Impact of sales and procurement on reverse logistics


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Impact of sales and procurement on reverse logistics

  1. 1. The Impact of Sales and Procurement on Reverse Logistics Management© 2011 Wipro Ltd - Confidential
  2. 2. Research Partners2 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  3. 3. Agenda 1 Objective of the study 2 Key Findings 3 Recommendations3 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  4. 4. Objective of the study When > Where >How4 © 2011 Wipro Ltd - Confidential
  5. 5. Objectives • Better understand the effect of sales operations on unsaleables • Provide recommendations to reduce the incidence of unsaleables • Raise industry awareness of future trends The study was conducted in four phases 1. Data Collection: Development and issuance of a 28 question survey specific to JIULT manufacturer and retailer members 2.Validation: Individual interviews with 16 subject matter experts split evenly between manufacturers and retailers. 3. Analysis: In-depth analysis of the survey results, interview results, and published reports. 4. Synthesize Findings: Review and summary of the findings with industry experts5 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  6. 6. Key Findings When > Where >How6 © 2011 Wipro Ltd - Confidential
  7. 7. Managing Discontinued and ExpiredProducts Unsaleables are defined as consumer products which are removed from the primary channel of distribution for any reason (damaged, discontinued, or expired) and which may or may not be processed through product reclamation centers. Annual average unsaleables rates, as a percent of gross sales, are .96 percent for manufacturers and 1.13 percent for retailers. Expired and discontinued products combine for over 50 percent of the total unsaleables incurred and have increased steadily in significance the past three years Unsalebles by type7 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  8. 8. Managing, Capturing and Enabling There are five shared challenges which impact the overall cost and process of managing unsaleables: Managing Open Code Dating/Expired Products Managing New Ensuring Product Proper Introductions/ Accountability Discontinued and Incentives Items Challenges Enabling Effective Capturing and Collaboration Providing the Internally and “Right” Data Externally Top Unsaleables Challenges8 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  9. 9. Finding 1 - Shelf Life Management Required Better management of product shelf life is required to reduce the amount of unsaleables. This includes education and execution in four specific areas. • Remaining Shelf Life Disconnect Study found that the disconnect resides in the material master set-up on both sides either due to process failures and/or as a result of the differences in shelf life guarantees provided by manufacturers. • Product Rotation Execution 77 percent of consumers claim they regularly check product code dates. Majority of retailers proper product rotation is occurring; however, the data collected suggests room for improvement. • Product Dating Variances When new products are developed, manufacturers want to get them on the market as soon as possible without waiting a year for the product information needed on the packaging. • Consumer Confusion o 76 percent of U.S. consumers mistakenly believe certain foods are unsafe to eat after the date printed on the packaging has passed o 61 percent of consumers mistakenly believe the printed date (sell-by) is the final date they can consume the product. o Retailers prefer the sell-by date9 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  10. 10. Finding 2 - Coordinated Planning Required New Product Launch  28 percent of manufacturers do not address key aspects of new product launches to ensure full retailer involvement  20 percent do not include unsaleables benchmarks to identify new product introduction execution results Some identified opportunities • Using retailer data to track new products through the supply chain, all the way to the shelf and register • Collaboration with retailers on planogram, quantities, shipment timing, retail reset support requirements, and promotional support/pricing • Working with retail buyers to review comparable launches to estimate demand and then shipment timing New Product Launch Components10 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  11. 11. Discontinued Products  The decision to discontinue a product is either triggered by profitability, seasonality, velocity, or new item offering decisions from the manufacturer or the retailer.  Strong coordination is required to ensure discontinued items are managed efficiently to minimize unsaleables. Discontinued Products11 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  12. 12. Exit Strategies  Manufacturers apply exit strategies to varying degrees dependent on the type of product (new item, seasonal, discontinued)  Over the past 15 years less than 3 percent of new products achieved more than $50 million in one-year sales; while 78 percent achieved less than $7.9 million in one-year sales Exit Strategies Used12 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  13. 13. Sales Promotions  Companies should also plan and forecast for the termination of the promotion to ensure inventory is in balance and that excess product is not on-hand resulting in unsaleables.  Retailers report success when promotions are presented by the manufacturer, sales goals are agreed upon, and processes and supporting measures are in place. Promotions Planning13 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  14. 14. Finding 3 - Opportunities to FormalizeCollaboration  Manufacturers and retailers have yet to completely formalize a collaboration process to achieve sustainable and repeatable results.  Thirty-nine percent of manufacturers and 17 percent of retailers report having either no collaboration or informal collaboration with their trading partners.  “Fire-fighting” approach is used to reduce unsaleables. Collaboration14 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  15. 15. Finding 4 - Accountability, Incentives andEducation Drive Behavior  Manufactures assign unsaleables responsibility to the head of sales and marketing (38%) or supply chain (25%).  The majority of retailers (56%) assign unsaleables responsibility to the head of operations/supply chain Unsaleables Accountability15 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  16. 16. Incentives  Financial incentives in terms of a performance bonus are in place for two-thirds of organizations and all include unsaleables as part of individual performance reviews.  One of the gaps cited by retailers is that the buyer/category managers may not be properly incented to reduce unsaleables. Incentives16 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  17. 17. Procurement Accountability  Successful companies are striving to understand the total cost of unsaleables and create internal ownership opportunities and commitment to ensure action is taken to reduce unsaleables.  Successful sales organizations are evolving from specific unsaleables goals to including unsaleables in the customer profitability model supported by performance metrics.  Organizations recognize that education supports the process.  Manufacturers are educating field sales representatives regarding the impact of overselling accounts and the importance of supporting discontinued SKU‟s with markdown funds.  Retailers are working with procurement to outline process improvements and coordination17 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  18. 18. Finding 5 - Demand Chain ManagementOpportunities  CPFR and VMI potentially offer two methods to better managing interactions and the impact of unsaleables.  Shared information: o Aids in planning and satisfying consumer demands through a system of shared information. o enables continuous updating of inventory and requirements CPFR Program18 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  19. 19. CPFR Elements Strategy and Planning To establish the ground rules and identify significant events that affect supply and demand. The Analysis component To monitors the execution, aggregates results, and shares insights for continuous improvement. CPFR Elements19 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  20. 20. Recommendations When > Where >How20 © 2011 Wipro Ltd - Confidential
