior to donation. In response to these concerns, Harvest Time International has developed an Unsaleables Management Program. By assuming the role of a 3PL, our donors experience better sustainability, asset protection, and warehouse utilization with lower handling, transportation and disposal costs. We also accept mixed, full and partial loads, pick-up same day and we pay the freight.

RLM: How does your Unsalesables Management Program meet your donor’s need for Brand Protection and Environmental Sustainability?

JM: As product moves from its end-of-first use to its ”second” use, donors are very concerned about their product showing up at a flea market

or on the internet. At Harvest Time International, our donor’s brand is protected by contractual agreements with our ministry partners prohibiting resale of donated product. If necessary, we can also distribute the product to needy families in locations where there is no risk of a brand

being compromised. Environmental Sustainability is another very real concern. Since Harvest Time International accepts donated product that might ordinarily be labeled for disposal, our goal is to repurpose or recycle. This preserves landfill space and lowers handling risks and costs


and fees associated with disposal.

RLM: What are some examples of a product that was labeled for disposal that you were able to repurpose?

JM: One of our donors, a large retail chain, was faced with having to dispose of over 24,000 gallons of customer returned house paint. In addition to handling risk and transportation and disposal costs, there were obvious warehousing, environmental sustainability and landfill issues. We accepted the paint, had it mixed into one color, and shipped it to developing countries. What was a formidable reverse logistics challenge was converted to a blessing to thousands of people and a charitable donation for our donor.

Another donor, a resort and theme park operator, was concerned about brand protection, environmental sustainability and the expense associated with the disposal of its used hotel linens and uniforms. Together, we developed a solution whereby, every month, we ship

multiple containers of clean, useable bedding, linens and clothing overseas to orphanages, refugee camps and field hospitals. In the last 10 years, the donor has touched over 15,000,000 lives.

RLM: What do you mean by the term Execution Logistics?

JM: No matter how comprehensive a non-for-profit’s unsaleables program is, it is of little value to a donor if the product is not moved in an expeditious and efficient manner. Response time and load flexibility are critical. Donors want to work with recipients that can pick up full or less than truck loads (LTL) of mixed product within hours of being notified. To meet these execution demands, Harvest Time International has outsourced its transportation logistics to C.H. Robinson Worldwide, Inc. We can now accept any donation, in quantities that range from a few pallets to many truckloads, with very little lead time. We can also spot a trailer at the dock door, which accommodates donors who have neither storage space for

its donations nor yard equipment. As product becomes available, it is loaded directly on the trailer, maximizing warehouse floor space. With C.H. Robinson, we have a national matrix of local transportation and warehouse operators who can aggregate full loads that are either shipped to Harvest Time or rerouted by us to other ministry or Non-Profit partners. The success of the program benefits all parties. Because our donors have the peace of mind in knowing that we will execute, we receive more product and people in need gain access to more relief.

RLM: How important is it for a Non-Profit to accept both grocery and non-grocery items?

JM: It’s very important. Unless a Non-Profit can accept a mixed load, the donor incurs the handling risk and expenses involved with segregating, re-packing and distributing the product. Hunger is a major issue here in the U.S., as well as in other countries, so donated grocery items are always in short supply. Since

Harvest Time International also serves a wide variety of needs like disaster and refugee relief, homelessness, the elderly, and the disabled, we also accept donations that take us beyond just food distribution. Two of our assistance programs, Hope One and Hope Two, are located at our Global Mission Center and serve nearly 600 families each day. Hope One offers mostly grocery items, whereas, Hope Two offers all kinds of products including electronics, school supplies, health and beauty products, diapers and some furniture items. During the Haitian earthquake relief efforts, our Central Florida headquarters served as a collection, staging and distribution command center for truckloads of donated items. We shipped 60 sea containers with over 1,500,000 pounds of much needed supplies including baby food, supplies, diapers, medical and first aid supplies, generators, food, clothing, tarps, plastic sheeting and 1,000,000 bottles of drinking water.

RLM: Manufacturers and retailers are looking at new ways to minimize their supply chain and reverse logistics challenges. Are you finding

that donations are harder to come by?

JM: With costs increasing, reverse logistics is becoming an increasing area of focus for manufacturers and retailers looking to become more competitive and improve their bottom-line. Unfortunately, the need for grocery and non-grocery product is greater than ever. This is why Harvest Time continues to say yes to every donation. Many of our donors have found that there are substantial tax advantages for expanding their charitable outreach. Congress has made more generous exceptions to the general tax rule when the donated goods are used by a charity for the care of the ill, the needy or for infants. Per IRS tax code section 170 (e) (3), a donor can deduct the lesser of one-half of the unrealized appreciation plus the taxpayer’s cost or 200% of the cost of the goods donated.

RLM: Any final words you would like to share with our readers?

JM: There are many concerns associated with solutions to the Reverse Logistic challenges of our

nation. Environmental Sustainability and Brand Protection are significantly increasing the expenses associated with processing unsalables. Every time the product is touched, the expense goes up. Along with the challenges, there are also many good options for donating product. Our Unsalables Management and Execution Logistics programs have enabled Harvest Time International to receive donations of every kind and to serve over 20 million hunger and disaster victims. The need for more donated product is great, and donors are seeking partners that can help cut their expenses and increase their charitable outreach, while maximizing their deductions. Harvest Time International is such a partner. We believe in “two-way street” partnerships, where the donor and the nonprofit work together to bless people who are in need.

