It happens every year – the holidays have once again crept up on us and are now right around the corner. For a lot of companies, this means revving up their supply chains for peak season planning in distribution and fulfillment.

This year, retailers are preparing to make the best of the upcoming peak season regardless of the twin threats of economic instability and low consumer confidence.

Did you know that nearly 60% of companies began their inventory build for the 2011 holiday season prior to Labor Day? This is just one of the insights gleaned from the recent Peak Season Trends and Strategies Survey of Tompkins Supply Chain Consortium members.

Nearly 80 retailers, manufacturers, wholesalers/distributors participated.

The consortium asked about the top threats to business success this peak season, and no surprise, they were indentified as economic weakness and low consumer confidence. Although there are no clear forecasts for the season, companies are doing what they can to brace themselves, make a profit and ensure customer satisfaction.
While nearly two-thirds of respondents list the economy as the single biggest threat to seasonal profitability, there has also been much talk among supply chain professionals about holding fewer stock-keeping units (SKUs) this peak season as compared to the last.

This is somewhat of a surprise. You can read more about this issue here in a DC Velocity article.

How did your peak planning go and what challenges are you experiencing? Is your company holding fewer SKUs?

More Resources

Peak Season Strategies and Trends: 2011 Real-Time Survey Report

Ten Proven Ways to Improve Inventory Performance 

Profitable Growth Podcast: Enhancing Management of Inventory

Photo credit: lordash photography

Merger and acquisition (M&A) is a closely watched segment in the business world these days. More strategic relationship building is expected in the coming year, versus the quick buy-ups of distressed companies of the previous few years.

Recently, I had a discussion with some of the experts at Tompkins Associates about M&A and reverse logistics – specifically the service supply chain. This is a topic that I often perceive as having a great deal of benefit to companies who do it correctly, even though many times those benefits are hidden.

The cost savings on improving the returns process, as well as the parts management and repair process, hold huge potential for cost savings. Many industry players are on to this revelation, as we found in the survey conducted by the Tompkins Supply Chain Consortium on M&A in the service supply chain industry.  But the survey also shows that private equity companies are not getting involved to a great extent.

So, why are private equity companies missing the potential for investment in the service supply chain? Is it they don't know the potential exists? Or is it just that they are not interested or don't think the time is right for making an investment?

I think the big missing piece of the puzzle is that private equity companies don't know about the profitability of reverse logistics. I would advise leaders of companies in this area to leave no stone unturned when it comes to service supply chain.  Don’t overlook or ignore reverse logistics opportunities while investments are made elsewhere.

What do you see in future trends for the service supply chain? Are you and your customers reaping the potential cost savings of reverse logistics?

GoGoGo!

Jim

Resources:

M&A in the Service Supply Chain Industry

Service Supply Chain

Photo Credit: Aleatoric Consonance

Although product returns are inevitable, wouldn't it be great for companies and consumers alike to avoid them whenever possible?

New developments in the service supply chain and reverse logistics areas are allowing companies to save money and customers to feel less inconvenienced.

For example, I recently came across a really cool blog post about innovations in how retailers are handling returns in the reverse supply chain. It was a post from The Operations Room, a blog from the Kellogg School of Management's Center for Operations & Supply Chain Management at Northwestern University.

The post explains how retailer Amazon.com has a program in the works that would allow its users to be notified when a gift was going to be sent to them. The user can choose to stop the shipment or choose a different gift instead.

It can also allow users to block whole categories of gifts from being sent to them, basically telling Amazon.com to never send a gift that's in the category of clothing, or DVDs, or jewelry.

The interesting issue that the blog post from The Operations Room pointed out was whether or not it was polite to refuse a gift and change it to something else. Or, as the Operations Room blog authors put it, "That's where operational efficiency smashes into social convention." Although returns cost businesses money, and unwanted gifts can be a nuisance to the consumer, you might never admit to actually using this service!

However, I can make a good case that it is a lot better than re-gifting, and it eliminates the hassle of returning a gift. By intercepting the order before it ships, customers get more satisfaction out of what they receive, and companies gain profitable growth from returns.

More priorities that are sure to emerge this year in the reverse logistics component of supply chain can be found here, in our Top 11 Priorities for Service Supply Chain in 2011.

Are reverse logistics a part of your plan in the coming year? How are you handling returns?

GoGoGo!

Jim


More Resources

Service Supply Chain

Top 11 Priorities for 2011

The Operation Room: Retails and Returns

Photo Credit: mmlolek

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

Guest Blogger: Greg Hazlett, Principal, Global Supply Chain Services, Tompkins Associates 

Greg lives in the San Francisco Bay Area and is an expert in helping high-tech companies – including manufacturers and distributors of computer hardware and software, consumer electronics, semiconductors, components and peripherals, and capital equipment – improve their global supply chain activities.

We’ve all been to those tradeshows in Las Vegas where the highest volume of people to the lowest ranges from the casino floor, to the conference speeches and panels, to the exhibition floor.

The recent Reverse Logistics Conference in Las Vegas "reversed" all that. The Expo floor was busy from the opening reception through the closing on Feb. 10. The sessions were relatively well attended, but the casino we were in was relatively empty. Go figure!

