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reversing logistics
Nokuthula Mthembu Tel: +27(31) 301 9489 Cell: +27(73) 603 3333 Email: nokuthula@wabonagroup.com
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reversing logistics
- 1. REVERSE LOGISTICS: IMPORTANT ORIRRITANT? Estimated $100 billion industry in 2006
- 2. “In an idealworld, reverse logistics would not exist.” Jim Whalen, “In Through the Out Door,” Warehousing Management, March 2001
- 3. Reverse Logistics -What is it? The Army’s Definition The return of serviceable supplies that are surplus to the needs of the unit or are unserviceable and in need of rebuild or remanufacturing to return the item to a serviceable status
- 4. Reverse Logistics -What is it? The Commercial Perspective Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.
- 5. Typical Reverse LogisticsActivities Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory Recycling packaging materials/containers Reconditioning, refurbishing, remanufacturing Disposition of obsolete stuff Hazmat recovery
- 6. Why Reverse Logistics? Competitiveadvantage Customer service - Very Important: 57% - Important: 18% - Somewhat/unimportant:23% Bottom line profits
- 7. Reverse Logistics -New Problem? Sherman Montgomery Ward’s - 1894 Recycling/remanufacturing in 1940s World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff Salvage and reuse of clothing and shoes in the Pacific Theater World War II
- 8. Key Dates inReverse Logistics World War II – the advent of refurbished automobile parts due to shortages 1984 - Tylenol Scare - Johnson and Johnson 1991 - German ordinance that put teeth in environmental reverse pipeline Summer 1996 – UK Packaging and Packaging Waste Legislation 1998 - first real study of reverse logistics in the US - University of Nevada, Reno 2001 – EU goal of 50-65% recovering or recycling of packaging waste
- 9. REVERSE LOGISTICS A USArmy Perspective
- 10. Operation Iraqi Freedom TheUS Army moved the equivalent of 150 WalMart Supercenters to Kuwait in a matter of a few months
- 11. Military Operations andExcess “In battle, troops get temperamental and ask for things which they really do not need. However, where humanly possible, their requests, no matter how unreasonable, should be answered.” George S. Patton, Jr.
- 12. Jane’s Defence Weekly “Recentreport (Aug 2003): There is a 40 hectare (~100 acres) area in Kuwait with items waiting to be retrograded back to the US.”
- 13. Does this createa problem? From GAO Audit Report
- 14. From GAO AuditReport
- 15. REVERSE LOGISTICS The CommercialPerspective
- 16. Reverse Logistics Rate ofreturns? Cost to process a return? Time to get the item back on the shelf if resaleable?
- 17. Costs - abovethe cost of the item Merchandise credits to the customers. The transportation costs of moving the items from the retail stores to the central returns distribution center. The repackaging of the serviceable items for resale. The cost of warehousing the items awaiting disposition. The cost of disposing of items that are unserviceable, damaged, or obsolete.
- 18. Costs Process inbound shipmentat a major distribution center = 1.1 days Process inbound return shipment = 8.5 days Cost of lost sales Wal-Mart: Christmas 2003 - returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers PalmOne - 25% return rate on PDAs
- 19. More Costs Hoover -$40 Million per year Cost of processing $85 per item Unnamed Distribution Company - $700K items on reverse auction 2001 - over $60 billion in returns; $52 billion excess to systems; $40 billion to process
- 20. Is it aproblem? Estimate of 2004 holiday returns: $13.2 billion % of estimated 2004/2005 holiday returns: 25% Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day) Electronics: $10 Billion annually in returns Personal Computers: $1.5 Billion annually = approximately $95 per PC sold 79% of returned PCs have no defects Home Depot ~ $10 million in returns in the stores alone Local Wal-Mart ~ $1 million a month in returns
- 21. Is it aProblem? European influence – spread to US - Green Laws Estee Lauder - $60 million a year into land fills FORTUNE 500 Company - $200 million over their $300 million budget for returns Same Provider - 40,000 products returned per month; 55% no faults noted K-Mart - $980 million in returns 1999 Warranty vice paid repairs
- 22. More consequences Increased CustomerWait Times Loss of Confidence in the Supply System Multiple orders for the same items Excess supplies in the forward pipeline Increase in “stuff” in the reverse pipeline Constipated supply chain
- 23. Impact? Every re-saleable itemthat is in the reverse supply chain results in a potential stock out or “zero balance” at the next level of supply. Creates a “stockout” do-loop
- 24. Results? This potential fora stock out results in additional parts on the shelves at each location to prevent a stock out from occurring. More stocks = “larger logistics footprint” = the need for larger distribution centers and returns centers.
