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Test Tech Audio Products Case Study060712

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Test Tech Audio Products Case Study060712

  1. 1. Case Study: After several months of positive results stemming from TestTech providing refurbishmentservices for a consumer and professional audio products that have been returned under warranty, TestTech’sOEM customer, located on the west coast, inquired about how they might expand their relationship withTestTech to reap additional benefits from the engagement. Below is TestTech’s response.Dear Mr. Customer:Thanks for the opportunity to allow TestTech to provide you with a high level view of the benefits of extendingour business partnership with your company. In preparation for your meeting with your CFO in regards toexpanding our relationship, I will try and keep this proposal as brief as possible, focusing on the areas that wethink will provide the best value and Return on Investment.Current StatusTestTech and your company entered into a business relationship in February of 2012. We are currentlyproviding Repair & Return Services for defective X and Y products. Under the current model, dealer returns arereceived by TestTech from your west coast warehouse. We receive, triage, repair, refurbish, and test allproducts with the intention of converting the returns to “B” Stock status, for you to resell through your dealers.We also warehouse and fulfill refurbished products to your dealers for resale. To date we’ve receivedapproximately 2,200 units with another truckload scheduled to arrive in mid June. The program has gone well.Your company has been pleased with the quality, service and pricing providing by TestTech. The primarybenefits enjoyed by your company for these services are: 1) Reductions in inventory carrying costs 2) Created additional warehouse space 3) Increased B Stock Revenue 4) Reduced freight costsOur current recovery rates are in the 75% range. These percentages are in line with the yields at your internalrepair facility. Of the units that cannot be repaired, TestTech is harvesting parts when possible, which keepsreplacement parts costs to a minimum while keeping scrap costs low. Fortunately, your company has beenvery successful to date selling the B Stock units. They typically sit on our shelves for less than one week.As we become more familiar with your company’s product lines, expect faster turnaround times and increasedrecovery rates which will lead to increased B stock revenue, reduced repair costs and improved cash flow forLoud.
  2. 2. Going forward Your Company’s Roadmap with TestTech Reduce Costs, Improve Performance,Protect Your Brand!Most tech and consumer electronics companies focus on the drive to develop new products and increaserevenues. The battle to lower costs is a constant. Identifying and eliminating hidden costs in areas such asRepair and Reverse Logistics can be missed because the managers in the Finance and Reverse Logistics supplychain are not always talking the same language, nor do they have the IT and engineering resources to efficientlyfocus on managing returns. Establishing key metrics between Finance and the Reverse Supply Chain byleveraging TestTech’s capabilities and expertise will provide your company’s execs the control and visibilityneeded to effectively manage and measure product returns. Creating a “Single Touch” Model by partneringwith TestTech will result in reduced returns, increased asset recovery, greater and faster B Stock revenues andincreased margins, all while protecting your company’s brand. TestTech can help your company become “BestIn Class”, by providing the flexibility, leverage and measurable results that is necessary to remain competitive inyour marketplace.We’re Just Getting Started!Turn Fixed Costs into Variable CostsBy outsourcing to TestTech, your company has established flat rate pricing for your returns activities. Hidden,unexpected internal costs such as unexpected overtime, opportunity costs, inefficiencies, etc have beeneliminated. Your capacity and flexibility has increased, providing your company the flexibility to devotemore time and consideration to your core competencies and focus on newer, more profitable initiatives. ITand Engineering personnel will be able to focus their efforts on more pressing issues such as new productdevelopment, introduction and support. As you mentioned during our phone call, since engaging withTestTech, you have cleared valuable warehouse space and your inventory pile is under control. Let us help youkeep it that way! We can help you manage the ups and downs in your business cycles. We are also sensitiveto the fact that in many cases companies are reluctant to completely move their repair and refurbishmentactivities to a 100% outsource model, but need to reduce costs. Our intention would be to augment andenhance your existing support model, working along with your support organization to optimize the customerexperience and manage fluctuations in your business.East Coast Reverse Logistics CenterTestTech is positioned to provide your company with a complete single touch reverse logistics center on the EastCoast. We have the technical capability to handle the repair of your company’s products and proven reverselogistics services that can save you time and money, by reducing freight distances, reducing inventory, reducingrefurbishment costs and reducing turn around times.
