It’s safe to say that, over time, high-tech hardware and its componentry will eventually either require repair or replacement due to hardware issues, or it will need to be replaced as it reaches the end of its serviceable life. This is why service contracts, and their service level agreements, are so vital to ensure promises are kept, customers are satisfied, and brand reputation is upheld.
Strategic inventory placement near a customer’s install base, coupled with a deft field services team to perform onsite swaps and scheduled maintenance activities, can help out in a pinch as logistics partners work collectively to bring mission-critical equipment back online. However, when these events occur, there is valuable inventory that may be stranded in the field. In many cases this inventory may not even be defective, or if so, could be repaired and repurposed saving companies from purchasing new inventory for service spares. Companies find themselves asking: ‘How can I find out if this inventory is even defective?’ or ‘Can we find a warehousing partner to assess it before shipping it to be repaired?’ or ‘How do we find (and trust) a partner to manage this intricate process?’
Establishing and implementing an effective reverse logistics program is a sound business strategy that offers several benefits for many high-tech companies and ultimately supports sustainable global operations. Maximizing the life of assets can save thousands of dollars in transportation costs, inventory buys, and repair costs. In a traditional linear supply chain, products are manufactured, used, and then disposed of, oftentimes ending up in local landfills. However, in today’s service supply chain ecosystem, the goal is to minimize waste while keeping products and materials in use, for as long as possible.
In a viable service supply chain ecosystem, reverse logistics plays a crucial role in this transition by facilitating the return of products and materials from end users or customers back to manufacturers, DCs, or recycling facilities.
Reverse Logistics versus Returns Management
Without a proper reverse logistics strategy in place, things can get complicated quickly and there are differences to note. At the cornerstone of service logistics is returns management, which is the complete choreography of the entire returns process. There is a distinct differentiation with reverse logistics, which is a returns management activity—and is more about moving spares from one spot to another (usually from the customer’s deinstall base back to a DC).
Returns management has many touchpoints and typically utilizes customary steps to reclaim, refurbish, and recycle spare parts and materials that are at the end of their lifecycle, and reintroduces these parts back into their supply chain. This often includes the collection, transportation, sorting, and processing of used or idle spare parts to extract their remaining value or recycle them into new products or other resources.
Reverse logistics is not a simple task and is not for the faint of heart. A certain level of mettle is required to manage service supplier relationships and siloed systems can make it difficult to get spares onsite for installation and back to the DC for refurbishment or remanufacturing. This elaborate activity often involves utilizing field technicians to restore used spare parts to like-new condition, often with upgraded features or improvements, and sometimes returned spares are disassembled and their components will be used to manufacture new spare parts.
Reverse Logistics ROI
The opportunity to grow revenue is possibly the greatest benefit with utilizing an effective reverse logistics strategy. Properly managed spare parts returns provide additional chances for repair, refurbishment, or resale, thereby generating additional revenue streams for equipment manufacturers.
Additionally, your returns process can help identify quality issues with specific parts for your customers. Tracking and monitoring returns data helps to detect and resolve issues with product quality and design, and incorporating reverse logistics ensures everyone on your team knows the protocol to reduce equipment downtime and improve inventory accuracy. Analyzing returned products can provide valuable insights into customer preferences, product quality issues, and creates opportunities for product improvements, which can help in future product development and shed light on unique marketing strategies for equipment manufacturers.
More motives to make the case for reverse logistics in your service supply chain can be attributed to improved sustainability and an enriched customer experience. Properly managing spare parts returns and refurbishments lowers the total number of miles driven for installs (and deinstalls), helps to minimize your company’s carbon footprint and creates less electronic waste. It also makes for an improved customer experience because it gives OEMs the clarity, efficiency, and communication necessary to meet contractual service level agreements with end users.
It goes without saying that a well-managed reverse logistics process reflects positively on the brand. Customers and their end users value equipment manufacturers who take responsibility for their products throughout their lifecycle, and that contributes to a positive brand experience and progressive image.
Avoid Common Reverse Logistics Pitfalls
Partnering with a single service logistics provider to manage your SLAs and reverse logistics, with visibility and readiness, is key to avoiding hiccups within a circular supply chain. Poor data integration leads to uninformed business decisions and can contribute to a trend of poor customer experiences. Not to mention, a poorly integrated DC does not have the capability to collect the required data to improve and automate analytic reports for you to make informed and strategic business decisions about your spare parts inventory.
Utilizing one service provider facilitates legal compliance that helps equipment manufacturers streamline operations, improve safety, and reduce risk. In today’s business climate, risk is a real threat, and many industries have regulations regarding the disposal and handling of certain products, especially those that contain electronic waste.
A comprehensive reverse logistics approach helps ensure compliance with these administrative protocols and avoids potential legal and
reputational issues down the road. Choosing a service logistics provider that is ISO 27001 compliant and owns DCs that are ISO 9001:2015 certified, provides an added layer of protection and consistency to ensure that the services provided meet customer and governing requirements.
Integrating reverse logistics into your service supply chain strategy can offer several advantages and requires coordination and collaboration among equipment manufacturers, service logistics providers, and customers/end users. The goal for reverse logistics is to minimize the environmental impacts of transportation and maximize the value recaptured from returned or refurbished spare parts. By designing and manufacturing high-tech equipment and parts for durability, repairability, and recyclability, OEMs can help facilitate the transition into a circular supply chain and reduce waste generation throughout a product’s lifecycle.
About Flash Global
Headquartered in New Jersey, Flash Global designs and implements end-to-end service supply chain strategies for rapidly expanding companies, including many of the world’s top high-tech companies. Flash creates global solutions that are locally fueled, enabling companies to efficiently scale in countries worldwide. Companies leverage in-region and in-country expertise throughout Flash’s worldwide infrastructure of distribution centers, a global customer response center, and forward stocking locations to seamlessly move products across international borders and serve their customer base. To learn more about Flash Global, visit www.flashglobal.com.
Denise MacDonell is an expert in change management with a proven track record of shaping software applications to drive value-added services to customers. Denise took over as Chief Technology Officer for Flash Global in 2016. Denise’s strategies, vision, and ability to leverage technology and people to create a collaborative, efficient environment that always puts the customer first — after all, Flash is in the services business —is crucial to Flash Global’s success.