Reverse Logistics:The Least Used

Differentiator. Page10

The Five Cs of Outsourcing.

Page 28

Depot Repair & the Reverse

Logistics Road Trip. Page 26

Eco-Responsibility Is a Key
Component of Reverse
Logistics. Page 18
Pictured: David Douglas,
Vice President, Eco-Responsibility,
Sun Microsystems, Inc.

The Six Hidden

Costs of Reverse
Logistics
Page 14

FALL 2006
US: $4.95

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Fall 2006

Reverse Logistics Magazine

www.RLmagazine.com

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Reverse Logistics Magazine

Fall 2006 

Issue 4 Volume 1
Fall 2006
President & Founder Gailen Vick
Editor Christine Morrow
Production Director Luis DeGuzman
Creative Design LunaWebs.com
Board of Advisors
Jose Garcia Microsoft Corporation
Michael R. Blumberg D.F. Blumberg
Associates
Chuck Johnston WAL-MART
Stores, Inc.
Jim Hunt Jabil Circuit, Inc.
Joe Beck UPS Supply Chain
Solutions
Dan Gilbert Cisco Systems
John Benardino Hewlett-Packard
Howard Rosenberg eBay Inc.
Tony Sciarrotta Philips Consumer
Electronics

FALL EDITION

CONTENTS
Logistics:The Least Used
10 Reverse
Differentiator
by Rodney Moore, UPS Supply Chain
Solutions

14

Companies make money selling things,

not taking them back. But companies
automating the reverse logistics process
have discovered a nontraditional but
relatively easy way to move dollars to the
bottom line. For many companies, reverse logistics is the last frontier of waste
in todays supply chain.

Fax: (510) 991-9950

[email protected]
www.RLmagazine.com

26

To Subscribe:
Go to www.RLmagazine.com.
Individual subscriptions are available
without charge to qualified individuals
within the U.S.Non-qualified rates
are as follows: single issue rate is
$4.95;one-year subscription (four
issues) rate is $12 for US; $25 for
Canada; $50 for all other countries.
To unsubscribe, email
[email protected]

Fall 2006

The Six Hidden Costs of Reverse

Logistics
by Lee Norman and Warren Sumner,
ClearOrbit

Reverse Logistics Magazine

The Five Cs of Outsourcing

by Mark DeLong, Bob McCallister and
Brad Hendrick, Arvato Services

34

Someday you will see your products back,

whether you like it or not. A growing
number of manufacturers are increasingly
aware of this new reality, but many have
yet to realize that product-returns can also
work to their advantage when consumer
goods are concerned.

36

You cant move forward on a journey

unless you map the course. These days
youd be hard-pressed to find a road that
hasnt already been paved. However,
when moving through new ground,
utilizing a few necessary tools, thorough
research and the drive for success you
just might be able to make that trip faster
and more efficiently while making some
unexpected discoveries along the way.

40

The Evolving Model in Electronics

Reverse Supply Chains
by Steve Manning, Solectron Global
Services
Think of aftermarket services or reverse
supply chain and you probably think
warranty repair. If that is the case, you
wouldnt be completely wrong. But
in the past 18 months, the industry has
undergone a quiet but profound transformation.

Kerns

A New Value Proposition for Reverse

Logistics in Europe
by Gerben Willems, Cycleon

Service Parts Management

by Stephen Buckler, Horizon Technologies
Todays macroeconomic environment of
globalization, outsourcing and consumer
market visibility has resulted in the commoditization of products and erosion of
margins. This has put pressure on manufacturers to not only drive efficiencies from
their supply chain through outsourcing of
non-core competencies, but to distinguish
their products through superior levels of
customer service.

Depot Repair & the Reverse Logistics Road Trip

by Joe Costa, Depot America

42

A young executive gazes absentmindedly

out his airplane window as his fingers
drum on the top of his closed laptop. He
looks at his watch and thinks of his wife
and kids just getting home from a soccer
game. This is the third trip this month
hes made to his companys off-shore call
center. He knows his company is saving
money by locating its call center there,
but he wonders if its really worth it. He
wonders if there isnt a better way.

An opportunity to generate additional

revenue, differentiate market position
and support product demand is available to companies in the form of reverse
logistics. Product returns are the most
common aspect of reverse logistics; yet,
most companies do not handle returns
well because it is not a part of their core
competency.

Editorial and Circulation Office

43289 Osgood Road
Fremont, CA 95439-5657
Phone; (510) 440-8565

Printed in the U.S.A. on paper

containing 50 percent recycled content
with 10 percent post-consumer
material. Reverse Logistics Magazine
(ISSN 1934-3698) is published
quarterly by Reverse Logistics
Association. The information presented
in this publication has been provided
by corporations and is believed to be
accurate; the publisher cannot assure
its completeness or accuracy.

28

Lighter Side of Reverse Logistics

Cover Story
44

When the Time Comes to Sell

by James Goldstein, IMSM

Eco-Responsibility Is
a Key Component of
Reverse Logistics Pg. 18
Todays major computer
manufacturers are all faced
with mounting reverse
logistics issues, but one of
the most interesting is how
to use reverse logistics as a
competitive weapon.

When a business wants to sell, the largest

influence on the price achieved is the
fundamental economic law of supply &
demand. Generally, people do not buy a
business for what it is; they will buy for
what the business does for them - earn
them enough money to repay their investment, provide them with a lifestyle, and
build for the future. EBITDA (Earnings
Before Interest, Taxes, Depreciation and
Amortization) is an accountancy term
that represents the sustainable cash profits
of the business, assuming nil borrowing
costs.

RMA Service in the Heart of Europe

During the June 2006 trip to Amsterdam,
Gailen Vick, President of Reverse Logistics Association, had the opportunity visit
multi-event participant and long-time RLA
supporter FRS. Hosted by Hans Cohen
Rodrigues, CEO, and Dick van der Vuurst,
General Manager, Gailen received a tour of
the facility and overview of the company.

Departments
5 Lighter Side of Reverse Logistics

31 Read the Press

7 Letter from the Editor

33 Industry Events

8 Letter from the President

46 Ad Index

30 On the Move in Reverse Logistics

Reverse Logistics Magazine welcomes

unsolicited articles and abstracts.
Please send to
[email protected].

46 Returning Thoughts
Copyright 2006 by Reverse Logistics
Association. All rights reserved.
Reproduction in whole or part without
permission is prohibited.

www.RLmagazine.com

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 

Reverse logistics association

WHAT CAN BROWN DO FOR YOU?

How do you streamline your business

processes while improving connections
between you, your eld staff and your
customers?
With Corporate Retail Solutions from UPS.
Simplify returns by directing customers to
a convenient location of The UPS Store
to have their item packed up and shipped
back, and youll benet from improved
visibility into incoming returns.
Use over 4,200 locations of The UPS Store
as alternate delivery locations and there
will always be someone to sign for your
eld staffs packages, boosting productivity.

