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Top 11 Priorities in 2011 for Service Supply Chain
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Returns are rarely what companies want as the end result of a customer relationship. But returns are almost inevitable. It is essential for companies to have a service supply chain that is a source of profitable growth via good planning and preparation. Based on our experiences and research, the following should be the top 11 priorities for 2011 for service supply chain executives: | |
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Executive sponsorship: A Tompkins Supply Chain Consortium’s survey found that less than 40% of the respondents have dedicated organizations for the service supply chain, and only about 38% of them are led by executives with titles of vice president or above. Senior executives in companies need to not only learn about their current service supply chain performances and benchmark them but also need to make that performance a part of their strategic growth planning process. |
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Organizational alignment: In many companies, service supply chain functions are spread across multiple organizations which have non-aligned objectives and incentives, causing overlap or redundancies of roles and responsibilities and produces undesired results. Companies need to make careful decisions about their service supply chain organization and resources. Exact structure of the organization may vary by company depending upon its activities, level of outsourcing and financial contribution towards the corporate bottom-line. |
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Reduce returns: Although reducing returns is the best way to reduce costs, there will always be customer returns. There are approaches which could help reduce returns while keeping customers delighted, including marketing correctly, educating sales personnel, and post-sale customer follow-ups & reviews. |
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Improve velocity of returns: Returned products diminish in value extremely quickly. Some technology products, due to their short life spans, could lose their value in a few short months. Time required for receiving, processing and final disposition for returned products is critical to capturing maximum residual value of the products. |
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Reduce cost per RMA (Return Material Authorization): Processing cost per RMA directly impacts the bottom line of corporations. Minimizing cost per RMA is fast becoming a key measure of the effectiveness of service organizations. |
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Implement processes to handle contingencies: Companies that grow rapidly can fail to design and implement important processes to address contingencies like product recalls. This can create a difficult situation when the exception occurs for the first time. Companies need to ensure that implementation of these processes are part of their key priorities for the year. |
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Follow the regulatory trend to avoid surprises: Regulatory environments are constantly changing, primarily driven by a focus on environmental issues. Many local, state and federal regulations are going to change the way businesses run their service supply chains. Companies need to stay close to the topic and proactively address the key issues in order to avoid expensive rework and compliances. |
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Decide your strategy – in-house or outsource: Many times organizations take the easy approach towards outsourcing their service supply chain activities, as many believe that it is not part of their core competencies. However, prior to making such a decision, they need to evaluate various options aligning their decisions with long term strategies, as well as which services to outsource. |
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Establish outsource partnerships strategically: Companies which decide to outsource part or all of their service supply chain activities need to look for the right fit for the service providers in order to have a meaningful and strategic long term partnership, instead of finding the cheapest option. |
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Optimize recovery of residual value: There are generally four options available to optimize the residual value of a returned asset to increase profitability. One is to put it back on the shelf after reconditioning or repackaging; another is performing a test, re-kitting and stocking it back on the shelf. Products can also be auctioned to secondary channels; finally, it can be donated to charity, which allows for tax deductions. |
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Commitment to sustainability: Some products can be de-manufactured and harvested for precious metals and components, some of which may need to be disposed of in accordance with the law. A new industry is developing that is part of the downstream service supply chain. Companies can leverage their service supply chain or their associations with downstream partners to derive value from sustainability initiatives. |
Don’t allow your company to be surprised by sudden contingencies, new regulations, or returns that can’t be processed to add any value to the supply chain. The service supply chain could be a powerful source of strategic growth and profitability if the above mentioned priorities are addressed adequately and an organization executes them with excellence.
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