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Figure 2: Driving Faster Returns with Incentives in Place
Enablers (E)
The investment in partners to
manage portions of the reverse
Performance Figure 1: Strategic Metric Actions Taken to Incentives Address Market in Pressures Incentives in Reverse Not Logistics
Place in Place service supply chain is one of
the top fi ve strategies for leading
Average days Develop until return standardized - product processes 14.9 15.5
69%
and rules governing the return, repair,
service fi rms. Currently, disposal,
Average days until return refurbishment - part of assets 14.8 16.4
62%
repair and logistics functions are
Source: Aberdeen Group, December 2008 those that respondent fi rms are
Develop visibility into return lifecycle
48%
increasing number of every of service companies asset and part partrate
and velocity of returns. The most likely to outsource, and this
44%
have considered the reverse ser- capture of these data enables the is consistent with leading service
vice supply chain Indicate as clearly a defined strategic return / development of forecasts 31% of future fi rms as well (Figure 3). However,
repair / replacement guidelines
avenue to manage costs, minimize return needs that could assist in
it is interesting to note that while
and processes to customers
22%
risk and drive additional revenue improved planning and resource
inventory management is noted as
by actively managing and tracking allocation to expedite part and
one of the most challenging areas
Improve planning and forecasting
28%
of part / product return needs
the return, repair, refurbishment product returns. 25%
to manage, most companies have
In fact, forty-one
Figure 3: Outsourced Portions of the Reverse Logistics Supply Chain still been hesitant to outsource
and remarketing of assets. Effec- percent (41%) of leading service
Outsource portions of the
24%
their Best-in-Class inventory holdings as of yet.
tive management Currently of the disposal fi rms are actively involved in
reverse service Outsource supply chain
% of All Respondents
20%
Still, All Others Aberdeen research reveals
of assets also ensures regulatory using performance data for future
Disposal 39% that 38% of all fi rms indicate
compliance and can drive “green” 0% forecasting, 10% 20% when 30% compared 40% 50% to 60% they 70% are 80% currently looking for
benefi Repair ts. / refurbishment Figure 1 illustrates the 25% of non-Best-in-Class 35% fi rms.
% of Respondents their partners to provide greater
specifi Logistics c strategic management actions that most
28% assistance with inventory holdings
companies are most likely to take To further boost Source: the Aberdeen velocity Group, of December 2008
Asset recovery 20% so as to minimize costs and even
to
Resale
address
of refurbished
the market
product
pressures returns for products
16%
and parts, some of the risk associated with
they face on a day-to-day and leading fi rms are incentivizing excess inventory.
Inventory management 15%
long-term basis.
their regional service depots and
All – entire chain fi eld technicians based 4% on their While there is signifi cant interest
Capabilities Figure 2: Driving (C) Faster Returns with timely Incentives Source: return Aberdeen in or Place transfer Group, December of parts 2008 among respondent companies
Real-time visibility supported or products to repair depots. in the use of partners to assist in
by leading service organizations While Incentives not widely in Incentives adopted, 21% Not
Performance Metric
of their reverse logistics activities,
also enables real-time capture leading
Place
fi rms currently
in Place
have such there are considerable challenges
of Average reverse days service until return supply - product chain incentives 14.9 in place compared 15.5 to acknowledged with leveraging a
performance. Average days until To return this effect, - part some only 11% 14.8 of all other 16.4 fi rms. On third-party network — challenges
of the key performance indicators average, fi rms that do have such that can become formidable to
Source: Aberdeen Group, December 2008
tracked by leading service fi rms (in incentive structures in place tend to manage given the global nature
addition to customer satisfaction) perform better in key performance of most service supply chains. As
are: total repair/refurbishment metrics with regard to the velocity such, responding fi rms indicate
costs, repair turnaround times, of returns of products and parts,
that visibility into the performance
spare part inventory turns, cost of and even more so with respect to
and quality of a third party network
is the most daunting obstacle they
spare part inventory, part defect parts (Figure 2).
have yet to overcome.
Figure 3: Outsourced Portions of the Reverse Logistics Supply Chain
Currently Outsource % of All Respondents
Disposal 39%
Repair / refurbishment 35%
Logistics management 28%
Asset recovery 20%
Resale of refurbished product 16%
Inventory management 15%
All – entire chain 4%
Source: Aberdeen Group, December 2008
Summary and
Recommendations
Whether a company is trying to
move its performance in reverse
logistics and customer service
from Laggard to Industry Average,
or Industry Average to Best-in-
Class, based on the most recent
Aberdeen research, the following
recommended actions should help
spur the necessary performance
improvements.
• Increase real-time visibility of
the service organization into
the status and location of parts
and products in the reverse
service supply chain.
• Track the velocity of returns.
• Standardize returns processes
and returns commitments in
service contracts.
• Improve on-site or pre-visit
diagnostic capabilities to stem
No-Faults-Found (NFFs).
• Promote collaboration between
the repair engineers and the
service/design teams.
• Increase and improve return/
replacement forecasting.
• Evaluate incremental revenue
opportunities from refurbished
products.
The data and information included
in this article represents only a
small portion of the analysis and
recommendations included in the
upcoming Aberdeen Benchmark
Report entitled “Driving Returns
in the Reverse Logistics Service
Chain.” To learn what leading
organizations are doing, or planning,
to counteract the effect of the current
economic and other pressures,
make sure to download a copy of
this report as soon as it becomes
available (scheduled for April
2009). RLM
Bill Pollock is
Vice President-
Principal Analyst
heading up the
Strategic Service
Management
practice at Aberdeen
Group.
He is a frequent
speaker, pre-
senter @ 300 and DPI DPIkeynoter
on services-related topics
for a variety of venues including Aberdeen’s
Chief Service Offi cer (CSO) Summit and RLA’s
North American Conference & Expo, and has
published more than 150 articles and features
in services journals including Reverse Logistics
Magazine and others. Bill can be reached at
(610) 399-9717, or via e-mail at bill.pollock@
aberdeen.com.
Sumair Dutta
is a Senior Research
Analyst
in the Strategic
Service Management
practice at
Aberdeen Group.
In that role, Sumair
researches
and examines
how service executives
are utilizing technology and streamlining
business practices to improve post-sales
service and support processes, analytics and
management. Sumair may be reached via
telephone at (773) 857-2123, or by e-mail at
Sumair.dutta@aberdeen.com.
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Edition 16 • Reverse Logistics Magazine 29