Ad#: UP6-002
Trim (flat): 7" x 10"
Acct. Manager: B. Adcock
Prefix: 52373
Caption: Always trust...
Bleed (flat):
Art Director: A. Wright
Proof: 9
Client: UPS Store
Live (flat):
Writer: Doner
Date: 4/13/06
Job #: 61-23750-005
Line Screen: 133 lpi / 4C
Print Producer: B. Hodge
Studio Artist: kc-sb
Unit: magazine
Product Code: 001
Traffic: R. Stewart
Art Producer: H. Bowen
Fonts: Helvetica (AD), UPS Sans (MI)
Prepared by DONER ADVERTISING Southfield, MI 248-354-9700

Always trust the company that spells

efficiency with just three letters.

To Our
Readers

A Letter from
the Editor

nlike most of our readers, Reverse Logistics Association is not an OEM

or a retailer or even a 3PSP. We have no productalthough we do offer
services. As we have no product, we do not repair or refurbish. What we do is
teach reverse logistics at conferences, seminars, workshops and best practices
in publications. And thats okayour mission is to educate others about reverse
logistics and as an authority in this arena, we can provide direction and offer
guidance to others.
During a recent staff meeting, we were discussing how we as an association
incorporate reverse logistics activities into our daily operations. Well, our
magazine is an example of reverse logistics. At the end of a distribution, rather
than toss (or even recycle), we have found ways to use our excess inventory. We
distribute copies at various tradeshows such as EScrap, CES, Storage Visions
and Aviation Week; provide copies to participants at all of our RLTS Seminars;
and we found that we could sell our unused copies of the magazine instead of
producing reprints, and at a better value for our customers! In addition, our
research shows that copies of Reverse Logistics Magazines are passed from
person to person, then land on bookshelves to be saved as reference material.
I encourage everyone to evaluate how your company uses reverse logistics
practices in your day-to-day operations. Think about ways you can introduce
new RL processes or expand the use of existing processes. Investigate whether
a small investment would provide the opportunity to process returns or perhaps
repair and refurbish products with greater monetary benefits for the bottom line
of the company. Perhaps you could expand on the product lines you service to
capitalize new revenue while increasing customer satisfaction and value!
We all need to pause and think about the ways that reverse logistics activities can
add to your companies bottom line.
Best regards,
Christine Morrow
Editor, Reverse Logistics Magazine

Reverse Logistics Association Mission

O
Outperform your competitors with
an exchanges program that lets your
customers and eld personnel return a
product and pick up its replacement in a
single visit to The UPS Store.
And with The UPS Store Corporate Card
in hand, your eld staff will always
have an ofce on the road where they
can copy, fax and stay connected with
headquarters.

2006 United Parcel Service of America, Inc. UPS, the UPS brandmark and the color brown are registered trademarks of
United Parcel Service of America, Inc. All rights reserved. The UPS Store centers are independently owned and operated by licensed
franchisees of Mail Boxes Etc., Inc., an indirect subsidiary of United Parcel Service of America, Inc., a Delaware corporation. Services
and hours of operation may vary by location.

Fall 2006

Reverse Logistics Magazine

52373_MBE_7x10_4c.indd 1

From handshake to handoff, UPS

Corporate Retail Solutions make boosting
business efciency as easy as U-P-S.
Learn more today. Call 1-877-462-3622
or visit theupsstore.com/efciency.

www.RLmagazine.com
4/13/06 10:40:26 AM

UP6-002

ur mission is to educate and inform

Reverse Logistics professionals
around the world. We do this by producing tradeshows, seminars and workshops
around the world where support services
can be presented to 3PSPs, OEMs, ODMs,
Branded and Retail companies. RLA has
been dubbed as a high tech association,
but our focus is to serve all industries in the
reverse logistics process. No matter what
industry, High Tech, Automotive, Medical/
Pharmaceutical, Publishing, Garment, or
Consumer, our goal is to provide RL process knowledge to all industries. We want
to educate everyone about the Reverse

www.RLmagazine.com
www.RLmagazine.com

Logistics Processes that are common to all

industries. We have been and will continue
to provide our services at a moderate price
to our members.
Managing the latest information in repair,
customer service, parts management, endof-life manufacturing, service logistics,
field service, returns processing and order
fulfillment (just to name a few) can be a
little intimidating, to say the least. Yet, that
is exactly what the Reverse Logistics Association provides with our membership services. We serve manufacturers and retailers
in a variety of settings while offering

ongoing updates on market trends, mergers

and acquisitions and potential outsourcing
opportunities to 3PSPs. We have gained
the attention of 3PLs like FedEx, DHL,
NYK & UPS. 3PSPs like Teleplan, Ozark,
Solectron, Jabil along with small service
providers have found that the RLA resources help advertise their services. OEMs like
Microsoft, HP, Palm along with Retailers
like Wal-Mart and Best Buy all participate
at our events. Our online RLmagazine and
weekly NewsClipping help OEM, Branded
& Retail companies find service partners
that were unknown to them.

Reverse
ReverseLogistics
LogisticsMagazine
Magazine Fall
Fall2006
2006  

Reverse Logistics association

Message from President and Founder of RLA

m always traveling to see Reverse Logistics processes around the world. Ive seen
operations from mediocre to fantastic! Sometimes Im shown a RL process that would
scare anyone to death while at the same time providing an opportunity for a 3rd Party
Service Provider and RL consultants to fix. But everyone always wants more business.
Recently while traveling to Utah for a little R&R, one of my sons took me to Cabelas. I
was shocked, this retail store made anything that I had ever seen look juvenile. Cabelas
retail stores bring back memories of a school field trip, something between a museum
and the Monterey Bay Aquarium. There were animal displays, huge aquariums stocked
with native fish and a centerpiece indoor mountain displaying trophy animals in realistic re-creations of their
natural terrain. These folks know how to mix the shopping experience for the whole family. Yes, mother, dad
and all the children were checking out the retail shelves and filling up their shopping carts.
Now, Im no hunter--the last time I shot a gun was when I was living on a farm in Arkansas, back in 1961.
Fishing, well thats another story--if someone invites me Ill go, but Im catch and release guyI prefer the
grocery store!
So, what does this have to do with Reverse Logisticseverything. Cabelas customer service was extremely
high and their return policy was similar to Costco or Wal-Mart. Every item has a 100% satisfaction guarantee.
Just look at some of the high tech opportunities that Cabelas could outsource to a 3PSP:
Optics
Binoculars
Riflescopes
Red Dots & Lasers
Rangefinders
Nightvision
Sighting In

Electronics
GPS Handheld
2-Way Radios
Cameras
Home Electronics
Auto & ATV Electronics
Boating Electronics

