Developing Technology Strategies for Reverse Logistics

          Reverse logistics management focuses on the movement of a returned product to recapture value by quickly making decisions on how the product will be managed and re-enter the supply stream.  Strategic planning to implement technology that will tightly control inventory, manage returns, develop a competitive advantage, while minimizing operational costs is the challenge.  “Today’s Enterprise Resource Planning (ERP) systems have outpaced organizational readiness for product recalls” (Persaud, 2012). 

A reverse logistics information system must be flexible. Unlike forward logistics, reverse logistics will touch upon more areas throughout the supply chain.  When developing automated technology to capture information, it is critical to consider how that information will be used and how it will benefit or impact different organizations.  Early efforts in tracking returns were simplified, often to the cost and capabilities of technology.  At one point of sale there may have been a sticker system in place identifying returns to go to the vendor, returns for salvage, or returns for disposition.  With the lower cost of technology and increased capacity to manage data, an organization can truly reap benefits to reduce costs associated with returns.

Companies often overlook returns management in developing a technological and communication plan.  By examining the organization’s existing return program, a strategic plan can be implemented achieving their specific goals to manage, improve upon, and reduce cost of managing returns, excess or obsolete goods.  If a recall were to occur, how would an organization identify where the product is?  If a retailer was receiving and inordinate amount of returns, how could they reduce those returns?  If a repair facility wanted to improve customer service, how could they plan their operations to reduce response time?

Recall Management

Tight controls over inventory, developing a tracking system to identify where a product has been throughout the supply chain most sensitive when a recall is initiated as a result of public safety or health concerns.  A company must effectively identify defective products to limit the financial impacts and liabilities that may be associated in the return process.  Integrating return or recall activities into a business strategy is the most effective way to create a plan that captures the data required that can quickly identity where a product is at any given time.  Developing strategic commitment by sharing responsibility throughout the supply chain is the most effective supply chain management.  The components in a product can be handles by multiple people throughout the supply chain from procurement of raw material, manufacture, and distribution.  This number increases when handling import or export goods.

Developing cooperation throughout the supply chain, data gathered could identify procurement, distribution, or collection strategies that could limit the impact of recall.  By capturing data that could ultimately identify low quality, or potential risks in the distribution of product. 

Service providers are beginning to look at recall management tools, to reign in active customers.  In a case study (Stone, u.d.) discussed a dental office managing patient files, educating patients on the necessity of the annual screening, as well as carefully recording inventory used in the event of a manufacturer recall to notify patients quickly who came in contact with the product.  The recall system for health service providers is designed to reduces lost revenue, increases quality of care, and limit liability in the event of a product recall.  The commitment to capturing data into the system was critical to developing and managing patient relationships.  The study determined that many patients do not return for the annual recall visits because it is commonly referred to as a cleaning that offered no value as patients considered they clean their teeth daily and do not require the service.  By capturing detailed data and using an automation system to generate consistent messages in the patient billing, reminder notices, phone calls, and any other communication system to include a specific reason for the visit increased response and quality of care.  The data captured can help the patient realize that the “cleaning”  will entail checking on specific fillings, evaluate the amount of bleeding, perform oral cancer screenings, or other specific care issues captured by the database.  As patient retention increases, management is able to determine hiring needs.  Often the hiring practices have been based on scheduling during the busiest times leaving periods throughout the year where staff is paid and little revenue is generated.  “Many offices do not know how much hygiene time they need” (Stone, u.d.).  The database system can help the office determine when hiring additional staff, is appropriate as the patient base grows.

Returns Management

The options to handle a return are limitless and can include liquidation, donation, resell auctions, private resale, and destruction.  Each option presents its own unique set of circumstances that an organization will need to examine to establish parameters to automate technology to expedite returns re-entering the supply chain.  Risks to consider might be quality control of repairs to protect the brand and perceived values of the branch.  Donations can be costly depending on an organizations tax strategies and could potentially increase operating costs. 

Setting up decision trees to maximize recovery and identify trends that can be mitigated.  “Making the right choices requires the ability to define the expected outcome, use the correct technique or combinations of the techniques for each situation, then deliver the results” (Returns Management Inc., n.d.).  By capturing data consistently that identifies who is returning the product and the reason for return, a company can easily identify opportunities for improvement. 

Is the return valid?  Nintendo faced a return rate that appeared to be higher than normal.  Nintendo had concern that some of the returns were outside the warrantee period and that consumers were registering products when there was a malfunction.  Nintendo responded to challenge of gaining better control of returns by encouraged retailers to register the merchandise at the point of sale by developing a bar code.  The process was facilitated by easily scanning a barcode on outside of the box at the point of sale.  The retailer was enticed to train staff to comply by offering a $.50 rebate for each registration they completed.  The new data supplied let retailers know whether or not the product was still in warrantee at the time of the return. “After implementing this system, Nintendo experienced an eighty percent drop in return rates” (Rogers & Tibben-Lembke, 1999)

Keeping control over inventory, managing assets, and developing communication and technology plans to manage inventory will reduce the financial impacts of returns management.  It is just as important to identify the reason for the return as well as analyzing how to handle the return.  In planning automated systems to capture information, the return should be taken one step back in the supply chain to re-introduce the produce to the supply chain recapturing value.  “A key to successful returns management is an asset recovery program that reduces losses or even generates revenue” (Biederman, 2006). 

LL Bean is an industry example of controlling returns, managing customer relationships, as well as protecting the LL Bean brand through vendor management because the organization has a consistent process in place to capturing the reason for return.   By capturing return reasons data could potentially identity the need to re-design a product, packaging, or include a simpler way to disassemble a product for easy replacement of parts that are known to wear out.  If there are a significant number of returns as a result of poor quality, a trend could be identified indicating the manufacturer is not meeting the organizational standards. 

