RLA News & Views

Looking back to go forward: When to assess your reverse logistics strategy

By Tom DeVroy, IFS

November 14, 2018

Service-oriented reverse logistics, particularly when applied to the world of electro-mechanical hard goods, is extremely complex. The simple act of moving products, parts and subcomponents back into inventory involves multiple steps and business entities, from the customer to your service organization, supply chain, receiving departments and even a repair depot operation or even subcontractors. Not all businesses are equipped to deal with this level of complexity. Tom Devroy, Senior Product Evangelist, North America, IFS, explains when a reverse logistics strategy is required in order to keep customers happy and business moving forward.

Not all software has the functionality to effectively manage reverse logistics, which brings the potential of lost revenue, missed service-level agreements and unhappy customers.

Fortunately, it doesn’t need to be that way. Dealing with the many different scenarios where reverse logistics is required can range from early product life to warranty return, and in environments that involve field service, depot repair or both. Here I’ve outlined three scenarios that show the differing roles reverse logistics plays. If you’re encountering these on a daily basis, then it’s time to access your reverse logistics processes so you can meet your customer’s demands

1. Does your returns process span a complex network of players? In most organizations, the reverse logistics process can be delineated by new product and after use returns. In an after-use environment, the reverse logistics process involves multiple stakeholders, and this means that a software product used to manage this value chain must encompass all, not some, of these stakeholders. Here’s why.

The customer service department generally authorizes the service and repair work through the call center, or increasingly, digital customer portals, chatbots or even social media.

If a replacement part is due for shipment, the customer service representative will check inventory availability, and may have to contact purchasing. If the product replacement requires a build order, the customer service representative may have to involve manufacturing or supply chain departments. If the defect is to be received for repair, logistics will be engaged to receive the defect and route it for repair. Each of the stakeholders has a role to play, and each has their specific process to follow. This gets even more complicated when there is a field service component to the reverse logistics process.

Throughout this process, there is a set of rules that must be followed. These rules cover everything from the asset or product itself, which parts are sent to which repair facility or depot, whether the part is covered by warranty or contract entitlement, whether a customer has a replacement for the part in inventory or whether you need to ship one and much more. Clear communication, beginning with the task of defining processes and ensuring that the correct business process is followed, maybe with configured workflow, is very difficult without some enterprise reverse logistics and repair software. Check yours out.

2. Do you have a reverse logistics element within your field-service operations? The field service process alone includes multiple reverse logistics steps. The technician pulls a component out of a repairable piece of equipment at the customer site and replaces it with a part out of his truck inventory. In a situation where the technician does not have a spare part and cannot, an inventory order will need to be placed. The field technician will need complete visibility of whether the part is under warranty or if the customer is entitled to special pricing as a result of a contractual commitment.

Without an integrated end to end service platform, you would be relying on a technician to communicate with separate field service, reverse logistics, warranty management, contracts and installed base systems to get the answers he or she needs.

Obviously, some type of communication between field service and reverse logistics software is necessary if only to prevent losing track of parts or components pulled from customer equipment in the field. But in these situations there needs to be a seamless way to track whether or not the part is going to be repaired, who owns the item as it enters the reverse logistics process, whether the part, or repair, is billable, and then the part must be tied with a return materials authorization (RMA) through the original field service order.

Regardless of whether an environment is focused entirely on reverse logistics or in the field, companies expect their software platform to handle knowledge transfer. A technician in the field should be able to access tutorials on various repair processes, which in turn makes those with less experience more productive while increasing first time fix rate. Reverse logistics software can now embed in the workflow detailed videos designed to walk a worker on the repair bench in the workflow. The result - increased productivity and putting knowledge into the hands of technicians where and when they need it.

3. Do you work with field service sub-contractors? Combining reverse logistics with field service is challenging enough when you are relying on your own employees. But more and more organizations now outsource field service work to subcontractors for specific tasks or in times of peak demand. Subcontractors introduce several new logistical steps into a reverse logistics process. Reverse logistics software needs to account for multiple subcontractor types, and reimbursement policies in order to manage the complex situations caused by sub-contracting.

First, in order to delegate tasks to a subcontractor, you need to establish their availability given the time constraints and ensure they have the parts and expertise needed for the job. The contractor must provide a not-to-exceed cost figure, receive a purchase order and perform the work.

But what if the subcontractor removes a part from a customer’s equipment for return? This is where things can get very, very complicated. If they replace part A with part B, what happens to part A? The subcontractor may send an invoice and want to get paid for the part they used out of their inventory. Depending on the arrangement you have with the subcontractor, they may get paid for the new part only when you receive the returned original part. Or, if we have a stronger relationship and have built more trust, the subcontractor may be paid once a material return is authorized or when shipping confirmation is received by the contractors. All of this can change by individual subcontractor, customer, product line or by geography.

If the work and part are covered by a warranty, the subcontractor will bill the vendor for the part. But if the part and work is out of warranty and the subcontractor in fact owns the relationship with that customer as an independent service provider, as a reverse logistics organization you may only get back parts if there is a core credit involved.

Don’t get stuck in reverse Reverse logistics is one of the most demanding business disciplines. These are just a few challenges that companies face as they work to ensure that reverse logistics processes result in customer satisfaction and profitable service organization operation. Once you’ve identified where in your organization requires a reverse logistics strategy it’s also time to assess your enterprise software support to help manage complexity, minimize expenditure and keep your organization moving forward.

Tom DeVroy
Tom DeVroy has over 30 years of experience in high tech service operations including work with hardware, software and consulting firms, as well as premier global service organizations like Ericsson, DHL, Xerox, and Ingenico. He holds a degree in business administration from the University of Wisconsin-Parkside.