I know many 3PSPs that could manage all the returns from
screening, sorting, refurbishing, and repairing to the final recycling disposing of the raw materials to recover the
remaining assets (look at the Sun cover story).
So, what is the moral of the story for all of us? To the 3PSPs; are you servicing LCD displays for HP in the
computer industry, but not providing the same service for Lowrance in the Sonar/GPS boating industry. Have
you decoupled your marketing teams to the point that they dont call on other industries for similar services?
How many 3PSPs repair cell phones for Motorola, but dont know about Innoteks dog training collars with a
handheld transmitter locator feature?
OEMs and Retailers should take stock also, have you partnered with a 3PSP that can provide the customer
support you want? How do you find the best 3PSP when best practices might be outside of the industry that
you are in?
Sometimes we just need to sit back, take a little time and do a little self-reflecting.
Gailen Vick
President
www.ReverseLogisticsAssociation.org
www.RLTShows.com

 Fall
Fall 2006
2006 Reverse
Reverse Logistics
Logistics Magazine
Magazine

www.RLmagazine.com
www.RLmagazine.com

Reverse logistics association

Board of Advisors
A Board of Advisors comprised of industry experts has been set up to monitor and
assist the Reverse Logistics Association management team in making informed decisions.
Advisors include:
Jose Garcia Microsoft
Corporation
Jose Garcia is Director
- Repair and Refurbishing
at Microsoft Corporation.
Jose joined Microsoft 4
years ago to establish World Wide repair
of X-box console from the ground up.
Building a world class team he integrated
systems, processes and partnerships with
expert service partners.
Michael R. Blumberg
D.F. Blumberg
Associates.
Michael R. Blumberg is
a Certified Management
Consultant (CMC) and
President & CEO of D.F. Blumberg
Associates, Inc. His firm focuses on
providing strategic and tactical assistance
to client organization for improving
the overall profitability and quality of
aftermarket service operations. Mr.
Blumberg has established himself as an
expert and industry authority on Reverse
Logistics and Closed Loop Supply Chain
Management.
Chuck Johnston WALMART Stores, Inc.
Chuck Johnston is General
Manager at the Bentonville
Return Center, WALMART Stores, Inc. Chuck has been with
Wal-Mart for the past 13 years and his
responsibilities include Returns, Imports,
Exports, Tires and Printing and Mailing
Distribution.
Jim Hunt Jabil Global
Services
Jim Hunt is Vice President
of Business Development
at Jabil Global Services
Jim has been with Jabil Global Services
since October 2002 but has been in the
contract manufacturing and contract postsales business for the last ten years. He has
held various positions including business

www.RLmagazine.com
www.RLmagazine.com

unit director, global account director, and

his current position of vice-president of
global business development and account
management.
Joe Beck UPS Supply
Chain Solutions
Joe is Director of Business
Development in the
High Tech and Telecom
sector for UPS Supply
Chain Solutions. UPS is the worlds
largest package delivery company and
a global leader in supply chain services,
offering an extensive range of options for
synchronizing the movement of goods,
information and funds. Its business unit,
UPS Supply Chain Solutions, offers
transportation and freight, logistics
and distribution, technical repair and
international trade services.
John Benardino
Hewlett-Packard, Inc.
John Benardino is currently
a Director of Reverse
Logistics for HPs Imaging
and Printing Group. In
his position, John is responsible for credit
issuance, engineering, remanufacturing,
and all return related costs. His product
responsibilities cover printing, digital
imaging, supplies, scanners, and shared
printing.
Howard Rosenberg
eBay, Inc.
Howard has been with
eBay for over 4 years
and runs the Companys
Trading Platforms
business serving companies interested
in maximizing their recovery rates on
excess and refurbished inventory through
the Reseller Marketplace or through their
own, private-label auction marketplaces.
He has 14 years of experience in various
capacities, including operating, advising
and investing in, companies in the
consumer product, consumer services and

business services sectors.

Dan Gilbert Cisco
Systems
Dan Gilbert is Vice
President of Worldwide
Reverse Logistics at
Cisco Systems, Inc. His
charter when joining Cisco in 2005 was
to define and create a world-class reverse
logistics organization. Dans global team
is responsible for driving excellence in
product recovery, receiving, inventory, and
recycling operations, and for transforming
returned product into value for Cisco
shareholders.
Tony Sciarrotta
Philips Consumer
Electronics
Tony is Director of Returns
Management at Philips
Consumer Electronics
North America. In this position, Tony
leads returns reduction and entitlement
initiatives for mainstream consumer
electronics, and is also currently concerned
with further driving the implementation of
electronic registration for Philips products
at leading retailers. Working with Philips
Sales, Service, Marketing, and the Philips
Business Excellence Group, Tony is
helping drive several teams to improve the
consumer experience and subsequently
reduce the high rates of products returned
with no defect found.

Complete biographies of Advisory Board

Members are available from the RLA site
at http://www.reverselogisticstrends.com/
company_advisory.php.

Reverse
ReverseLogistics
LogisticsMagazine
Magazine Fall
Fall2006
2006  

Difficulties of Reverse
Logistics
Many companies do not have an
awareness of the current costs
associated with reverse logistics. The
reasons for this may include poorly
defined processes and lack of system
support. Due to the variable nature of
returns, both processes and systems
must maintain a degree of flexibility to
manage the returns process.

Reverse Logistics: The Least Used Differentiator

by Rodney Moore

n opportunity to generate
additional revenue, differentiate
market position and support product
demand is available to companies
in the form of reverse logistics. It is
estimated that reverse logistics costs
account for almost one percent of the
total United States gross domestic
product and is rapidly becoming
an integral component of retailers
and manufacturers profitability and
competitive position. Product returns
are the most common aspect of reverse
logistics; yet, most companies do not
handle returns well because it is not a
part of their core competency.
While many companies are working
closely with third-party logistics
providers, many others are still
considering the best way to handle
reverse logistics. A primary reason
for this is the massive shift in revenue
opportunity that now follows each
product sale. Customers spend 5 to
20 times the initial sales price on
subsequent services and consumables.
This leaves some companies
seriously considering a closed loop
approach to the supply chain that
10

Fall 2006

includes product returns, service

contract returns, product recalls, used
equipment and replacement parts for
refurbishment, as well as reuse or
sale as raw material. Increasingly,
reverse logistics must be considered
part of a successful growth strategy.
Today, having a solid disposition

In fact, the gate

keeping function
can actually
provide an
opportunity to upsell and cross-sell.
plan is an essential aspect of an assetrecovery strategy. Returns, repairs
and used items can also have brand
implications. For some companies,
brand protection is paramount and
most companies want to ensure their

Reverse Logistics Magazine

goods are not sold in secondary

markets or end up in discount stores.
The Center for Logistics Management
at the University of Nevada
conservatively estimates that 6 percent
of all goods may be returned, but
concedes that the true number may be
closer to 8 percent.
Companies often mistakenly believe
that outbound operations can also
handle returns by running everything
in reverse. Not so. Reverse logistics
operations must manage a number of
unique functions that are not included
in outbound operations: collection
of outdated, unwanted or damaged
products as well as packaging. It is
also true that the more complex the
product, the higher the percentage
of returns due to several factors
including more variables that can go
wrong, greater numbers of unqualified
operators, and often regulated endof-life disposition. While many
companies have begun to recognize
the need to address reverse logistics,
few have strategically examined
the opportunity or established
explicit contribution objectives and
formal processes/metrics for asset
refurbishment, resale or disposal.
www.RLmagazine.com