RLM: Thank you for your time!

JM: My Pleasure.

Pastor John Murphy can be reached at [email protected].


RLM


The 8th Annual RLA Las Vegas Conference and Expo will be held on February 7-9 at the Rio Resort & Casino. RLA is offering three full days of Reverse Logistics immersion starting with RLA Workshops and Industry Focus Committee meetings followed by two days of sessions and exhibition.

The RLA conference kicks off on Monday with a number of activities including RL Workshops, RL Industry Focus Committee meetings and the opening of the Exhibit Hall. For those who like one-on-one time with their clients, join us at the RLA Golf Tournament.

Tuesday will start with an industry overview and forecast presented by RLA President, Gailen Vick. Afternoon sessions and panel discussions by RL professionals and leading academics will focus on cutting edge reverse logistics practices. Check the schedule available at www.RLAShows.org for session topics. More sessions and panels will follow on Wednesday and will end with the closing remarks and the Lucy Draw.

Be sure to visit the Exhibition Hall where ODMs and OEMs will be looking for 3PSPs that can manage Reverse Logistics in the Americas, along with identifying solutions for Europe and the Far East. There will be many exhibitors showcasing their Reverse Logistics services and solutions. This is a rich opportunity for OEMs and Branded companies to identify future service partners.

to benefit

6th rLA AnnuAL ChArity GoLf tournAment

www.kotm.org

Over 150 Exhibitors and Sponsors – 1,500 RL Professionals Representing 700 Companies

for CompLete detAiLs visit www.rLAshows.orG

some of our pArtiCipAnts

8th Annual Conference and Expo

February 7-9

LAS VEGAS

Dominion East Ohio, a subsidiary of one of the nation’s largest producers and transporters of energy, is in the midst of the fourth year of a five-year program of installing automated meter reading equipment on 1.2 million customer meters. The project involves either replacing older meters

or updating them with Encoder Receiver Transmitter devices, which transmit meter information via radio signals.

Dominion plans to complete the automated meter reading installations by the end of 2011. When completed,

the technology will enable Dominion to obtain as many as 10,000 reads in a single route, compared with the 400 to 600 reads recorded per daily walking route.

While the new automated meter

Utility, Supply Chain and Recycling Companies Collaborate to Reduce Carbon Footprint, Create Jobs and Increase Economic Stability By Robert Glenn Sims

ARTICLE


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and Advertising

ToLearnhowtoobtaintheseplusadditionalbenefitsthrough membership

call +1 801-331-8949 x4 or visit www.RLA.org

With an RLA Membership You Can:

technology provides many benefits to consumers - eliminating estimated meter reads, improving meter reading accuracy and reducing the need for Dominion East Ohio to enter a customer’s property - the company was looking for a more efficient logistics plan. There were challenges keeping sufficient inventory, delivering inventory efficiently to installers and discarding outdated equipment.

Dominion East Ohio Meter Operations Manager Jeff Angeletti viewed the challenges as an opportunity to first optimize end-to-end logistics distribution of gas meters and supporting products, and secondly to increase the company’s sustainability efforts by recycling and remanufacturing the old equipment. However, Dominion couldn’t achieve this alone; so it turned to ASW Global, a minority-owned supply chain solutions company for help.

André Thornton, president and CEO of ASW Global, was just as excited

to take on the challenge as Angeletti. “It was a natural fit for our core competencies and also our business strategy,” said Thornton.

ASW recognized that Dominion’s strategy included a robust plan of recycling material and strengthening the local economic enterprise. Therefore, we engaged another local partner, Slesnick Steel & Recycling.

The objective was to create a collaborative solution between Dominion, ASW and Slesnick Steel & Recycling that would extend beyond traditional partnership exchange to benefit stakeholders and the environment.

ASW led the logistics distribution design approach using ASW’s Supply Chain Optimization Model, and Ed Slesnick, president of Slesnick Steel & Recycling, focused on assisting Dominion and ASW in executing the reverse logistics process to maximize the material recovery solution, as well as improve environmental impact.

The collaboration between the three companies resulted in a streamlined solution; materials are shipped to Ohio and installed in consumers’ homes, while replaced units are recovered and recycled in the state and used by local companies to manufacture such items as bearings.

Typical Data Elements that must be Factored include:

• Inventory level• Packaging requirements

(size, kind, weight, parts per pallet)

• Material cost• Suppliers• Delivery and return fre-

quency• Facility requirments• Engineered standard work

hours• Shrinkage• Safety stock requirments

Specifically, the team established an Origin Distribution Center at ASW’s facility in Mogadore, Ohio, that receives Less-Than-Truckload (LTL) and Truckload (TL) to consolidate and delivers in Milk Runs (TL’s) to the operating facilities at a planned replenishment frequency.

It was also necessary to adjust various distribution process elements, including order releases’ data systems and safety stock requirements, delivery frequencies, network min/max levels and transportation planning. This optimized the supply chain network and provided the best total cost value, operating efficiency and environmental sustainability.

The collaborative solution is on track to yield the following annual savings.

• Reduce the cost of inbound transportation by 24.3%

• Produce a 52.3% savings on outbound transportation to and from local operation shops

• Deliver an 80% improvement in

the value gained from reversed logistics and material recovery

Other results include reduced traffic congestion, reduced fuel usage, reduced air pollution and recycling of wood pallets.

