Originally presented at RLSC 2015 Conference by Irv Grossman, EVP of Americas at Chainalytics.

1. CASE STUDY :
DESIGN CONSIDERATIONS FOR
MANUFACTURER’S REVERSE
LOGISTICS FACILITIES
IRV GROSSMAN
EVP, AMERICAS

2. Right Process, Right Location
RL Facility Design Concepts
Questions and Answers
About Chainalytics
AGENDA
2
Case Studies

3. 3
Questions and Answers
About Chainalytics
AGENDA
Case Studies
Right Process, Right Location
RL Facility Design Concepts

4. WHO IS CHAINALYTICS?
4
11YEARS
GREAT SUPPLY
CHAIN PARTNER
SupplyChainBrain
10PROS TO KNOW
Supply &
Demand Chain
Executive
18TOP 25
supply chains
of Gartner’s
ATLANTA
BANGALORE
MILAN
MINNEAPOLIS
HELSINKI
SINGAPORE
STOCKHOLM
SYDNEY
8 RETAILTOP 10
7 FOOD & BEVERAGETOP 10
6 CPGTOP 10
91of the
FORTUNE 500
TOP SUPPLY CHAIN SCHOOL
67%
WITH DEGREE FROM
consultants
of
*25BILLION
$
FMIC
SPEND
CAPTURED IN
25%
CAGR
since 2009
COOL
VENDOR
in supply chain services
Gartner2013

5. Strategic
Alignment
Performance
Improvement
Transformation
Descriptive &
Diagnostic Analytics
Predictive &
Prescriptive Analytics
Intelligence
Networks
Decision
Support
Technology
FACT-BASED
TRANSFORMATION
5

6. OUR COMPETENCIES
6
Supply Chain
Design
Integrated
Demand & Supply
Planning
Sourcing
& Supplier
Management
Packaging
Optimization
Supply Chain
Operations
Transportation Service
Supply Chain

7. SOME OF OUR CLIENTS
7
RETAIL
HOME & OFFICE DURABLES
FOOD & BEVERAGE
HOME & OFFICE NON-DURABLES
HIGH TECH & TELECOM
LSP
Packaging
HealthcareOTHER INDUSTRIES Chemical & ProcessAutomotive & Industrial

8. 8
Questions and Answers
About Chainalytics
Case Studies
AGENDA
Right Process, Right Location
RL Facility Design Concepts

9. 9
REVERSE LOGISTICS FRAMEWORK
Crafting the right Reverse Logistics Operation begins with an
understanding a holistic view of the RL CHAIN.
9
Supplier(s)
Customer
Address Process Recover
AlignAvoid
• Customer Facing Returns Policies
• Days and Condition
• Receipt and/or Tracking
• Fraud and Abuse
• Exchanges vs. Returns
• On-line vs. In-store /Cross Channel
• Inventory Left in
Field
• Inventory Flow
Paths
• Returns Cycle
• Liquidation
options
• Throughput
• Volumes
• Productivity
• Cost
• Handling and
Disposition
• Repurpose and
Reuse
• Varying product
lifecycles
• Landfill versus
Recycle
• Remarketing/
Secondary Market
• Repair/
Re-box/Resell
• Suppliers terms and conditions
• Paperwork Processing
• RMA Clearance from Suppliers
• Allowances and Money Transaction

10. DELIBERATELY DETERMINE THE RIGHT SUPPLY CHAIN
NETWORK.
10

11. VALUE-DRIVEN SUPPLY CHAIN DECISIONS
ARE BASED ON COST VS. SERVICE TRADE-OFFS
The cost/service trade-off curve indicates the lowest possible costs for a range of
customer service positions.
11