Most products are engineered to

incorporate manufacturing efficiencies
(postponement of manufacturing
and modularization), but few
product designs take into account
the impediments to
disposition that a
products lifecycle
should incorporate. And
while business partners
often play key roles
in the disposition of a
product, all parties need
to be well-informed
about the true costs
and possible revenue
opportunities, so
when entering into an
agreement the financial
and marketing goals are
clearly understood.
If customer service
representatives and/or
sales personnel are not
trained or encouraged
to manage the reverse
logistics needs of customers, they can
become impediments to operating a
successful returns logistics process.
But, if properly motivated, these
personnel can be gate keepers for the
process.
They can often walk consumers
through set-up and early usage
issues and, in effect, talk them out of
returning products.
Company policies and employee
incentives must not be barriers to
offering an advantageous reverse
logistics program.
www.RLmagazine.com

Reverse logistics programs are also

typically complicated by a number
of factors. Paperwork and poor
workflow processes tend to plague
reverse logistics operations. This is
exacerbated by the multiple entities
customer, manufacturer, reseller
and disposer that need to partner to
develop a smooth reverse logistics
program.

Improving Reverse Logistics

Operations
Complex business systems, such as
reverse logistics and the decisions
affecting it, are often not made inside
the operational process.

Improvements must happen well

before operations and even before a
product reaches production. Marketing
should define:
1.
2.

How the secondary market affects

original equipment demand
What customer experience is
sought

Once these numbers are determined

a manufacturer can focus on the
operational improvements needed to
achieve results.

An often overlooked
strategic aspect of
reverse logistics is that it
clears the channel for
future purchases.
An often overlooked strategic aspect
of reverse logistics is that it clears
the channel for future purchases.
By working with customers to
trade up to replacement or new
products, companies are able to elude
inefficiencies and costs by avoiding
product obsolescence. This also
releases capital and display or storage
space for
replacement
products.
Reverse
logistics can
be used as a
differentiator
to distinguish
one company
from another,
which further
increases
switching
costs to
competitors.
A well-defined
reverse
logistics
program can be
used to capture
customer
opinions and needs that can deepen
the collaborative relationship.
Key incentives to implement
and conduct an effective reverse
logistics program include: customer
retention/satisfaction; container reuse,
recycling, damaged materials returns,
asset recovery/restock; downstream
excess inventory; hazardous material
programs, tracking obsolete equipment
and recalls.

Making Returns Profitable

Returning goods to the supply chain is
equally as important as moving goods

Reverse Logistics Magazine

Fall 2006 11

to market, so assigning key executives

to manage and improve the assetrecovery program is fundamental to
achieving profitable results.
Each center should have an executive
team to handle administrative
functions relating to facility
management, material flow and
marketing efforts, while contract
labor can be used to perform sorting
functions. A company might find it
more beneficial to outsource the postproduction environment completely.
Materials being returned from
customers and distributors might be
handled by various contractors with
assigned territories, while the product
disposition is coordinated with a
network of decision matrices set forth
by the central outsourcing company.
When developing a reverse logistics
program, process responsibilities
should be clearly defined. While
a companys logistics division
may coordinate the product return
operation, the production department
may manage asset recovery. Therefore,
the production department would

12 Fall 2006

Think_return_final_cmyk.indd 1

handle the material that has fallen

out of the system prior to reaching
the customers. Well documented
approaches benefit both consistency
and traceability which leads to
greater efficiencies.

High-level Example of an
Effective Reverse Logistics
Program
Each point below represents a step
in how a reverse logistics program
can work. It is important that each
company define how an effective
reverse logistics program will affect
customer experiences and original
equipment demand while contributing
to revenue. Each step requires more
detailed characteristics to be defined:
1. At the installation site, authorized
personnel complete the appropriate
forms and attach them to the items
being funneled to the recovery
operation. (Customer service and
logistics processes must be defined and
communicated.)
2. Supply trucks bringing new

Reverse Logistics Magazine

products and materials to nearby

sites can backhaul the older parts and
materials to the local supply location.
(Schedules, transportation, networks
must be established and effectively
managed.)
3. Dedicated staging locations at all
supply locations as well as at some
customer locations specifically for
materials bound for the processing
centers. (Customer processes and
expectations must be clearly defined
and communicated.)
4. An intranet connection that
facilitates communications between
the processing centers, supply
centers and customer locations.
(Communication processes and
infrastructure must be established.)
5. A database of buyers categorized
by certain classes of materials should
be maintained. (New processes must
be developed to support new revenue
streams.)
6. When the trucks arrive at the
processing centers, sort the material,
categorize it according to buyer,
then notify the appropriate buyers
that the material will be placed for

www.RLmagazine.com

31/8/06 10:36:30

Reverse Logistics Association Publications

ews - The Reverse Logistics Association mission is to educate, inform and produce tradeshows and
workshops around the world. One education medium is RLA news publications. With the January 2006 launch of Reverse Logistics Magazine, we now have a hardcopy quarterly publication, as well as
monthly online magazine and weekly news clipping service to keep our users up-to-date on the latest industry
news, trends and events. We welcome noteworthy reverse logistics related submissions.
Reverse Logistics Magazine provides the latest information regarding the
various areas of reverse logistics including customer service, repair, fulfillment,
recycling, refurbishment, regulatory and warranty management. It features case
studies and highlights research documents available from our association.
Online Reverse Logistics Magazine is a monthly publication which provides
industry insight as well as highlights of recent news.
Reverse Logistics Weekly News Clippings is a weekly push of the latest news
collected from around the world related to OEM, ODM, Retail and Branded
companies, third party service providers and other organizations.
Research Documents, White Papers, Case Studies Reverse Logistics Association offers an extensive
collection of information from high level overview to in-depth studies of a wide variety of subjects. White
papers and case studies cover topics such as warranty management, repair services, online auctions, asset
disposition, customer service and WEEE and RoHS. Research documents provide results of significant
research, conducted by academics and leading consulting firms. Visit the RLA Publications page and peruse
the many titles available from our site.

silent bid. Processing centers may

also include company stores, where
customers can shop among the items
that make the journey through the
processing center and are determined
by site managers to have purchase
appeal. (Processing center network,
operations, and organization needs to
be established and managed for ongoing improvement.)
7. Each lot of material is described
and placed for auction on a medium
such as the companys web site. The
lots generally remain up for bid for a
specified time, e.g., five days (Sales
techniques and mediums must be
identified as well as processes,
business rules and metrics.)
8. The winning bidder typically gets
a specified time, e.g., an additional
five days to pay for and pick up the
material. Buyers are responsible
for transport. (Expectations and
business rules must be developed and
communicated.)
9. Track materials inbound and
through the sorting, bid, sale and
release processes with a central
accounting system. All cash collected
www.RLmagazine.com

from sales should be sent by the buyer

to a central clearinghouse, which
authorizes release of the material and
performs all the reporting, accounting
and reconciliation activity. (Central
tracking system should be developed
and analyzed.)