Angeletti is impressed with the results. “The team delivered outstanding outcomes resulting in an efficient and sustainable process that set the stage for continuous improvement,” said Angeletti. “We found substantial cost savings in warehousing, transportation and material recovery, drastically reduced the energy involved with shipping, and recycled the replaced units. Best of all, the project is keeping the work in Northeast Ohio.”

Similar to the Dominion story, companies across the country can be successful in collaborating to develop solutions that benefit the local economy and help sustain the environment by following five key steps.

StEP 1 : DEf iNE A StARt PoiNt.

In the case of Dominion, the starting point was to streamline the shipping and logistics. The old metering equipment process began with material shipped from a Nebraska vendor to a logistics management company based in Pennsylvania, passing through Dominion East Ohio’s service territory. The equipment was eventually shipped to 11 utility local shops upon request with little coordination of shipments. Once the material reached the local shops, individual employees loaded equipment into their service vehicles for installation at a home or business. Once the replacement equipment was installed, the same employees returned the old equipment to the local shops for disposal.

StEP 2 : DEf iNE thE REQUiRED

ChANGES.

The Dominion project required a complete review and re-design of the logistics management. A critical review of the distribution and


disposal/recycling process was also warranted.

StEP 3 : bE CLEAR AboUt whAt

SUCCESS LookS L ikE .

A one-time project plan was not sufficient. Success had to be more than on time and on budget. The partners needed to assist in designing a logistics management process that would improve inventory control, reduce cost and improve customer satisfaction.

StEP 4 : iDENt ify thE R iGht

StRAtEGiC PARtNERS.

Sometimes existing suppliers cannot or do not want to change their process to adapt to new approaches. In the case of the Dominion challenge, ASW and Slesnick Steel & Recycling made adjustments to ensure the solution would be effective.

For example, Slesnick Steel & Recycling Company made substantial investments in high tech equipment for managing collection and processing material for both domestic and overseas mills.

StEP 5 : EStAbL iSh A bASEL iNE

to mEASURE CoLLECt iVE

RESULtS.

The baseline for the Dominion project was to achieve substantial cost savings in warehousing, transportation and material recovery, as well as reduce the energy involved in shipping and recycle the replaced units.

Collaboration between companies with similar values and interest will improve the local economy and help sustain our environment. In this example, the companies were able to support and retain local

businesses, protect the environment and improve stakeholder value. The project success can be measured by managing the many variables to achieve an inclusive solution that support the community engine - people, environment and business profitability.

Robert Glenn Sims is the chief operating officer for ASW Global where he leads the strategic development of all supply chain

services for client customization, including outsourcing services, emerging market sourcing and enterprise cost modeling. He has more than 30 years in the supply chain industry.

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Returns processing is an important Reverse Logistics function, and yet in some industries, different companies may have very different ideas about what costs are legitimately related to fulfilling warranty claims. As a result, different companies classify different things as warranty costs, and there is no assurance that companies’ reports about the cost of warranty claims are true apples-to-apples comparisons. With no standardization about warranty costs, it is difficult, if not impossible, for analysts to study the companies’ true warranty costs, or

draw any conclusions about their warranty claims rate in comparison to the industry overall. For example, at one point, two printer manufacturers had warranty reserves equal to 12% and 6% of sales. Why is there such a large difference? Does one company really have twice the warranty claims rate of the other? Does one company not have large enough reserves, or does the other have overly large reserves? Without better consistency about warranty costs, there is no way to know.

The Securities and Exchange Commission (SEC) is aware of this problem. The American Institute of Certified Public Accountants (AICPA) works with the Financial Accounting Standards Board (FASB) to the accounting standards know as the GAAP (Generally Accepted Accounting Principles), which are followed by all US companies. The GAAP does not give detailed guidance about warranty costs, and the AICPA is also aware of this problem. The members of the RLA have on-the-ground, intimate knowledge of the processes involved in processing returns, and therefore, the AICPA is willing to listen to the input of the membership of the RLA on this important issue.

Rather than have these important decisions made without the input of

the RLA members, the Standards Committee is working towards creating recommendations to forward to the AICPA. This is an issue that is important to the members of the RLA, because how costs are classified and categorized can make a huge difference in where activities are placed within an organization’s org chart. In short, changes to warranty accounting practices could mean that you would get a new boss. Therefore, it is important that the members of the RLA take this opportunity to provide input on this issue.

Our first step is to begin by trying to create a list of the pieces of information commonly used in warranty-related transactions. For our first step, we would like to find out the following from the members of the RLA:

• From all collection methods (online registration and/or mail-in cards) What information do you collect from customers who register a new product?

We look forward to hearing from as many RLA members as possible on this important project.

If you would like to send a copy of a warranty card or a copy of your online form (or directions to one), please forward them to :

Dr. Ron Lembke, either electronically to [email protected], via fax to (775) 784-1769, or via USPS to :

Dr. Ron LembkeMGRS / 0028University of NevadaReno, NV 89557Standards Committee -

Standardizing Warranty Databy Dr. Ron Lembke

SURV

EY

RLM

The Standards Committee

is working to develop

standardization in Reverse

Logistics terms and practices.

For a listing of many terms and

to offer your thoughts about

the terms we have defined so

far, please visit our website:

ReverseLogisticsWiki.com

Reverse Logistics AssociationFocus CommitteesFOCUS COMMITTEES

Corporate Social ResponsibilityChairperson - Brian F. Eddy, SubCon IndustriesCommittee Members:• Larry Maye, Precision Camera &

Video• Christopher F. Fabian, Professional

Services Solutions• Wes Stott, Data Exchange Corp

(DEX) Software SolutionsChairperson - Leonard Schneeman, DEXCo-Chairperson - Paul Rupnow, Andlor Logistics Systems IncRLA Advisors - Matt Gwilliam Committee Members:• Jacob Aharon, Asset Science M.