  21. 21. The 5 challenges The five major challenges organizations experience are significant and will require continued commitment from manufacturers and retailers to affect change: Managing Open Code Dating/Expired Products Managing New Product Introductions/Discontinued Items Capturing and Providing the “Right” Data Enabling Effective Collaboration Internally and Externally Ensuring Proper Accountability and Incentives21 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  22. 22. Recommendations Shelf Life Management Synchronize Product Data • Synchronize product data with partner to ensure product shelf life is understood • Ensure a product data review process is established to account for changes in data Drive consistency in product • Guarantee a reasonable amount of minimum shelf life to ensure sell shelf life through and collaborate with partner • Explore the potential to base minimum code life on a products sales velocity and quantities sold to the customer • Identify top 10% problem SKU‟s, conduct root cause analysis and target Adopt targeted product for rotation plan or other action rotation • Ensure accuracy of planograms and customize to fit fast/slow items with high/low volume stores • Reward department leads for reducing out-of-code/expired product22 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  23. 23. Recommendations Coordinated Planning Consistently apply exit • Communicate exit strategy in writing during program sell-in and obtain agreement from strategies the retailer buying agent • Include exit strategy for any item being replaced Plan Discontinued Product • Implement regular portfolio performance reviews to identify and monitor potential product delist risks or planned exits • Include accountability for cost of discontinuation in new item introductions • Determine product markdowns with trading partners and a establish a time limit • Timely communicate decision to discontinue a product • Jointly explore product redeployment options Coordinate New Product • Establish clear hand-over points for each New Product Introduction (NPI) from the Launch „project‟ team to line operations • Reflect optimal store mix in distribution strategy • Identify course correction opportunities throughout the product launch/checkpoints • Continually monitor actual versus projected sales growth in aggregate, across consumer segments and by store Optimize Sales • Establish joint coordination for promotion execution Promotions • Monitor results at specific touch-points23 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  24. 24. Recommendations Formal Collaboration • Assign dedicated resources • Define roles & responsibilities Establish a formal collaboration process • Establish regular meetings • Openly share data • Assign relationship owner/leader • Share cost to optimize ownership and involvement Accountability Incentives Education • Assign SKU profitability goals and accountability metrics to Match accountability and incentive structure to procurement • Assign customer profitability and metrics to sales desired goals and outcomes Demand Chain Optimize demand chain • Include strategy/planning and analysis in collaborative efforts24 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  25. 25. Customer Takeaways25 © 2011 Wipro Ltd - Confidential
  26. 26. Customer takeaways • Supporting proper product rotation is the • Strong coordination is required to ensure need for customized planograms to fit discontinued items are managed efficiently fast/slow moving items with high/low to minimize unsaleables. volume stores. • Manufacturers must consider educating field • Retailers should ensure policies and sales representatives regarding the impact procedures are in place to avoid rotating of overselling accounts and the importance items off the shelf prior to the shelf life limit of supporting discontinued SKU‟s with being reached. markdown funds. • The time is right for collaboration between • Align accountability and incentives within manufacturers and retailers as both are cross-functional areas to address experiencing the challenges associated with opportunities, gain an understanding of total managing unsaleables. cost, and ensure commitment to take action to reduce unsaleables. • The establishment of a formal collaboration process should also be applied internally between functional areas as sales, merchandising, procurement and operations.26 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  27. 27. To read the complete report please visit the link below ts/Impact_of_Sales_and_Procurement_on_Reverse_Logistics.pdf27 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  28. 28. About Wipro Council of Industry Research Wipro set up the Council for Industry Research, comprised of domain and technology experts from the organization, to address the needs of customers. It specifically surveys innovative strategies that will help customers gain competitive advantage in the market. The Council, in collaboration with leading academic institutions and industry bodies, studies market trends to help equip organizations with insights to facilitate their IT and business strategies. For more information on the Research Council visit or mail wipro.insights@wipro.com28 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  29. 29. About Wipro Technologies Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company, that delivers solutions to enable its clients do business better. Wipro Technologies delivers winning business outcomes through its deep industry experience and a 360 degree view of “Business through Technology” – helping clients create successful and adaptive businesses. A company recognised globally for its comprehensive portfolio of services, a practitioner’s approach to delivering innovation and an organization wide commitment to sustainability, Wipro Technologies has over120,000 employees and clients across 54 countries. For more information, please visit www.wipro.com29 © 2011 Wipro Ltd - Confidential © 2011 Wipro Ltd - Confidential
  30. 30. Thank you© Wipro Limited, 2011. All rights reserved.For more information visit www.wipro.comNo part of this document may be reproduced in whole or in part without the written permission of the authors.Wipro is not liable for any business outcome based on the views presented in this document. For specificimplementation clients should take advise from their client engagement manager. © 2011 Wipro Ltd - Confidential
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