Solutions to Reverse
Logistics Obstacles
Depending on your current operation,
proven solutions exist that can
improve customer retention through
a reverse logistics program. These
answers could be strategic in nature
from process development and
expansion to improvement portfolio
development. The solutions include:
possible options for reclaimed product;
refurbish (improve product beyond
original specs); recondition (return
product to original specs); salvage
(separate components for reuse); repair
(prepare for sale as a used product);
sell to third-party or recycle (discard/
liquidation) to a landfill.

Conclusion
First, develop a strong reverse logistics
strategy. Second, clearly outline
financial, corporate, brand, marketing
and other objectives. Treat the reverse
logistics function as a business; it
is not the returns department, it is
an operation. Give it goals, give it
objectives, support it with resources,
assign executives to manage it and let
it be part of the lifecycle design for
your products and your customers. t
Rodney Moore is a senior
consultant with UPS
Supply Chain Solutions
Consulting Services, where
he focuses on supply
chain optimization with an
emphasis on procurement
and inventory analysis. His
experience includes leading
teams through process improvement and
technology enablement of the supply chain
while working on supplier connectivity,
inventory management and e-procurement.
He possesses a deep knowledge of and
experience in program management including
the rational unified process methodology used
for application development.

Reverse Logistics Magazine

Fall 2006 13

The Six Hidden Costs of Reverse Logistics

by Lee Norman and Warren Sumner

ompanies make money selling

things, not taking them back. But
companies automating the reverse
logistics process have discovered
a nontraditional but relatively easy
way to move dollars to the bottom
line. For many companies, reverse
logistics is the last frontier of waste
in todays supply chain. Take a look
at the industrial equipment sector,
where return rates run 4-8%. The total
revenue impacted by returns is $52104 billion in just the U.S. alone. For
computers and network equipment, the
return rate is 8-20%. For an industry
with total U.S. revenue of $486 billion,
the revenue impacted by returns
is an astounding $39-97 billion.
Unfortunately, many companies have
not yet had the information or tools
necessary to turn this untapped source
of value into additional revenue gains
or cost reductions for their companies.
A big reason for this is that the costs
of reverse logistics are hidden across
the organization, and no one functional
group has line item responsibility for
managing those costs.
To help identify where poorly
managed returns may be affecting
your bottom line, lets take a look at
14 Fall 2006

six hidden costs of reverse logistics,

the area of greatest concern being
Hidden Labor Costs, in addition
to Grey Market Items, Lack of
Visibility, Inaccurate Forecasts, Credit
Reconciliation, and Poor Response
Time.

1- Hidden Labor Costs. Just as

housed in the companys central ERP.

These enterprise returns management
systems work best when linked
directly to a customer-facing web
interface (more on this below), thereby
integrating every link in the returns
process to the ERP, allowing visibility
across every station in the value chain
24/7.

sales fulfillment impacts all facets of

Lets look at the common areas of
an enterprise, handling returns does
hidden labor costs:
too. From customer relations all the
Customer Relations: Costs are
way to Sarbanes Oxley compliance,
incurred when manually deciphering
there are layers of cost incurred if
return policies on a one-off basis,
your returns process is not automated.
determining a products eligibility
A reverse logistics operation is
for return, determining the timing
automated if it uses enterprise returns
of credits back to the customer, and
management software
(used internally and
1- Hidden Labor Costs
externally by channel
partners) which offers
2- Grey Market Items
rules-based, product3- Lack of visibility
specific protocols for
how to handle any
4- Inability to forecast accurately
returned items. Based on
5- Credit reconciliation
information linked to the
products SKUwhich
can be activated by
identifying what warranties apply
scanning or RF gunsthis class of
(if one applies). Moreover, you risk
software can best determine what
the perception that your company is
return rules and parameters apply
interested only in customers who buy
if its attributes are drawn from the
and not those who return.
authoritative inventory, warranty,
Customer Service: Costs are incurred
policy, and accounting information

Reverse Logistics Magazine

www.RLmagazine.com

determining which warranty policies

to enforce, which service contracts
apply, what credit rules are in place,
how a product should be coded when
it is replaced with a new one, and
for determining special needs (e.g.
expedited return shipping). Further,
handling return-related contacts is
alone time consuming. On average,
customers call up to four times
to inquire about each return. The
opportunity cost of not eliminating
one to two of those contacts is
too significant to ignore. Imagine
eliminating 35% of your returnrelated contacts, thereby redirecting
the newfound capacity to generating
additional revenue.
Finance: Financial reconciliation of
the return is required, as is issuing
credit to customers. Most onerous, so
is the inventory reporting for Sarbanes
Oxley (where forward and reverse
activity can very possibly be logged
across two different quarters). Add
in the appraisal / write-down process
and the charges incurred if a returned
product is not covered by warranty but
is returned anyway.
Sales: In many cases, account sales
reps spend much of their valuable
time dealing with nagging returns
issues instead of new sales activities
with clients. By implementing a webbased self-service customer portal, a
major consumer electronics company
was able to free up 40% of their sales
reps time that was formerly tied up in
dealing with returns issues.
Traffic and shipping: Because you
bear the costs of shipping of returned
items, it will cost you more in labor
to individually assign a shipping
method for each returned item. There
are carrier-control rates to consider,
as well as damage incurred in-transit,
one-off shipments, inability to track
returned items and cost-effective
aggregation and routing. Without the
application of rules, these decisions
are made and costs incurred on ad
hoc basis. Certainly, the processes
arent monitored regularly via metric
reporting.
Receiving and Warehousing: Facility
and labor planning takes employees
time. Mostly because organizations
www.RLmagazine.com

have few systems in place to

adequately support any such planning.
And remember your warehouse
costs, especially when occupied for
long periods of time with inventory
whose fate is unclear until a returned
inventory assessment and recovery
program is put in place to extract its
value.
Asset Management: Repairing,
replacing, liquidating, or recycling
products is costly, if it is done
product by product by an ill-informed
or undereducated worker. Also,
assets and subcomponents devalue
rapidly in some markets (2-5% per
month in some cases) and value
is lost if disposition isnt timely.
Value recovery of a product means
appraising its residual market value
before it goes to costly repair. A cell
phone whose market value is $5 isnt
worth fixing for $15. But what returns
manager can know the difference
without physically opening the return
shipment? Using business rules, some
items can be scrapped in the field

rather than returned and processed,

based on a serial number or part
number that is easy for end users to
obtain.