I was at the conference to moderate a panel, attend a number of presentations and panel discussions, and tour the exhibit hall.

The panel I hosted, Creating a Customer Centric Reverse Supply Chain Strategy, was reasonably well attended, especially in light of the fact that we were up against a Wal-Mart panel. There was a lot of discussion around technology to support the reverse process, as well as its ability to support the consumer experience. Software in this space is relatively new, and most of it homegrown by providers, rather than offered to others, but we are now starting to see commercial products with the service supply chain as its main focus.

Other important topics that came across during the panel discussion were the ability to measure the customer experience, using reverse capabilities to grow revenues, and managing the customer lifecycle vs. purely focusing on the product lifecycle.

Special thanks to my panelists: John Axe of the ECN Group, Dr. Dale Rogers from Univ. of Nevada – Reno, Srini Gorty of Evavi, Jim Schoessling from Servigistics, Randy Hatheway of Ryder Supply Chain Solutions, and Patrick Sullivan from Inmar – Reverse Logistics.

Great job by all!

Based on what I learned at the conference, my Top 3 Takeaways are:

1) Reverse Logistics is attracting greater attention today as companies seek to cut costs, and the focus on this key part of the service supply chain will only continue to grow;

2) We’re now starting to see commercial products with service supply chain as the main focus vs. software created by homegrown providers; and

3) Being able to measure the customer experience is a high priority in managing the service supply chain customer lifecycle.

As a side note, the majority of conferences I’ve been to have had an "Us vs. Them" feel – the "Us" being the customers (manufacturers and retailers), and the "Them" being the various types of service providers. While the conference attendees were predominantly service providers, the manufacturers and retailers were in attendance, but the conference didn’t by any means revolve around them.

And while the service providers were interested in gaining business from the retailers and manufacturers, the majority of them were looking for partners to help grow their business – either by sharing leads or working together as part of a larger solution set. Everyone wanted to share information and get the word out on what they were doing. No games of chance here – a sure winner!

Did you attend the conference, and if so, what did you take away from it? What is your organization doing in the area of reverse logistics these days?

More Reverse Logistics Resources

 

Blog Post: Pause: Services Supply Chain Is Not the Same as Rewind

 

Blog Post: Service Supply Chain: A Golden Opportunity to Cut Costs and Make Your Customers Happier

 

Read the article, Returns, Refunds and Recalls: Reliable Reverse Logistics 

 

See the scope of Service Supply Chain consulting services from Tompkins Associates (PDF).

Photo credit: Gregory Moine

Photo credit: Lara604

When many folks see the term "service supply chain," they automatically think "reverse logistics." But lately, I have come to the conclusion that this is a case of bad terminology. For example, if you ask a child what reverse logistics is, he or she may say that it is logistics done in reverse.

But really, this is not the case. Product isn’t going in a backward direction – back up through the supply chain. It’s not like pressing rewind and seeing a product moving backward to its original state before it was created. On the contrary, it’s more like when you come to a fork in the road and have to decide which path to take.

The fork represents the place and time in the supply chain when a company has to decide what to do with

Servicing the products they have previously sold

Retrieving the products they previously sold

Retrieving inventory from the field – whether it’s returned, recalled, overstock, etc.

Service supply chains represents the options (or paths) for handling these product flows.

It’s not a new concept. But as the Tompkins Supply Chain Consortium found in a recent Service Supply Chain Hot Topic Survey, it hasn’t received much attention lately, especially during this recent ugly economic downturn.

The survey also notes the following challenges that companies and individuals in the service supply chain are seeing:

The low degree of outsourcing being done in service supply chain functions;

Inadequate management involvement in the process;

Lack of sound forecasting techniques for service parts;

The amount of wasted effort in the company processes; and

Inefficient and ill-suited IT systems to manage service supply chain activities.

As I’ve repeated over and over, now is a great time to make changes, and improving your service supply chain practices should at least be on your list of areas to assess. With improved practices in this area, you can reduce costs and improve customer satisfaction.

Also, many companies may be interested in the sustainability benefits of service supply chain functions. Product screening, recycling and resale, and remarketing of materials and products, as well as other functions, can help with green supply chain initiatives.

An interesting fact noted by the Consortium is that the companies leading the sustainability efforts are the same companies that lead in managing and executing service supply chain processes. (See the figures below from Tompkins Supply Chain Consortium report, "Service Supply Chain: The Growing Challenge of After-Sales Supply Chain Management," for more information on the disposition of returned product.) 

I’m not trying to get philosophical on you, but when you come to that fork in the road, don’t you want to be prepared? Having your service supply chain in order (and not just thinking that you’ll run the logistics in reverse) will have great results for your company.

Do you share my view on the terminology: It’s service supply chain, not reverse logistics?

I would like to hear your thoughts.

Go!Go!Go!

Jim

Read more on reverse logistics in this article, Returns, Refunds, & Recalls: Reliable Reverse Logistics

See the scope of Service Supply Chain consulting services from Tompkins Associates (PDF).