Brian Carter, SAP Labs • Haozhe Chen, E.Carolina University • Matt Domachowski, GENCO-ATC • Peter Philippens, Ideatics BV • Norman Plummer, Haeiwacom, Inc. • John Rinehart, Intel • Paul Rupnow, Andlor Logistics

Systems Inc • Lee Sacco, Oracle

Spare Parts Management Chairperson - NeededCommittee Members:• Tim Andreae, MCA Solutions• Matthew Cutone, Horizon

Technology• Shawn McFay, Dell• Mitch Williams, Superior Service

Solutions• Jürgen Donders, Gordian Logistics

Experts• John Weatherup, Tech Ed

Networks• John Wild, Flash Logistics• Jack McHale, Choice Logistics• Jesus Sales, Juniper Networks• Edward Higgins, MasterWorks

International• John Baehr, KLA-Tencor

Corporation• Alan Wheatley, MasterWorks

International• Derek Scott, Canon Europa N.V.• Michael Bisk, Prelco Electronics

• Andy Chuang, ZyXEL Communications Corp

• Herman Goemans, Sprague Magnetics Europe

• Mike Joy, Tech-Ed Networks• Dan Gardner, ATC Logistics &

Electronics• Roy J. Steele, RoShar Associates,

LLC

StandardsChairperson - Ron Lembke, UNV, RenoCo-Chairperson - Ken Jacobsen, ConnexusCommittee Members:• Haozhe Chen, East Carolina

University • Beth Foster, United States Postal

Service • Matt Gwilliam, Reverse Logistics

Association • Ken Jacobsen, Connexus • Ishak Kang, dot UI • Ron Lembke, University of Nevada,

Reno • Jeff Redford, Service Logistics,

LLC • Paul Rupnow, Andlor Logistics

Systems Inc

Sustainability and Environmental Management Chairperson - NeededCommittee Members: • Gina Chiarella, WeRecycle!• Renee St. Denis, Hewlett-Packard• Robert Gallagher, Li Tong Group• Dr. Lutz-Guenther Scheidt, PE-

International GmbH• Gary Cullen, 4PL• Chris Soh, Mentor Media Ltd.• Adrian Jooste, Duons MCO Pty Ltd• Bob German, Rochester Institute of

Technology

REGIONAL FOCUS

APACChairperson - Needed• Kenichi Kato - KatoTec• Colin Kempter – ECN group• Brian Noone – INFINET Service

Solutions• Peter Chung – Chungco• Andrew French, Asia Manufacturing

& Technology

BrazilChairperson - Needed• Vlademir Gatti, Pandisc Information• Pedro Mauricio, Keylab

China Chairperson - Haozhe Chen, Ph.D., East Carolina UniversityCommittee Members:• Glenn Norem, eeParts• Yu Tian, Ph.D., Sun Yat-Sen

University• Yuan Xu, China Marketing

Association• Daniel Pengfeng Xue, Sprint• Meiping Liu, Bostar Consulting Ltd.

China

EMEAChairperson - Needed• Ian Rusher, Cisco• Dr. Lutz-Guenther Scheidt,

PEInternational GmbH• Dr. Lutz-Guenther Scheidt,

PEInternational GmbH• Herman Goemans, Sprague

Magnetics Europe

India Chairperson - Sanjeev Kakar, inTarvo Technologies Limited, IndiaCommittee Members:• DK Sareenn, Electronics &

Computer SW Export Promotion Council

• John Mehrmann, ZSL, Inc.• Oliver Lemanski, MGH Consulting

Ltd• MK Tan, Western Digital• Ian Rusher, Cisco• Sivakumar Sethuraman, Amazon.

Com• A. Venkataraman, Cadensworth

India Ltd.• Gurudutt P. Kamath, Koosh

Logistics

is partnering with

The Reverse Logistics Association is exhibiting at CES 2011 to promote its members and the solutions they can offer the consumer electronics industry. International CES hosts more than 120,000 attendees from around the world and your company can be in front of all of them!

• The Reverse Logistics Association will promote itsmember companies among the world’s leading electronics manufacturers, retailers and distributors.

• CurrentRLAMemberscanhelptostafftheRLAdisplaytopromote their company and the solutions they provide.

• ReverseLogisticsMagazinewillbedistributedatCES2011.

Jump on this opportunity to be a part of the world’s leading tech event. Contact the Reverse Logistics Association now

at [email protected] to advertise in RL Magazineandtoensurethatyourcompany’sRLAMembershipis current.

2011 International CES - Las Vegas, NVJanuary 6-9, 2011www.cesweb.org

RLA Conference & Expo – Las Vegas, NVFebruary 7-9, 2011http://www.rltshows.com/vegas.php

RLA Conference & Expo – Sao Paulo, BrazilApril 13-15, 2011http://www.rltshows.com/brazil.php

RLA Seminar - BentonvilleMay 19, 2011http://www.rltshows.com/ark11_event.php

Industry Events

RLA Members help man the RLA booth #21752 in the Las Vegas Convention Center - South Hall

go to www.RLAshows.org to reserve booth time


Today, more than ever, efficiently processing returned goods can literally be the difference between a company losing money or making money. The reverse logistics system (RMS) used to process returns is the critical component of the reverse logistics process. The returns system will determine if a company is going to maximize the value of returned assets or if they will needlessly throw money in the trash, literally.