2- Grey Market Items. Even

if a warranty program is controlled
by serial numbers or SKUs, manual
lookups are costly, and grey market
contamination is a risk. Grey market
contamination is a risk on many levels,
not the least of which is warranty
processing or the cost of determining
that a product is not even eligible for
warranty service. Controlling both
asset history and required disposition
systematically at the SKU or product
category level helps to minimize this
risk. For example, assets designated
as scrap may reappear for warranty
service. Manual operations are not
able to quickly ascertain this, and
costly work is performed against an
asset that has been deemed to have no
residual value. The key to avoiding
this cost is to establish a rigorously
enforced returns authorization process

WorldWide locations Global it system

UnsUrpassed QUality total sUpply chain solUtions

providing Global repair, Warranty

& logistics solutions since 1980
10800 Roosevelt Blvd. St. Petersburg, FL 33716 (727) 577-9749 www.jabil.com
Reverse Logistics Magazine Fall 2006 15

RevLogPrintAd1.pdf

that grants you the power to deny any

unacceptable return and offers you
advanced knowledge of whats coming
at you.

3- Lack of visibility.

Customers want visibility to the

status of their return requests. If they
dont have it, theyll call. Or email.
Repeatedly. Merchandising would
like to know what inventory is on
hand, immediately. Are they short on
the latest hand-held devicedo they
need to order more or is a sufficient
supply in-transit as a return? Design
would like to know if a product line
is experiencing high return rates
due to a single component failure.
Marketing wants information about
the instructions on the new phone
system that is so confusing that
customers think the phones dont
work. A well-run returns operation can
derive more efficient use of capital by
capturing, synthesizing and publishing
intelligence about your returns
population to the relevant functional
areas in your organization.

4- Inability to forecast
accurately. Detailed historical

information about returns may be

trapped in local Excel spreadsheets
and static databases. Sales staff is often
asked to provide forecasts for reserves,
16 Fall 2006

but they can

see across
the various
stations
and links in
the supply
chain to
make those
predictions
accurate.
Operations
is unable to
accurately
predict
whether
additional
(temporary)
resources
are needed
to process a
large influx
of returns.
They may be paying overtime to
ensure internal cycle times are met, or
up-staff too far in advance and have
to send employees home early, if they
have no returns to process.

5- Credit reconciliation. Large

customers often calculate their own

credits and take a debit on next
payment, which is a very laborintensive problem to resolve in the
accounting office. And thats not the
only reconciliation problem. Return
requests are approved, but not valued
or matched against receipts. This
prevents accurate accruals, claims
recoupment or effective vendor
management. Manually processing
this information is a method made
obsolete 30 years ago. It can be
automated and integrated, and the cost
eliminated.

6- Poor response time and

brand toxicity. Manual return

request processing and validation

cause delays in approving or rejecting
return requests. This frustrates
customers and communicates lack of
concern, which tarnishes your brand
and drives up call and email volume.
It also ties up their open-to-buy
dollars and prevents more sales. So
do delays in validation, cycle count

Reverse Logistics Magazine

discrepancies in receiving, and many

other simple problems. Customers
expect you to stand by your products
during the entire lifecycle. They
demand that your returns processes
work as well as your sales process. Do
you have this same expectation and a
path to implement enterprise reverse
logistics to solve it?

Reducing Hidden Costs by

Automating the Reverse
Logistics Process
A few approaches to reverse logistics
have been tried and shown to be
inefficient. For some companies, it
seemed like a good idea to ship a
product with a pre-printed return label.
This process guarantees only one
thing: The returned inventory will be
shipped to the proper address because
it is printed on the label. Beyond that,
the data management process hasnt
advanced much because these labels
declare neither the quantity of goods,
or if the return shipment is a mixed lot.
Nor do they control the timing of the
return of those goods.
Other companies have tried call
centers. Fair enough, as you typically
get the data right (or nearly right)
with an agent, and you can even
take time to sort through the various
mix-matched SKUs in the shipment.
But manual, human intervention in a
returns process (as with any supply
chain task) is costly because it is time
consuming. According to Gartner: If
you were to automate your reverse
logistics with a web interface that
demanded an RMA and compliant
label before any return it would save
35-50% over a live call center. If you
were to set up an entirely web-based
RMA system that linked directly to
your ERP, your company could save
50-80% over pre-printed return labels.
Clearly, automating front-end RMA
approval and labeling processes,
as well as rule-based receiving,
disposition and settlement, is the path
insightful companies are taking for
managing reverse logistics. C-level
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8/2/06

4:51:54 PM

officers are eager to reduce costs,

and the return-on-investment for an
enterprise returns management
(ERM) system can be achieved in
a remarkably short time, given the
margins and the money now left on
the table. Set up a web-based RMA
system, link it to your ERP, and train
your customers to respect and adhere
to your rigorous returns process, as
enforced by web services. This need
not alienate your customers, nor be
perceived as inflexible. Returns can
be made remarkably easy, given the
flexibility built into powerful ERPs
for manipulating highly granular data,
the wide availability of distance
printing of customized returns
compliant labels, and the availability
of sophisticated web services that
can access and distribute data from
a central ERPand update that ERP
with awareness of inventory that is
heading back to the warehouse, and
better yet, what to do with it once it
arrives.

Leading companies today are

recognizing the damage that hidden
costs of reverse logistics are having on
their profitability. Increased profits and
excellence in the returns management
process is found once companies
focus on reverse logistics. With a
logistics team thinking in reverse
and the process automated at the
industrial level, an effective reverse
logistics operation offers a significant
opportunity to recover returned goods
and dollars that can dramatically
impact the bottom-line of a company
of any size and structure. RLM
CM

MY

CY

CMY

About the Authors:

Lee Norman is senior manager of
Enterprise Returns Management
for ClearOrbit.

Warren Sumner is Vice President

of Marketing and Strategy for
ClearOrbit.
ClearOrbit provides real-time
supply chain execution (SCE) and reverse
logistics software solutions. Founded in
1994, ClearOrbit serves more than 275
leading manufacturing and distribution
companies including Cisco Systems, Motorola
and Texas Instruments. ClearOrbit.com.

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 17

Eco-Responsibility Is a Key Component of

Reverse Logistics
by RLM Staff Contributor

odays major computer

manufacturers are all faced with
mounting reverse logistics issues, but
one of the most interesting is how to
use reverse logistics as a competitive
weapon.
Computer and information technology
(IT) manufacturers compete for
customers by constantly delivering
more powerful, more efficient, and
better computing and storage systems.
The competition is fueled by the fact
that business customers themselves
need those advantages to compete in
their markets. Business customers,
especially enterprise-size IT staffs,
need to keep their data centers filled
with always-faster computers, called
servers, to keep up.
As a result, computer manufacturers
are in a race to render their own
hardware products obsolete at a rapid
pace.
Meanwhile, the pile of used computers
grows mountainous. About 12 million
computers a year end up as ewaste,
and a single computer can contain 700
distinct compounds -- some valuable,
some toxic. Disposal and recycling
for reuse are complex and expensive
processes.
In this environment, reverse logistics
rises to strategic importance.

Efficiency and the

Lifecycle of Products
David Douglas,VP Eco-Responsibility,
Sun Microsystems, Inc.

