There is no doubt that increasing sales and decreasing returns lead to increased profit and growth.

But to truly leverage the Sell and Return processes for shareholder value, it’s a good idea to take a closer look at these aspects of the supply chain framework.

Today, I am continuing with the third blog of a five-part series about leveraging the supply chain to increase shareholder value.  This third edition focuses on the Sell and Return processes of the supply chain framework. (Based on a new white paper that we just released on the topic.)

Here are some important issues within the Sell and Return processes that go beyond the mere surface opportunities and have a big impact on shareholder value.

Sell

Differentiation in the Sell process through service value is the critical success factor, but companies often underestimate the contribution it can provide.  Those who try to achieve superior customer service through methods such as the “Perfect Order” realize that differentiated customer service is not only profitable; it can be a true competitive advantage.

There are four key steps involved in planning and implementing profitable, differentiated service programs:

1)    Segment Markets and Product Groups: Although most companies do some form of market segmentation and targeting, few develop strategies that help them figure out where and how to create customer value.

2)    Identify Key Value Points by Customer: All customers are not created equal.  For each of the key customers, what service elements would add the most value to their business? Cost reduction? Joint logistics? Collaborative planning?

3)    Identify Consolidation Opportunities Around the Customer: Evaluation of supply chain often leads companies to discover that separate chains exist for certain products or groups, but flow to the same customer.  Consolidating supply chains across products, geographies and channels improves costs and services.

4)    Identify and Create Common Processes and Systems Around the Customer: Global, regional, and local supply chains that depend on market, product, customer, value proposition and common processes perform at higher levels and contribute to revenue growth.

There are various ways to satisfy demanding customers.  One of the best solutions is to develop “service-products” targeted to the right markets, segments, and customers.

Return

Product return rates vary by industry, but normally range anywhere from 6% to 20%.  The costs of refunds, repackaging, restocking, reselling and repairing add up quickly and negatively impact the cost of goods sold (COGS).

Take these initiatives into account with returns:

Reducing Returns: Approaches such as marketing the right features, delivering products on time, educating sales personnel, and encouraging customer reviews can help reduce returns while keeping customers satisfied. And this is the most effective way to minimize return processing costs.

Improving Cost per Return Material Authorization (RMA): Minimizing cost per RMA is becoming a key measure of effectiveness of service organizations, as it directly impacts their bottom line.

Improving Velocity of Returns: Returned products diminish in value quickly, and therefore, time required for receiving and processing them is critical.

These are just some of the basics of Sell and Return, folks. What trends are you seeing today in these two key areas?

You can read more about these processes in our new white paper: Leveraging the Supply Chain for Increased Shareholder Value. Also, be on the look out for our next two blog posts for this series – Speed and Efficiency, and Tax-Effective Capital Efficiency. 

Go! Go! Go!

Jim

More Resources

Strategic Market Planning

Service Supply Chain

I was recently discussing transportation capacity on Twitter (click here to join in) with a few folks. The big question was: Is the capacity crunch lessening? What’s your view on the subject?

I think the transportation capacity crunch is bound to increase. The recession eased domestic US transportation capacity issues in the short-term, but essentially the problems are unchanged.

With this eventual post-recession rise in shipping volume comes the rise in transportation cost rates and fuel costs as well. How do you keep supply chain transportation costs down and still maintain a well-controlled transportation plan? Supply chain managers are interested in this, and so are executive-level leaders who see the opportunities for post-recession cost savings in their operations.

This transportation question overlaps perfectly with the blog post series I started last week, looking at the supply chain mega-processes: Buy, Make, Move, Store, and Sell. Transportation is the Move piece, and Store relates to inventory, storage, and similar processes.

The “Move” mega-process and profitable growth

One way to save on transportation costs is outsourcing, which was another recent topic being discussed on Twitter. Transportation outsourcing providers offer a full suite of services with potentially advantageous cost savings. (Six more ways to cut transportation costs can be found in this new Tompkins white paper, “Leveraging the Supply Chain for Increased Shareholder Value.”)

The “Store” mega-process and profitable growth

Inventory costs (the Store mega-process) can be so difficult to reduce that “storage cost cutting” seems like a contradiction in terms. With the use of supply chain planning, purchasing and procurement management – and the application of best practices – profitable growth can be reached both in the short and long term.

The supply chain, and its potential to enhance an organization’s profitable growth goals, is really under the spotlight right now. As we enter 2011, supply chain value will continue to be a focus for any company looking to reduce risk and uncertainty while achieving profitable growth.

What are your thoughts on the “Move” and “Store” processes as we jump into the next year?

Go!Go!Go!

Jim

Resources:

Download the Tompkins Associates white paper, “Leveraging the Supply Chain for Increased Shareholder Value.”

Follow me on Twitter

Download the executive briefing from the Tompkins Supply Chain Consortium - Domestic Transportation: The Industry is Moving Once Again

Photo Credit: Keng Susumpow

I am very positive about the upcoming year, especially from a supply chain point of view.

As the New Year approaches, many of you are thinking about ways to increase your company’s shareholder value and enjoy a better year than you experienced in 2010. Well, the solution to this may very well exist within your supply chain.

The importance of leveraging your end-to-end supply chain to increase profitable growth has never been more apparent than now.

Take a look at the areas and actions that drive shareholder value within your organization and examine how these fit into your supply chain. Each of these areas should move your company toward profitable growth, margin improvement and capital efficiency.