For many companies, if you had to draw a picture of a car that would represent their reverse logistics process, it would look like Fred Flintstone’s car. For other best-in-class organizations, the car would look like a Ferrari. The question is “what differentiates a Flintstone mobile from a Ferrari?” The answer

is the returns management system (RMS). There are not many supply chain executives who have any experience with returns and even fewer IT executives. It is this lack of experience and knowledge about reverse logistics that leads to poor decisions when it comes to building or buying a reverse logistics system.In this two part series, we will explore what to look for in a quality returns system. We will describe critical capabilities needed in a State-of-the-Art RMS. The system used to process returns is the engine that drives “The Reverse Logistics Process Flow” shown below. We will explore what differentiates a state of the art reverse logistics systems from lesser “returns processing systems”. In this first part of our series, we will talk about the receiving process and the

process requirements to disposition assets, drive repair practices, as well as workforce management capabilities. In the next part of our series, we will cover the processes that drive shipping, financial transactions, quality assurance, along with visibility requirements and key reporting capabilities that will be needed.

thE RECE iV iNG PRoCESS

The RMS receiving process should accomplish two primary functions. First, the receiving process should identify and credit the “sender” of the assets for what they shipped to the processing facility. Second, the receiving process adds the value of the

State-of-the-Art Reverse Logistics SystemsPart I By Curtis Greve

returned asset into the “inventory” of the returns processing facility. Before an item can be refurbished, repaired, repackaged, recycled, or sold, it has to be properly identified and recorded as received into inventory of the returns facility or location.

Many companies treat returns literally like garbage. Little time and effort is given to account for the goods received because it is damaged or it isn’t in pristine condition any longer. This attitude costs many organizations millions. Returns processing is often viewed as “garbage in, garbage out”, when in reality it is valuable assets in and “garbage out.” In a recent survey by the Aberdeen Group manufacturers said they spend between 9% and 14% of sales on returns. This is not garbage, it is big money and deserves having dedicated systems to ensure 14% of sales aren’t thrown in the garbage.

To maximize the value of returned inventory, you must have a flexible, scalable RMS with a quality receiving module with a quality receiving process at the front end. The RMS should drive a process that answers the following questions as goods are received:

• When did the item arrive at the facility?

• Where did the item come from?• Who was the shipper?• Is there any damage and should a

freight claim be filed?• What is the SKU / Model

number / Serial number or other identifying number for item identification?

• Is the asset “hazardous” or some other regulated classification?

• What is the condition of the item? (New, defective, damaged, damaged beyond repair, in original packaging, etc.)

• What quantity is received?• What is the value of each item

received?• What is the total “inventory”

of the shipment that has been received?

Once this information is collected for each shipment, the process of crediting the sending customer/store/plant can take place. One of the critical differences between a Returns Management System and a Warehouse Management System (WMS) is that most WMS’s rely on verifying the receipt of goods against a purchase order (PO). In the returns world, there usually isn’t a PO or similar document and the condition of what is received can vary greatly. The condition of the individual item determines how the asset is valued and how the item flows through the rest of the reverse logistics process.

An important back office function relies on the RMS receiving process. That back office function is the reconciliation of what the sender says they shipped versus what was physically received. One of the challenges that exists in the world of returns is that most of the customers, stores, plants, or consumers are not properly equipped to determine the condition of the item they are returning. They have no way to determine the condition and the value of the returned asset based on the condition. The accuracy of goods shipped is not reliable and the preparation and packaging of the item


ARTIC

LE

Army to Enlist Smartphones for Active Duty

When one thinks of equipping soldiers for the battlefield, the delicate glassy casing on an iPhone doesn’t seem ideally suited for the job. Yet the Army plans to equip every soldier with an iPhone or Android smartphone early next year. Many smartphone vendors are positioned to make adjustments for the rugged needs of a war zone, says 451 Group’s Chris Hazelton, making them more durable, as well as waterproof, windproof and dustproof.http://www.technewsworld.com/

story/Army-to-Enlist-Smartphones-f o r - A c t i v e - D u t y - 7 1 4 6 2 .html?wlc=1292873163

Wearable robots may help those who are paralyzed

Brain-machine interfaces – devices that let users control electronics with their minds – have long enabled paralyzed individuals to perform everyday tasks such as sending e-mails and playing video games. But the problem with such interfaces is that they tend to lack the feeling of movement that typically goes along with these activities. http://www.msnbc.msn.

com/id/40687535/ns/technology_and_science-innovation/

Analysts downgrade RIM on competitive threat

Research In Motion Ltd. will face intensifying competition in 2011 as the BlackBerry maker battles iPhone and Android-based smartphones and enters the nascent tablet market, analysts said Tuesday. ht tp: / /www. theglobeandmai l .com/globe- inves tor /analys ts -downgrade-rim-on-competitive-threat/article1828600/

Technology Spotlight

is not sufficient to prevent significant damage during shipment. These issues cause differences in valuation and drive the need for a back office reconciliation process that is based on the information gathered during the receiving process.