18 Fall 2006

Reverse Logistics Magazine

Fortunately, the industry has learned

how to design modular computers that
are increasingly easy to disassemble,
repair, and recycle. Sun Microsystems
www.RLmagazine.com
www.RLmagazine.com

in particular prides itself on delivering

some of the industrys most powerful
computers and storage systems that
also lead in eco-friendly efficiencies.
Looking for efficiency is in our
corporate DNA, says David
Douglas, Suns Vice President of
Eco-Responsibility. Saving energy
and reducing waste are not just good
for the environment, theyre good for
business.
Eco-responsibility at Sun is a multilayered approach and includes
efficiencies targeted at the supply
chain to help streamline and
economize the reverse logistics
process.
As a top-tier, broad-line IT
manufacturer, Sun provides hardware,
software, and services to corporations
worldwide. Much of the companys
hardware revenues come from
high volume sales of servers -- the
networked computers that process
applications and deliver data to
business and Internet users. Sun
customers typically purchase hundreds
or even thousands of VCR-sized
servers at a time, stacked dozens high
in racks and placed in secured, cooled,
raised-floor rooms called data centers.
As an innovative, engineering-driven
manufacturer, Sun has a history of
designing information technology
products that use less energy, occupy
less space, and conserve resources -all an advantage to its customers.
Sun has some worthy competitors
-- IBM, HP, Dell -- and efficiency is
one of the ways we stay competitive,
at many levels, says Douglas.
Sun has used its repair network as a
competitive advantage for many years.
In fact, Sun established its first reverse
logistics network more than 20 years
ago. And it is constantly undergoing
change, says Steve Simpson, Suns
Senior Director for its Service Supply
Chain. It becomes smarter, more
efficient, and more eco-friendly at
each step.
www.RLmagazine.com
www.RLmagazine.com

Douglas claims that now is the time

for technology manufacturers to look
at important reverse logistics changes
on the horizon, and he offers some
tips. First, network technology can
extend the reach of your process
and help it move more smoothly by
delivering the right information to the
right person wherever, whenever its
needed. Second, initial product design
that anticipates product returns can
significantly accelerate and economize
reverse logistics. Third, energy
efficient designs can expand the useful
life of a product to both the customer
and the manufacturer.
And finally, continue preparing for
increasing environmental regulation
in the areas of ewaste and hazardous
substance management. Under the
EU WEEE regulations, for example,
manufacturers are responsible for
the ultimate disposal of all electronic
equipment they sell, and that paints a
target directly on the reverse logistics
organization.

inexpensive desktop virtual clients

and enterprise servers to huge
storage area networks, are saving us
money and improving our network
capability as user demand grows.
Java technology, which we invented,
drives much of our software code
and allows deep and diverse crossplatform compatibility with our
supply chain, including handheld and
embedded computing devices. We
use our own operating system, Solaris
OS, widely recognized as the most
scalable, highest volume 64-bit UNIX
platform available, our own enterprise
infrastructure software platforms, and
our own servers and storage.
As a result, Sun has developed
a highly integrated reverse
logistics network that offers
endless opportunities to connect
people, products, and information
inexpensively. Building future
flexibility today through compatible,
integrated, industry-standard systems
is important, says Douglas.

If the Product Isnt

Designed for Reverse
Logistics, Its Not Designed
Right
Sun has also learned over the years
how to design computers and storage
devices, from the desktop to the data
center, that minimize the reverse
logistics effort through the initial
product design.

Steve Simpson, Sr. Director, Service Supply

Chain holding reusable, field replaceable units.

Applied Technology Keeps

Reverse Logistics Moving
Our first advantage is that we
manufacture much of the technology
used in our logistics process, and
we aggressively implement our own
innovations, Douglas explains.
Our own hardware systems -- from

Extreme modularity is key. Computers

that are designed to be disassembled
quickly move through reverse logistics
quicker. At the same time, extreme
modularity also benefits Suns IT
customers, who often do instant, onsite modular component replacements
themselves. Here, modularity and
redundancy work together. Customers
who need highly reliable, always-on
computing power choose servers with
a high number of field-replaceable
units, for example dual, hotswappable power supplies, fans, and
disk drives that can be removed and
replaced without shutting the system

Reverse
ReverseLogistics
LogisticsMagazine
Magazine Fall
Fall2006
2006 19
19

Know Your Regulations

California Electronic Waste Recycling Act Establishes a fee, to be paid by the consumer
of 2003 (SB20 & SB50 amendment)
and collected by the retailer, on all brands of
http://www.reverselogisticstrends.com/regulat
designated electronic devices sold in
ory_cew.php
California, including CRTs and LCDs
EU REACH
Requires manufacturers to register
EU regulatory framework for the Registration, information on substances in their products in
Evaluation, and Authorization of Chemicals
a central database
http://ec.europa.eu/environment/chemicals/re
ach/reach_intro.htm

business where customers want to

constantly upgrade units for the
fastest technologies. But because
enterprise customers have
such a high need for extremely
reliable equipment, even in used
equipment, we build, test, and
certify our systems to the quality
standards of our new products and
offer same-as-new warranties.

Also, the company has learned

to design products for higher
recycling yields. Many
manufacturers are working to
reduce their returned-product
WEEE
Requires that producers of electronic
landfill percentage from 35
Waste Electrical and Electronic Equipment
equipment be responsible for the collection,
Returns
reuse, recycling, and treatment of equipment
percent down to approximately
http://www.sun.com/aboutsun/ehs/weee.html
in the EU market
25 percent of product. Suns
progressive product designs have
down, thus, improving system uptime.
In the reverse logistics system, the
helped cut ewaste down to under
Customers are always happy not to
part instantly becomes a candidate
five percent. Were able to put over
have to take a server offline because
for Suns robust repair and
half of the product back into use, says
of a bad fan, and were glad to receive
remanufacturing programs.
Douglas, and can recycle almost all
just the fan, not the whole unit, adds
of the rest. Currently less than five
Simpson.
We have very active Trade-in and
percent ends up in the waste stream,
Remanufactured Systems programs,
and we have goals to drive that even
says Douglas. It makes sense in a
lower.
RoHS
Directive on the Restriction of the Use of
Certain Hazardous Substances in Electrical
and Electronic Equipment
http://www.sun.com/aboutsun/ehs/rohs.html

An EU directive that bans the sale of some

electronic equipment with concentrations of
lead, mercury, hexavalent chromium, and
other hazardous chemicals

Have you found the

HIDDEN PROFIT

in your returns?

At GENCO, we know theres more to your returns

operation than just boxes full of unwanted product.
There are many opportunities to uncover hidden profit.
We can help. As the leader in reverse logistics, we can
offer a solution that improves your:

Cash flow
Inventory turn rates
Asset recovery channels
Labor costs
Customer service
Transportation effectiveness.
Let us help you find your HIDDEN PROFIT today!