- 25. Reverse Logistics According tothe Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, is an astounding 200-300%. “In the U.S. alone, the cost is an annual $100 billion.” Forbes, March 2005 Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline
- 26. “The truth is,for one reason or another, materials do come back and it is up to those involved in the warehouse to effectively recover as much of the cost for these items as possible.” - Whalen, “In Through the Out Door”
- 27. RFID and Returns VisibilityTracking Component tracking Data Warehouse on what, why, when Altered products Not for every product
- 28. Impacts of ReverseLogistics Forecasting Carrying costs Processing costs Warehousing Distribution Transportation Personnel Marketing
- 29. CHAPTER 4 Quality Management Quality isa measure of goodness that is inherent to a product or service. Bottom line: perspective has to be from the Customer – fitness for use
- 30. Out of theCrisis “Failure of management to plan for the future and to foresee problems has brought about waste of manpower, of materials, and of machine-time, all of which raise the manufacturer’s cost and price that the purchaser must pay.
- 31. More Deming The consumeris not always willing to subsidize this waste. The inevitable result is loss of market. Loss of market begets unemployment. Performance of management should be measured by potential to stay in business, to protect investment, to ensure future dividends and jobs through improvement of product and service for the future, not by the quarterly dividend….
- 32. Deming’s solution The basiccause of sickness in American industry and resulting unemployment is failure to top management to manage. He that sells not can buy not.” The job of management is inseparable from the welfare of the company.
- 33. What Is Quality? “The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics that satisfy needs” (ASQ) Fitness for use Quality of design
- 34. Quality Quality Management –not owned by any functional area – cross functional Measure of goodness that is inherent to a product or service
- 35. FedEx and Quality DigitallyAssisted Dispatch System – communicate with 30K couriers 1-10-100 rule 1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix 10 – if caught later in different department or location = as much as 10X cost 100 – if mistake is caught by the customer = as much as 100X to fix
- 36. Product Quality Dimensions ProductBased – found in the product attributes User Based – if customer satisfied Manufacturing Based – conform to specs Value Based – perceived as providing good value for the price
- 37. Dimensions of Quality(Garvin) 1. Performance Basic operating characteristics 2. Features “Extra” items added to basic features 3. Reliability Probability product will operate over time
- 38. Dimensions of Quality(Garvin) 4. Conformance Meeting pre-established standards 5. Durability Life span before replacement 6. Serviceability Ease of getting repairs, speed & competence of repairs
- 39. Dimensions of Quality(Garvin) 7. Aesthetics Look, feel, sound, smell or taste 8. Safety Freedom from injury or harm 9. Other perceptions Subjective perceptions based on brand name, advertising, etc
- 40. Service Quality 1. Time& Timeliness Customer waiting time, completed on time 2. Completeness Customer gets all they asked for 3. Courtesy Treatment by employees
- 41. Service Quality 4. Consistency Samelevel of service for all customers 5. Accessibility & Convenience Ease of obtaining service 6. Accuracy Performed right every time 7. Responsiveness Reactions to unusual situations
- 42. Quality of Conformance Ensuring product or service produced according to design Depends on Design of production process Performance of machinery Materials Training
- 43. Deming’s 14 Points 1. 2. 3. 4. Createconstancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality 5. Constantly improve system and workers 6. Institute worker training