Identifying the item, determining the condition, and valuing the inventory when it arrives are critical capabilities that a quality RMS receiving process must have. Once all of this information is gathered, the process of inspecting, refurbishing, repairing and dispositioning the assets can take place. It is at this point in the process that the value of the asset is determined. Without a well thought out receiving process, the value of the returned assets could be lost when the item is received in the returns facility, before the process really gets started.After the item is received, the RMS should then drive the processing of the individual items. It is in the processing function that asset disposition is determined, repair and refurbishment takes place, and manpower productivity is dictated.

PRoCESS iNG

Once or twice a year, logistics trade publications will come out with a list of third party service providers and/or logistics software companies that show a matrix of “solutions” offered by each company. Practically every company that appears on these lists will have the box for reverse logistics checked. However, there are less than a dozen companies, IN THE WORLD, that actually have a credible reverse logistics software solution. Many third party service providers (3PL’s) claim to offer reverse logistics solutions, but the reality is that they simply transport, unload, and store used or broken stuff. This is hardly a “reverse logistics solutions.”

What differentiates the pretenders from the true reverse logistics solution providers is their ability to process goods in a manner that maximizes the value and minimizes the risks of the returned assets. The processing capabilities of an RMS is the key to realizing the value of returned assets. Processing returned goods without a quality returns management system

is like running a department store without a POS system. It can be done but a lot of money will be lost and it will be very difficult to maintain control over inventory.

There are a number of companies that try to use some part of their existing WMS to process returns. This seldom works and for good reason. To understand why you cannot simply process returns by running a WMS process in reverse, you need to understand the basic difference between a traditional distribution operation and a returns operation.

In distribution, orders for new goods are placed. A PO is cut which tells the DC operations what to expect and a general idea of when it is going to arrive. When the goods are received, they are check in against the PO and put away in a predetermined location. When orders are cut, a pick ticket is generated, the items are picked, consolidated, loaded on a truck and shipped to their predetermined location. Items are typically segregated by SKU, stored in the same part of the warehouse every


time, and picked using repeatable processes and shipped. What is inside of the box almost doesn’t matter. DC’s receive, put-away, pick and ship large, medium, and small boxes to the same locations on a scheduled basis. The condition of the individual items, as long as it is not clearly damaged, does not matter and is never checked.

Returns operation, whether centralized or decentralized, process goods with a completely different process. First, nobody orders returns so you have no idea, really, what will have to be processed until it is sitting in front of the receiving clerk. After the returned item is physically received, you must account for the specific item, BUT, you must also determine the condition and profile of the item so it can be sorted. This sorting process and the processes that follows is what drives the value recovery in a returns process.

For example, let’s say you receive a box of white coffee cups. Two cups

are in the original packaging and have never been opened. One of the cups is broken in half and cannot be repaired. Another cup appears to have been used but has no visible flaws or defects. A quality RMS will direct processing so that the first two cups are sorted and shipped to the vendor for full cost credit. The second cup will be thrown away and written off. The last cup would be sold on the secondary market for ten percent of the original sales price. As you can see from this example, processing all four cups the same way would either cause problems with the vendor or a loss of value for three of the four cups processed.

It is an RMS’s ability to identify not only the item, but also identifies the condition and provides for processes that can increase the value of the return that differentiates a quality RMS from a low end gate keeping solution. This process is referred to as “dispositioning” the item. While this might sound complicated it is a

little simpler than many think. There are only six dispositions for anything. Whether the returned item being processed is a top of the line hi-tech server or a white coffee cup there are only five possible dispositions for the item. Those dispositions are:

1. Returned to the vendor or OEM for credit

2. Liquidated on the secondary market either “As Is” or like new after repair

3. Donated to charity4. Returned to a warehouse for

redistribution later5. Recycled6. Disposed of in a landfill or

incinerator

There are many variations in the processes used to flow assets through any company’s reverse pipeline, but there are only six different dispositions for any item. Some companies repair goods and sell them on the secondary market, for example,

while others don’t repair anything. They have a simple, yet important controlled destruction process. Some new items are repackaged and stored for next season while other items are donated to charity. Some companies are very concerned about brand protection while others are much more interested in keeping costs down and getting the most for the item returned. The options and variations are as numerous as the companies and the items they sell.

Because of this, an RMS must be flexible in terms of how items are dispositioned in order to accommodate market demands and seasonal issues. The RMS must also have the ability to capture the information needed to ensure the item is sorted and prepared properly in order to achieve the customer’s goals,

while minimizing the risks that might result from improper dispositioning of the returned item.

Receiving and processing is the first half of an RMS and it is here were the returned assets are identified, financial transactions are triggered that transfer ownership, and where the value of the returns are determined.

In the next part of our two part series on state of the art reverse logistics systems (RMS), we will cover critical elements required to properly cutoff, pick, and ship returned inventory. We will also cover critical reporting requirements, QA processes, and productivity tools that will be needed to run an efficient operation.

Curtis Greve a Principal of G r e v e - D a v i s , an independent reverse logistics c o n s u l t i n g

firm that specializes in reverse logistics. For the past 25 years Curtis Greve and Jerry Davis , the Principals of Greve-Davis, have worked with third party logistics providers, liquidators, retailers, manufacturers, and distributors to help them improve reverse logistics capabilities. Together with the rest of the Greve Davis team, they have over 100 years of experience in reverse logistics, liquidation, and supply chain management. To learn more about Curtis Greve or Greve-Davis, go to www.grevedavis.com or Call 877-638-7357 or Email [email protected]

f iGURE 1 : thE REVERSE LoGiSt iCS PRoCESS fLow


RLA Seminars are one-day events held around the world that bring RL professionals together to address specific industry topics pertinent to OEMs, Retailers, and 3PSPs. The highlight of these events is a facility tour showcasing efficient return, repair and services operations from industry leaders such as Best Buy, HP, Walmart, Motorola and Dell.