12. 12
WHY DO COMPANIES INITIATE NETWORK STUDIES?
Source: Chainalytics
Cost Reduction
41%
Merger,
Acquisition,
Divestiture
12%
Excess /
Insufficient
Capacity
11%
New Management
6%
New Markets
6%
Develop Internal
Competency
6%
Never Done;
Thought It Was Time
3%
Process
Re-Engineering
3%
Annual Planning
Process
3%
Political /
Regulatory
2%
New Product
Introduction
2%
Sourcing
Change
2%
Assess 3PL
Outsourcing
2%
Increase Service
1%
• Cost is the Key Factor
• Service Improvement and Sustainability did not move the needle

13. 13
HOW MANY LOCATIONS?
Number of Warehouses
Costs($)
Warehousing Costs
Transportation Costs
• Inbound
• Delivery
Inventory Costs
Total Costs
Network Cost Drivers
For a given service requirement, the right number of sites
balances several costs.
Service Example:
One leading soft drink company has 400+ finished goods warehouses in
the U.S. and only ~10 for equipment (vending machines, fountains, etc.).

14. ANALYSIS & SELECTION OF CANDIDATE SITES
14
Earthquake
Peak Acceleration
0 - 6
7 - 15
16 - 40
41 - 60
61 - 100
HS Degree
12.5% - 53.9%
54.0% - 69.5%
69.6% - 80.5%
80.6% - 89.8%
89.9% - 100.0%
Intermodal
Terminals
BNSF
CSX
CN
CP
KCS
NS
UP
Annual Cost
$7,500,000-$8,400,000
$8,400,000-$9,200,000
$9,200,000-$10,100,000
$10,100,000-$10,950,000
$10,950,000-$11,125,000
$11,125,000-$11,950,000
Union Election
Union Loss
Union Win
Weather & Seismic
Earthquake events
Seismic risk zones
Tornado touchdowns & intensity
Hurricane tracks and classification
Temperature & humidity
Days of snow & ice
Development &
Operating Costs
Wages rate by job title
Electricity costs
Real & personal property taxes
Construction costs
Labor Unions
Elections by union
Election trends (20 years)
Win rates by union
Elections/wins by industry
Union success by bargaining unit size
Organized companies by union
Labor Availability & Quality
Population density and growth
Employment by industry
Population age distribution
College/university enrollment
Military installations
Unemployment rates
Worker commuting patterns
Educational attainment
Transportation &
Other Infrastructure
Intermodal terminals
LTL terminals
3PL Locations
Sea ports
River ports
Commercial & general aviation airports
Class 1 and shortline RR’s
Interstate highways
Electric transmission lines by kVa
Foreign Trade Zones
Non-attainment areas

15. TRANSPORTATION-THE MOST IMPORTANT COMPONENT?
15
Destination alone can affect a TL cost by up to $1000 per load.
Source: Chainalytics Freight Management Intelligence Consortiium (FMIC)

16. REAL ESTATE
16
Lease Rate Variation Among Common Logistics Areas
Lease rates trend with property values and are the
highest in CA, S. FL, DC, and near NYC.
Lease Rate PSF
by MSA
11.0
6.8
2.5
(COV: 24.1)
Source: Loopnet 11/10

17. LABOR COSTS
17
86
88
90
92
94
96
98
100
102
104
106
100 105 110 115 120 125 130
Labor Supply Score
Labor
Cost
Score
Bubble size = Labor
force size
Salt Lake City is the lowest cost market on the list and also scores well in terms of DC labor skill depth.
Ontario has the largest DC skill base, but is also the most expensive market.
North Las Vegas is a large market with above average DC skills, but costs are still above the U. S. national average.
Reno and Goodyear have smaller labor forces, but high DC skill density.
Greater Supply
Lower
Cost
Optimal
QuadrantSalt Lake City
Goodyear
Ontario
Reno
N. Las Vegas
U.S.
Avg
Given the importance in handling costs, a significant effort needs to be made to
understand the Labor Market on a Macro and Micro basis.

