Paul Kelly, Head of Supply Chain Development & Strategy at Telefonica - What does an effective reverse logistics operation look like?
Paul Kelly email@example.com T: +44(0)7801 671 741 T: +44(0)7801 671 741 T: +44(0)7801 671 741What does an efficient ReverseLogistics Operation look like ?
∀ Defining a role and goal for Reverse Logistics which is "fit for purpose"∀ Using end-to-end Performance Indicators (Measures) Reverse logistics, and specifically product returns, represent significant costs and, if properly managed, the opportunity for significant benefits. ■ Average return rate for online retail sales is 5.6%, although it varies by product and time of year∀ From efficiency to effectiveness ■ Cost of processing a return can be 2–3 times that of an outbound shipment ■ The average cost of processing per return for items bought on the Internet is $30–$35 See Reference on Slide 5
Its "purpose" should link to Enhance Revenue the business strategy Enhance Profitability Reduce Operating Costs Supply Chain Value Reduce Working Capital Reduce Invested Capital Reduced Fixed Capital
Should we avoid them* - if so how? Improve the experience? What value information? How to increase efficiency/effectiveness? * Is there is some other value/driverSome additional questions > Buyback/Recycling to think about first > Returns policy and contribution to sales
Reference:Receive “Managing Product Returns for Competitive Advantage” James Stock, Thomas Speh and Herbert Shear MIT Sloan Management Review FALL 2006 VOL.48 NO.1 Sort and Stage Reverse Logistics: Receiving products & maximising their valueProcess Analyse “Support” - Repair, Refurbish, Dispose Analyse
Its just another “transformation” process !Resources Inputs “Transformation” Outputs Outcomes Economy Efficiency Effectiveness (including cycle times) Operational Measures “Business” Measures
Drivers to effectiveness Spend € “Return on Returns” € Basic “Screening” Financial Benefits Indirect BenefitsReceive Minimise cycle time Sort & Stage € Total € Total Improve process capability (yield)Process Ratio 1 Ratio “N” Consider the value of information, the benefits of Minimise cycle time “Value add” activities Financial BenefitsAnalyse the policy & the impact of the Customer Exp.Support Improve process capability (yield)- Repair € Total € TotalRefurb.Dispose Enhance or extract value Ratio 1 Ratio “N” Operational Measures “Business” Measures
∀ Conclusions & Implications• Reverse Logistics can can and should contribute to the business strategy• Use measures that look at outcomes as well as outputs• Economy = Procurement Use to align and incentivise your teams and your• Efficiency = Operations suppliers• Effectiveness = Everyone! • Encourage a “ROI” approach to budgets and investments • Promote " joined-up-edness"