Upcoming RLA seminar:

Interested in Networking?

www.RLAshows.org/seminars.php

Bentonville, Arkansas • May 19thFacility Tour: Walmart Returns Facility Sponsored By:

TEChNICAL TRENDSElectronic Shortages


drive stable demand into the market by slowing down build cycles and inventory levels. In addition to stabilizing supply this will clearly drive higher profits.

One other point to keep in mind is that there are a number of outside influences that are likely to keep this shortage cycle and it’s affects around for awhile. Consider the chart below from the St. Louis Federal Reserve Bank. This chart if from a report published in Sept and trends the monetary base against the M1 multiplier. For the old-school folks out there we used to call this velocity. It basically tracks the amount of hard money in circulation and the how easily that money is moving in the US economy. The data indicate individuals and business are holding tightly onto cash. But we knew this-right? This has been a widely reported metric in many newspapers of late. What does this mean for semiconductor supplies? I think it points to more shortages and price inflation. If there is a reluctance to move or release

cash, there will need to be a change in the market to oppose this desire. Markets like balance and will fill a cashflow vacuum like this. There are two ways that this condition will change.

1: thAt ComPoNENtS/mAtER iALS bEComE So ChEAP thAt yoU CANNot RES iSt bUy iNG thEm. 2: thAt itEm iNCREASES iN PR iCE to thE PoiNt yoU ARE motiVAtED to mAkE A bUy bECAUSE tomoRRow thE PR iCE mAy bE h iGhER-AkA iNfLAt ioN.

my GUESS oN thE oUtComE? Inflation, there are just too many benefits to major players in the economy for inflation to not be the right answer for our future.While slowing down supply chains is good for electronic components it is bad for RL service providers. If you have a pallet of the latest hot product you need to get those items fixed and back out to the market while they will bring the best value. If you wait until component demand for new-production subsides and the repair components are available, the value

of the repaired product is down in a major way and that is lost money.

So how to RESPoND? I suggest that RL providers consider more reliance on structured purchases as opposed to contracted work-for-hire. In short, rather than negotiating to ‘fix’ X amount of cell-phones from a national wireless carrier, instead negotiate to buy a pallet of un-sorted product with the intent to rebuild the product to get a yield of a certain percent. For example you would buy 1K returned phones at ~$5 each. With the intent (based on your repair experience) to yield 400 resalable phones that would be worth $20 each, producing a ~40% contribution margin. This strategy is attractive for many reasons. One, it helps the RL service providers leverage the one commodity they have superior to the everyone else-the knowledge of the true value and what it will take to make the product saleable. Second, if we move to a greater inflation trend-you are insulated from component price increases that kill cash flow and then inflation works in favor of the RL provider. Regardless of how you respond, pay close attention the storm winds are still blowing.

L. Bryant Underwood is Director, Supply Chain for Elbit Systems of America, a leading provider of high p e r f o r m a n c e products and system solutions

focusing on the defense, homeland security, commercial aviation and medical instrumentation markets.

by L. Bryant Underwood

RLM

FEAT

URE

For those of you that know me, you have doubtless heard me ramble on about how similar the food service business is to the RL business. The reason is this-both have very high sensitivities to inventory costs and are very labor intensive. In addition only restaurants seem to suffer as badly as RL service providers to market noise and disruptions. One of the reasons the RL business can be so very challenging is the rate of change is massive and the RL Service Provider is contracted to perform regardless of volume or component parts availability. This rate of change and negative leverage is such that it is very hard to get ahead of the information tsunami in order to lead the business to profit. Most managers just find themselves

reacting to the market-makers and trying to cover costs while hoping for a better tomorrow. My hope is that your better tomorrow is now. Let me explain.

In the last quarter there has been a major increase in electronic component shortages reported. These shortages are far reaching and cover not only LCDs, BGAs and active semiconductors, but even cover standard resistors and capacitors in addition to the perpetually short-supplied Tantalum Caps. These shortages create havoc for RL suppliers. For RL to work we need to get defective product transported to the same place as the good materials and trained RL staff. If the ‘good materials’ to support repair are not

available or there are just enough components to support production, the entire RL value proposition comes into jeopardy.

whAt iS CAUS iNG th iS tURmoiL? Since the liquidity crash of ’08 the resulting market disruptions have whipped the semiconductor manufactures to and fro. There’s is a very capital intensive business with long lead times for building products. Having unstable demand and short capital supply is finally catching up and creating shortage everywhere. In fact there are many articles openly proclaiming that key Brands are getting preferential supplies of what little production there is. The net affect is that the manufactures of electronic components are trying to

You’re in town for the RLA Conference & Expo, why not take advantage of your Monday and learn more about RL in an interactive classroom setting.

Beginning at 9:00AM on the day prior to the conference, a registration fee of $999.99 allows you to attend any three workshops.

Some Past Workshops• Successful Outsourcing - RFQs, Contracts and SOW presented by Gailen Vick, RLA• Customer Experience by Kok Huan Tan, Senior Service Program Manager, DELL• Leverage RL to Drive Sustainability & Reduce Expenses by Jesse LaRose, ESE Solutions

there is GreAt Content AvAiLAbLe in rLA worKshops this yeAr.