Today, I am starting a new five-part blog series that focuses on these elements and the supply chain mega processes – BUY, MAKE, MOVE, STORE, SELL – and how you can leverage the supply chain to increase shareholder value. (This blog sequence was brought about by a new white paper that we just released on the topic. Read more here.)

To begin our series, I’ll start with the first two supply chain mega processes: BUY and MAKE.

Buy

The buying process is often viewed simply as purchasing – a necessity of business – and, thus, its potential to impact margin is often not well understood. However, the procurement (buy) process (which is what we are talking about here) has a distinct role in securing products and materials as a critical integrated component of the supply chain, turning procurement into a significant cost and value driver.

The procurement process should be leveraged to deliver the best price, the best quality, the best availability, and an agile supply base throughout all processes. By establishing the right strategy, designing efficient processes, staffing the right skills, enabling with the right technology and designing an effective organization, procurement can achieve real value for your company.

Make

Next, we have the Make process. This is an area in which we can find significant improvements in the Cost of Goods Sold (COGS), and it should be a high priority for all companies. And wow, did you know that a 1% reduction can translate into a major improvement in gross profit margin?

You can reduce waste in the make process by executing lean tools with a focus on the overproduction, waiting time, transport, over-processing, excess inventory, unnecessary motion and defective products. By eliminating waste and improving the gross profit margin, the make process is an excellent driver for value.

So, that’s the basics of buy and make. You can read more details about these processes in our new white paper: Leveraging Supply Chain for Increased Shareholder Value.

Over the next few weeks, be on the look out for the next four installments – More/Store, Sell/Return, Speed and Productivity, and Tax-Effective Capital Efficiency.

I hope you enjoy exploring how your supply chain can lead to value and profitable growth in 2011.


Go!Go!Go!

Jim


More Resources:

Strategic Market Planning

Procurement and Sourcing

Industries

As 2011 approaches and the 2010 budgets fade, companies are taking a serious look at their supply chain IT (SCIT) systems. But we see many organizations floundering because they don’t know where to begin when evaluating, selecting and implementing systems.

The questions we usually hear are: Should my company upgrade? Or does my company need a completely new system? When should we begin the selections process? How long will the selection and implementation take?

Our very own SCIT systems expert Kevin Hume will answer some of these questions during a presentation at Logistics Management’s virtual conference, Best Practices in Supply Chain Productivity: People, Process, and Technology, on November 18.

With a focus on Improving Warehouse and DC Operations, he will touch base on warehouse management systems, transportation management systems, as well as labor management systems.

Kevin also wrote a recent blog post to help companies that are struggling with long-term and short-term goals for their technology. Read the post to learn more about initiatives that you can take to prepare for supply chain technology in 2011.

We’re also interested in learning more about your plan and pitfalls when it comes to evaluating, selecting and implementing supply chain technology systems. Let me know what obstacles you’ve had to overcome.

Go!Go!Go!

Jim

More Resources

Supply Chain Technology 2011: Get Tactical with Your Long-Term Strategy

Best Practices in Supply Chain Productivity: People, Process, and Technology

Technology Investments - Plan Ahead for the Payoff

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Photo Credit: Philo Nordlund

What do you think of when you hear the word, “procurement”? We recently tackled this question as part of my Global Supply Chain Podcast – with the first of a four-part installment that debuted November 2.

Procurement management is really an intrinsic part of the end-to-end supply chain mega processes: plan, buy, make, move, store, sell. But, when many folks think of “procurement,” they automatically think of the buy process.

So, today, I want to show you how procurement actually plays a role in every link of the supply chain.

Here’s how it fits into each process:

Plan: Procurement in strategic sourcing has a huge impact on aspects of the planning process, including, supplier location, lead times, agility, and performance. It also allows these processes to fulfill their responsibilities to the overall supply chain.

Buy: Of course, the purchasing element of procurement is involved in the execution of the buying function, which travels from requisitioning, to purchase order, to order receipt, to PO fulfillment, and finally to settlement.

Make: In this link, procurement provides direct materials, indirect materials and packaging materials that are needed to make the product. This also includes supplier relationship management, with respect to these materials, as well as to the procurement of all outsourced manufacturing and service functions required.

Move: Procurement plays the role of strategically and tactically purchasing the transportation services that provide the movement between the links of the supply chain. By decoupling inbound transportation, the right buy decisions can be made, which will help to assure that the total delivered cost to the end user is optimized overall.

Store: Procurement strategically and tactically assures that the right insourcing and outsourcing decisions are made in the store function. Today, procurement plays the key role of rationalizing logistics service providers, with a significant impact on profitability and customer service.

Sell: Here, procurement is important in having the right products for sale at the right place and at the right time.

As you can see, procurement plays a larger role in the end-to-end supply chain than many realize, and it is important that we see how it flows through every link of the process.

You can find more information about supply chain procurement – as well as in profitable growth, margin improvement, and capital efficiency – by listening to our procurement podcasts at www.tompkinsinc.com/podcast.

Check back on the first and third Tuesdays of every month to hear new installments.

Go!Go!Go!

Jim

More Resources

Podcast: How Procurement Connects to Every Supply Chain Link

Article: Supplier Relationship Management: It Takes the 'Big R' to Win Global Sourcing Game