Consider the quickest path to re-introducing a return to the supply chain.  An organization may want to implement a support desk to identify the concern.  If a consumer bought an all-in-one printer, scanner, fax, and copier and the scanner was not working, how could data is captured to eliminate that return?  A customer support center identifying the problem and capturing data would benefit reducing the number of support calls or returns.  As customer service troubleshoots the problem, data could be captured identifying the solutions which work.  Once the problem is identified, management can examine the data determining the need for call and may uncover confusion in the instruction manual which would require clarification, or possibly a need to improve the drivers for the unit to be updated. 

Repair Facilities

“A number of decisions including return collection center locations, mode of transportation to be used, control systems, and just-in-time policies, will not only influence the forward logistics network, but also the reverse logistics network” (Madaan & Wadhwa, 2007).

To reduce repair time, tight control and adherence to processes and maintenance of an inventory system should be consistent.  Maintain tight control, inventory samplings and mini-audits conducted at regular intervals will ensure control over inventory is maintained ultimately reducing costs associated with excess stock as well as increasing the quality and efficiency of the facility.  In a case study, the military identified exposure to counterfeit parts that infiltrated the supply chain which has “threatened National security, the safety of our troops, and American jobs” (Shaughnessy, 2012).  The problem America faced could not solely be blamed on the Chinese for the manufacture of substandard parts, but could be traced to a continued lack of consistency with inventory control and accountability.  Different organizations within the military have different levels of commitment surrounding inventory maintenance and control.  Property accountability managers often spend a significant amount of time trying to obtain accurate paperwork, records, and facilitating reconciliations.  Without commitment and support from the top levels encouraging compliance with the process and clearly communicating the goals for tight inventory control, frustration and resistance could work against the effort leading to gaps filled with low inventory, excess inventory, error, damage, theft, loss or the opportunity for counterfeit parts and substandard quality of the repair.  Although the military manages a database for tracking and accountability of equipment that is consistent, the processes in managing and capturing data as well as identifying location of the equipment are not.  Some military units may have bar code scanners while others will manage inventory manually with pen/paper and checking items off from a master report.  An organization overseeing a repair facilities across many different business divisions, must think about planning operations to eliminate inconsistencies and implement automation that will focus on decreasing the time a product is not operational. 

By establishing organizational objectives and an acceptable wait time for a repair, data can be used to identify customer clusters to optimize location and warehouse of repair personnel.  Data can also help anticipate and plan for common repairs, coordinating physical parts and labor to expedite the process and increase customer service.  Amini, Retzkaff-Roberts, and Bienstock (2005) conducted a study involving the planning, design, and implementation of medical laboratory devices.  The company identified parameters for repair to minimize risk to the laboratory guaranteeing a six hour turn around on repairs for most customers with exceptions being those in remote areas making compliance with the standard economically unsound or impossible. The company designed a self-diagnostic tool in the equipment that would expedite the process.  The tool would determine the cause for the repair reducing down-time. 

Controlling inventory data as well as dispatch data were the two challenging parts to coordinate to meet the six hour repair window.  By identifying common repairs, managing inventory and storage of parts decisions were made as to what parts could be stored at a customer site, warehouse, or repair technician’s vehicle.  The data was taken apart and examined using many “what if” scenarios valuating costs and identifying an optimal path to gain the most value for the least expense. 

Conclusion

Strategically planning what information to capture can enable an organization to more effectively manage operations.  In a reverse logistics process, drilling down data will help identify key challenges to improve efficiencies in the organization.  The ability to reorganize data, take it apart, and look at it from a different perspective can also prove effective in increasing operational effectiveness.

Good data management and the commitment to follow the processes in collecting data will identify opportunities in any organization to increase revenue, manage returns, and determine how a return can be managed to maximize recaptured values.

References

Amini, M., Retzlaffroberts, D., & Bienstock, C. (2005). Designing a reverse logistics operation for short cycle time repair services. International Journal of Production Economics, 96(3), 367-380. doi: 10.1016/j.ijpe.2004.05.010

Beiderman, D. (2006). Planning for happy returns. Traffic World, 18-21. doi: 195733704

Proquest

Bewster, P. (2011). Johnson & Johnson and the "phantom" recall: Practical advice to prevent risk management and quality systems from failing to identify and address sentinel events. The Heath Lawyer, 23(6), 1-12. doi: 887099742

Proquest

DeBrito, M. P. (2003). Managing reverse logistics or reverse logistics management? (Master's thesis, Erasmus Research Institute of Management). Erasmus Research Institute.

Madaan, J., & Wadhwa, S. (2007). Flexible process planning approaches for sustainable decisions in the reverse logistics system. Global Journal of Flexible Systems Management, 8(4), 1-8. Retrieved December 23, 2012.

EBSCO

Persaud, D. (2012). Your system is ready for reverse logistics. Reverse Logistics Magazine. Retrieved December 09, 2012, from http://viewer.zmags.com/publication/b00db76a#/b00db76a/24

Digital Issue 45

Rogers, D. S., & Tibben-Lembke, R. S. (1999). Going backwards: Reverse logistics trends and practices. Reno, NV: Reverse Logistics Executive Council.

Shaughnessy, L. (2012, May 22). Probe finds 'flood' of fake military parts from China in U.S. equipment. CNN Security Clearance RSS. Retrieved December 26, 2012, from http://security.blogs.cnn.com/2012/05/22/probe-finds-flood-of-fake-military-parts-from-china-in-u-s-equipment/

Stone, A. (n.d.). Recall, recare, who really cares? Hylife. Retrieved December 21, 2012, from http://www.wcdental.org/wcd_professionals/2010_annual_meeting/pdf/RecallRecareWhoReallyCaresHandouts.pdf