Register now www.RLAshows.org48 Reverse Logistics Magazine • Edition 24 Edition 24 • Reverse Logistics Magazine 49www.RLmagazine.com www.RLmagazine.com

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Back Cover23

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Returning ThoughtsRevisit Product Registration to Help Reverse Logistics

PRoDUCt REGiStRAt ioN: t imE to RE-V iS it th iS REVERSE LoGiSt iCS oPPoRtUNity

When was the last time you filled out and mailed in that Product Registration card? “Never” is the answer from most people. Why not just keep the receipt handy? Why bother with the effort just to get on another junk mail list. Not so any longer. A number of trends are now encouraging consumers to complete product registrations and these factors are opportunities for Reverse Logistics teams to reduce returns and decrease costs.

tRENDS - moRE ELECtRoNiCS, SoftwARE DEPENDENCE, CoNVERGENCE AND RECALLS

The average US household now owns 25 Consumer electronics products according to Consumer Electronics Association market research at www.CE.org. Historically, about 20-25% of consumers would typically register only their “big ticket” purchases to ensure warranty coverage. Today, however, more and more big and small ticket consumer electronics items are dependent on software, operating systems or firmware to operate effectively. This “software component” represents an opportunity

for a manufacturer to modify or improve the user experience after the product has completed manufacturing and been sold to a consumer, often with a simple update or upgrade.

Convergence is one of the big recent trends in home electronics. Convergence will enable our home electronics systems and devices to share data or features, often combined with the use of a network or Internet connection. Internet or USB connections represent an easy opportunity to check, upload and automate software updates, not just for your computer, but for all your electronic devices such as DVD players, receivers, GPS units or even refrigerators. Apple is an excellent example of the effective use of convergence with music players connecting to computers, connecting to sound systems and televisions. More importantly Apple has done a great job of providing customers with an easy opportunity to automatically update their hardware systems as soon as a user plugs the device into a computer to sync iTunes media or to receive update notifications from Apple via the Internet.

Recently, recalls seem to be common news items, not only in electronics, but in many other industries, such as automotive, food and

children’s products. The ability of a manufacturer to quickly contact the purchasers of the defective products drives the success of any recall program and the safety of the consumers.

wARRANty REGiStRAt ioN, PRoDUCt REGiStRAt ioN AND PR iVACy

It is helpful to clarify the difference between Warranty registration and Product registration. The Magnuson-Moss Warranty Act is the federal law governing warranties on consumer products in the USA. The Act outlines that a consumer is not required to complete a warranty card to be entitled to the product warranty. As a result, warranty cards or warranty registrations are typically just an opportunity to record your purchase with the manufacturer in advance of a possible future warranty issue.

Product registration, by mail or on a website, is also an optional registration, where a consumer shares some information with a manufacturer. This registration may enable the manufacturer to contact the consumer in the future regarding product updates, issues, recalls or related opportunities.

Many companies combine a warranty


registration, a product registration and additional questions in an attempt to capture product or marketing info. Often privacy concerns and the lack of a tangible benefit have created some controversy, skepticism and often low response rates for product registration. Privacy experts recommend only your name, address, product serial number and a copy of the receipt to verify the date of purchase if you feel the need to register your product.

The recent increase in recalls however, is causing consumers to see some real benefits to product registration. A recent article in Bankrate.com by Laura Bruce outlines new encouragement for product registration. “The Consumer Product Safety Commission, which regulates 15,000 products and issues about 300 recalls a year, is aware of the warranty-card controversy and is exploring ways to improve the recall process.”

“The consumer advocacy groups would like to see registration cards where the privacy of the individual is protected and it doesn’t become a marketing tool; it’s a consumer safety tool,” says Bruce Richardson, director of public affairs for the CPSC.”

“There’s a general belief that if people knew the registration card would be used strictly for a safety recall it would have more impact

than a warranty card. Registration cards need to be something separate, exclusive of any other materials that the manufacturer may be asking of the consumer.” outlined Richardson”

A new rule by the Consumer Product Safety Commission in the Consumer Product Safety Improvement Act outlines that many children’s products must now come with product registration cards to allow the manufacturer to contact the consumer in case of a recall.

REVERSE LoGiSt iCS bENEf itS of PRoDUCt REGiStRAt ioN

For a consumer, the big wins are support and risk avoidance. Better and faster notification of software, firmware or system updates will help reduce the need to return products and increase satisfaction. The ability to be contacted about a product recall or safety issue will also be seen by most consumers as a significant reason to register and share appropriate private data with a manufacturer.

For the Reverse Logistics team product registration will help to:

1. Reduce support calls and time spent on the calls. With updates immediately downloadable for installation, many issues will be solved quickly or avoided completely.

2. Reduce product returns. The updates provide an opportunity to fix an issue without the need to return the product for repair or to retail because of unsatisfied customers.

3. Rapid handling of recalls. Reduce the effort to find and resolve products requiring recall. This reduces cost and risk that a safety recall may result in a personal injury and lawsuit.

4. Warranty validation. Early registration will eliminate time and uncertainty of eligibility.

The Reverse Logistics Association Standards Committee is performing some preliminary research on Product Registration. Please contact them if you have further questions or if you have any further knowledge or wisdom to share.

Good Luck!

Paul Rupnow -

Editor of www.ReverseLogisticsProfessional.com

Also Co-Chairman of the RLA IT Solutions Committee

RLM

www.ReverseLogisticsProfessional.com

lessons in spare parts planning ... - reverse logistics · returns is the critical component of the...

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