  3. 3. Freight SavingsMost of our customers’ installed base of product closely matches the population density of the United States.Test Tech is in the center of the most densely populated area of the country. By leveraging our east coastlocation, freight costs can be reduced dramatically. From our NJ location, TestTech can reach most of theeastern half of the USA within 2 days or less via UPS Ground. One of our existing customers saved over $1.4Million annually in freight costs by switching to a single touch reverse logistics program with TestTech andallowing us to select optimal shipping methods to meet their customer delivery SLA at the lowest cost. TestTech
  4. 4. UPS Ground transit Days from Marlton, NJ UPS Ground transit Days from West Coast Control and Visibility One concern businesses have about outsourcing their reverse logistics services is a lack of control and visibility. In actuality, TestTech’s customers find the opposite – they get better and more timely data than they were receiving from in house systems. TestTech’s customized reverse logistics solution for your company can provide real time visibility and control. TestTech will utilize our Microsoft Dynamics NAV ERP System and our proprietary PRISM data collection software to develop an IT solution optimized to match your internal requirements for managing your reverse supply chain. TestTech automates supply chain collaboration and document exchange with our partners using Vantage Point EDI for NAV by Data Masons Software. TestTech generates custom reports by using Report Designer, an ad hoc query tool and component of Microsoft SQL Reporting Services. All report data can be exported to Excel or other familiar programs for further analysis and graphical presentation. Subscription services can be easily established to send reports on a pre arranged schedule. Access to reporting can be provided to your company through an SSL VPN.
  5. 5. Technical Data Collection TestTech’s proprietary PRISM software is used for Technical Data Collection. Data can be collected by serial number during the incoming, fulfillment, repair and reverse logistics process, so it is available in real time. We create customized templates by customer, or product, in order to retrieve an unlimited amount of valuable data useful in trend and reliability analysis. The specific data your company requires is captured in an SQL database, allowing for ease of data transfer in your preferred format. For example, logistics/repair data collection data currently being captured for some of our customers are: Serial number, part number, customer part number Scan for Multiple Return Occurrences (Loopers) Failure Data from Defective Product Tags (Toe Tags) Warranty Status Product disposition (TF, NFF, BER, etc.) Components replaced – both new and harvested ECNs applied Dealer or origin of receipt Date of repair/test/receipt Test Results Customer Induced Damage & ScrapAdditional Ways TestTech Can Support Your Company and Your Customers: * In Warranty Dealer returns In Warranty dealer returns can be shipped directly to TestTech vs. shippingto WA, thereby drastically reducing freight costs, improving TAT and improving your return on assets by gettingreturned product back into your supply chain quickly and efficiently. Consider TestTech to manage specificproducts, geographic areas or specific customers. We will compliment your existing internal supportoperation. * Authorized East Coast Repair Center When a returned unit cannot be repaired by one of your localservice centers, TestTech can step in and provide support. We will work directly with your smaller servicecenters and manage this process for products east of the Mississippi. You can expect reduced freight costs,improved TAT and greatly improved customer satisfaction.
  6. 6. * Out of Warranty Repairs Let TestTech manage all of your OOW returns. Rather than tie up valuableresources, allow us to take this off your hands. We will use approved parts and processes approved by yourcompany. Your brand will be protected and your customers will be sending their OOW returns to a reputablesource. You will save costs by staying focused on your normal in warranty returns for your larger dealers.Better yet, redeploy your valuable personnel to more lucrative projects that fit your core business objectives. * Spare Parts Save administrative costs by allowing TestTech to manage your spare parts sales. No needfor parts management, stock room space, inventories, and so on. We will set up a portal for your customers toorder directly from us. We can be transparent to your customers if you would prefer.Improve B Stock Margins and RevenuesConsider partnering with TestTech to further support your B stock sales. In addition to or instead of selling BStock through your dealers, sell direct to the end user. We can help support and manage a web portal and alsocreate an E Bay store. Your sales people could make greater commissions, margins would improve and youwould create additional sales channels to move your B Stock. Your new products will impact market value,sometimes causing obsolescence and price erosion. Let us create the channels to allow your company to movemore product at a greater velocity with better margins and move B Stock while there is still a decent margin.Your brand is protected by keeping units out of the gray market. We’re the engine your company is the driver!TestTech welcomes the opportunity to work together with your company towards building a long termprofitable relationship for both companies. We sincerely appreciate the current business relationship betweenour companies and look forward to continued future success.Sincerely,Marty WalshVP Business DevelopmentTestTech

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