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