18. 18
THE MICRO VIEW OF LABOR

19. NETWORK STRATEGY FOR REVERSE LOGISTICS
19
Many Considerations are Exacerbated
 Labor-Handling, Triage and Repairs (L1-L3)
 Service-Responses for Failures
 Inventory
Placement of Inventory for Forward Logistics
Spares and Recovery
Some Issues are Less of a Consideration:
 Transportation
And No Two Networks are the Same
 Contractual Relationships across the Chain
 Turn around Time (TAT) versus Labor Costs

20. 20
Questions and Answers
About Chainalytics
Case Studies
AGENDA
Right Process, Right Location
RL Facility Design Concepts

21. FACILITY DESIGN STARTS WITH THE CONCEPT
21
Project
Kickoff
Current
Distribution
Center
Capacity
Recommend
Design
Changes
Develop
Baseline
Model
Current
Block
Layout
Iterate
Capacity
Model
Review of
Model &
Modifications
Finalize Model
And
Transition
Roadmap &
Business
Case
(as needed)
Concept
Design
Detailed
Design
Implementation

22. CAPACITY MODEL EXAMPLES
22

23. CAPACITY MODEL FRAMEWORK
23
Product
SKUs/Items
Slotting/
Profiling
Cubic Fill
Inventory
Facility
Storage/
Slotting
Throughput
Accessorial
Sales
Replenishment
Order
Characteristics
Labor
Direct
Indirect
Productivity
3PL
Cross-Dock
Overstock
Costs
Direct/Indirect
Relevant
3PL/Trans
Storage
Media
Growth
Same Store
New Stores
Offerings
Efficiencies
Throughput
Storage
Productivity
Outputs
Revised
Facility
Revised
Labor
Revised
Costs
Revised Mat’l
Handling
Pick Type

24. CAPACITY MODEL CONSIDERATIONS
24
Volumes
 Puts and Takes of Key Customers
 New Product Lines and their Return Implications
 Peak/Average
Agreements with Customers/Suppliers
 Turn around Time
 Handling Expectations
 Handling Strategies
 Productivities
 Technology Implications (Systems and Controls)
 Layout (Cell vs. Line)
 Pre-Inbound
 Material Handling Systems

25. EXAMPLES
25
Two-Level Carousel
Single-Level Carousel,
with Light TreeStatic Pallet Roller Conveyor
Three Level with Trash Conveyor

26. EXAMPLES
26
AutoStore-Swiss Log
Kiva Robots

27. 27
Questions and Answers
About Chainalytics
Case Studies
AGENDA
Right Process, Right Location
RL Facility Design Concepts

28. 28
CPG Category Leader
CASE STUDY:
NETWORK FOR VENDING MACHINE REFURBISHMENT
Consolidated
outsourced operations
into company
managed sites
Rationalization of
existing network
Outlined the
transformation from
existing to future state
in support of the
implementation
THE BOTTOM LINE
Objective:
• Determine the most cost effective network
configuration for forward and reverse
logistics of equipment while maintaining
or improving current service standards
• Develop 5-year strategy plan for
consolidation of two separate distribution
operations with a mix of sites performing
in-house operations and other sites
outsourced to a third-party provider
Approach
• Constructed a network model for forward
and reverse logistics with 40 greenfield
locations to determine best network
configuration

29. 2929
CASE STUDY:
CAPACITY MODELING & DC CONCEPT DESIGN
Global Wireless Distributor
Selected block layout
reduced material flow by
25%
Identified annual savings
of about $1.5 million
with selected Material
Handling Equipment
THE BOTTOM LINE
Objective:
Identify impacts of additional business volume
and customer requirements, model forward and
logistics capacity requirements, and suggest DC
layout options that minimizes material flow and
maximizes use of current facility assets.
Approach
• Developed analytical models to calculate space
requirements for storage, production and reverse
logistics; ran scenarios for different volume
projections
• Created three block layout iterations and multiple
material handling options for new business
requirements; comparing storage, processing, and
throughput needs with each designs
• Presented improvements to the operations for
density, productivity and quality.

30. QUESTIONS & ANSWERS
Irv Grossman
Executive Vice President-Americas
igrossman@chainlaytics.com
+1 (770) 365-2000