- 44. Deming’s 14 Points 7.Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans 11. Remove numerical quotas
- 45. Deming’s 14 Points 12.Enhance worker pride 13. Institute vigorous training and education programs 14. Develop a commitment from top management to implement these 13 points
- 46. The Deming Wheel (orPDCA Cycle) 4. Act Institutionalize improvement; continue the cycle. 1. Plan Identify the problem and develop the plan for improvement. 3. Study/Check 2. Do Assess the plan; is it working? Implement the plan on a test basis. Also known as the Shewart Cycle
- 47. Six Sigma Quality managementprogram that measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and products
- 48. Six Sigma Started ByMotorola Define Measure Analyze Improve Control Made Famous by General Electric 40% of GE executives’ bonuses tied to 6 sigma implementation
- 49. Malcolm Baldrige NationalQuality Award Category 3 – determine requirements, expectations, preferences of customers and markets Category 4 – what is important to the customer and the company; how does company improve
- 50. Cost of Quality Costof achieving good quality Prevention Planning, Product design, Process, Training, Information Appraisal Inspection and testing, Test equipment, Operator
- 51. Cost of Quality Costof poor quality Internal failure costs Scrap, Rework, Process failure, Process downtime, Pricedowngrading External failure costs Customer complaints, Product return, Warranty, Product liability, Lost sales
- 52. Employees and Quality Improvement Employee involvement Quality circles Process improvement teams Employee suggestions
- 53. Cause-and-Effect Diagram Measurement Faulty testing equipment Environment Old/ worn Inadequate training Quality Problem Defective from vendor Not to specifications Dust and Dirt Tooling problems Lack of concentration Improper methods Machines Out of adjustment Poor supervision Incorrect specifications Inaccurate temperature control Human Materialhandling problems Materials Also known as Ishikawa Diagram or Fish Bone Poor process design Ineffective quality management Deficiencies in product design Process
- 54. Hot House Quality Lotsof Hoopla and no follow through
- 55. ISO 9000:2000 Customer focus Leadership Involvementof the people Process approach Systems approach to management Continual process improvement – GAO Factual approach to decision making Mutually beneficial supplier relationships
- 56. Implications Of ISO9000 Truly international in scope Certification required by many foreign firms U.S. firms export more than $150 billion annually to Europe Adopted by U.S. Navy, DuPont, 3M, AT&T, and others
- 57. ISO Accreditation Europeanregistration 3rd party registrar assesses quality program European Conformity (CE) mark authorized United States 3rd party registrars American National Standards Institute (ANSI) American Society for Quality (ASQ) Registrar Accreditation Board (RAB)
- 58. Wabona Logistics Contact Details WabonaOffices Head Office Durban Office: Chris Magagula - Group Chairman Suite 811 Salmon Grove Chambers 407 Anton Lembede Street Durban 4001 South Africa P.O. Box 1901 Durban, 4000 South Africa Operations Johannesburg Branch: 44-48 Fountain Road2nd Floor Adoni's Centre, Fordsburg, Johannesburg, 2092, South Africa Email: jhb@wabonagroup.com Chris (Group Chairman) chris@wabonalogistics.co.za chris@wabonagroup.com ops@wabonalogistics.co.za Tel: +27(31) 301 9489 Fax : +27(86)512 8520 Cell: +27(72) 578 7638 Cape Town Branch: Port Elizabeth Branch: Benoni Branch: 27 Goedehoop Street Windsor Port Elizabeth, 6200, South Africa Email: pe@wabonagroup.com Suite 21c, 2nd Floor 71 Woburn Avenue, Benoni, 1500, South Africa Email: jhb@wabonagroup.com Business Unit 28B Foreshore, Lowershore, Cape Town, 8001, South Africa Email: cape@wabonagroup.com Business Development Executives Carl Lupke Tel/Fax: +27(31) 301 9489 Cell : +27(82) 464 8139 Email: carl@wabonagroup.com Dashen Tel: +27(31) 301 9489 Cell No: +27(71) 873 3878 Email: dashen@wabonagroup.com