Call GENCO. 800-378-9671

www.genco.com

20 Fall 2006

Reverse Logistics Magazine

www.RLmagazine.com
www.RLmagazine.com

Eco Legislation Is the New

Reality Plan on It
We recognize a clear trend towards
increasing regulatory complexity, from
labeling and certification to energy
efficiency and eco-safe disposal,
warns Douglas. For example, if
you want to continue doing business
with electronic products in Europe,
youll have to conform to WEEE
regulations. That means planning how
youll eventually take back every bit
of equipment you sell. Its a serious
challenge and will get bigger as similar
regulations are adopted elsewhere
around the world.
And thats just one example.
Manufacturers should also expect
a series of escalations in hazardous
substance regulations, limiting the
use of toxic chemicals and regulating
their disposal, says Douglas. Just
as weve seen strict laws regarding
mercury disposal throughout the
world, we can expect to see other
chemicals receive similar treatment.
For example, the EUs RoHS
regulations place restrictions on six
chemicals, and we expect others to
pass similar legislation in the next 12
months.
Each of these factors could cost you
a lot in time, lost opportunities, fines,
and finally, new process investments
to get it right. But Douglas has some
advice, from experience: Start
now to address these challenges,
ahead of your competition. Youll
certainly lower the risk to your
own business, but may find that
competitive opportunities may arise as
a result as well. Since many of these
regulations involve disposal as well
as manufacturing, understanding the
reverse logistics implications up front
can lower risk and save money.
Now, Sun is actively involved
in lobbying for uniformity and
consistency within and between
this cluster of directives and
regulations. Regulation uniformity
and more predictability will help all
www.RLmagazine.com
www.RLmagazine.com

manufacturers plan ahead and save on

design costs, says Douglas.

Help Customers Cut Costs

through Energy Efficiency
and They Will Upgrade
One of Suns website headlines says,
More computing power has always
demanded more energy consumption.
The subheadline echoes a Sun mantra,
Lets change this.
Noting that a large data center may
house more than 10,000 servers and
can consume the energy equivalent of
80 barrels of oil every day, Douglas
claims, We really can change this,
and our customers are very interested
in us doing so.
Picture this: The average house
requires approximately 225
kWh/year (kilowatt-hours per year)
of electricity. The typical corporate
headquarters draws about 15 million
kWh/year. Todays largest data centers
can draw over 100 million kWh/year.
Thats enough power to run 400,000
homes, at a cost of around $10 million
a year.
But you certainly dont need to have
a large data center to benefit from
energy-saving IT equipment. Suns
ultra-low power servers, powered by
the Sun UltraSPARC T1 processor
with CoolThreads Technology,
have helped everyone to see whats
possible. They have also improved
Suns supply of incoming legacy parts.

Product Upgrades: Good

for Customers, Good for
Sun, Good for Reverse
Logistics
Introduced in 2005, the Sun Fire
T1000 and T2000 servers use onethird the power of other servers in
their class while delivering a 3x
improvement in performance. That
means you can get more compute

Maximum
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Provides:
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Close to source sorting,
destruction and logistics.

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T H E E L E C T R O N I C S L I F E C YC L E R E S O U R C E

For global locations see:

www.AerWorldwide.com

Reverse Logistics Magazine

Fall 2006 21

power out of the same size room and

still pay less in power costs, including
air conditioning. One server can
process up to 32 simultaneous threads,
or process flows. For multi-threaded
processing, no other system can pack
as much performance in a rack of
computers.

costs, a system that uses less power

will produce less heat, and heat is
the enemy of reliability. For most
computers and their components,
reducing the heat in the system
improves the mean time between
failures (MTBF). And that improves
customer satisfaction.

These servers are so energy efficient

that they now earn a rebate for Pacific
Gas and Electric (PG&E) customers in
the Western U.S. As a first-of-its-kind
program for PG&E, the California
energy provider gives Sun customers
a cash savings of $700 to $1000
per server when they replace old,
inefficient servers with Sun Fire T1000
or T2000 servers.

And for the benefit of reverse logistics,

product innovations such as these help
entice customers to upgrade to newer
servers, especially through trade-ins.
When they do, it fills the reverse
logistics pipeline with good, usable
parts and material, which are used to
service customers who need repairs
on older equipment. For repairs,
Id rather re-use whats already out
there than buy new, says Simpson.
Its less expensive and better for the
environment.

This is a growing trend, says

Douglas. Energy efficiency makes
economic sense, and we take it
seriously, as do our customers. It really
does pay off.
For Sun and its customers, the benefits
are multiple. Beyond cutting energy

In this way, product innovations help

reverse logistics become a cost-cutting
competitive weapon. Ive always
said every bit of legacy material Ill
ever need is already deployed, says

RLTS Las Vegas Conference & Expo

Simpson. I just need a catalyst for

customers to want me to take it off
their hands. Now weve got one.

Americas Premiere Reverse Logistics Event

The Riviera Hotel February 5-7, 2007

Just the Beginning

Douglas predicts that smarter
design and manufacturing will help
manufacturers deliver eco-responsible
products and processes while
reducing the cost of reverse logistics.
At the same time, anticipating an
environment of regulatory tightening
can help you make changes at the
design stage and reduce the need for
retrofits.
Each is an opportunity to gain unique
competitive advantages, no matter how
big your competition is. RLM
For more information, visit
Sun Eco Center at www.sun.com/aboutsun/
environment
Sun Remanufactured Systems at www.sun.
com/remanufactured

Partnerships In Managing Electronic

Waste Streams In Harmony with Nature

Over 100 Exhibitors -- More than 1000 RL Professionals Attending

ALUMINUM
BREAKAGE
CAPACITORS
CD-ROM
CIRCUIT BOARDS
CLOSEOUTS
COMPONENTS
COMPUTERS
COPPER
CRT'S
EQUIPMENT - NEW & USED
EXCESS
FERROUS METAL
FLOPPIES
HARDDRIVES
IC'S

E - WASTE MANAGEMENT

ENVIRONMENTALLY RESPONSIBLE

MAINFRAME
MEMORY

Join us in Las Vegas at the 4th Annual RLTS

Conference and Expo. Reverse Logistics
Association is offering three full days of RL
immersion starting with two days of sessions
and expo followed by post-conference RL
Workshops.
Arrive early to have some fun before the
conference starts. Imagine Super Bowl
Sunday in Las Vegas--entertain your clients
with the celebrations at the Riviera Hotel.
The RLTS conference kicks off on Monday
with sessions presented by RL professionals,
leading academics and panel discussions.

further in to the issues and to network with

others who share your interest in a particular
topic.
For those who like one-on-one time
with their clients, join us at RLA Golf
Tournament being held on Wednesday.
Wednesday also offers RL Workshops and
Seminars. Check out the line up of speakers,
then sign up for one or more.

The day concludes with a roundtable

discussion with each of the speakers. Take
advantage of this opportunity to delve

MONITORS

REVERSE LOGISTICS

FULLY PERMITTED & STATE APPROVED

REDUCE SUPPLY CHAIN COSTS

ACCOUNTABLE SAFE

NETWORK EQUIPMENT
NON FERROUS METAL
PASSIVE COMPONENTS
PRINTED CIRCUIT BOARDS
PULLS
RESISTORS
SCRAP METALS

If you are a Reverse Logistics professional dont miss this event!

Have an interesting story to share? Want to be part of this event? RLTS speakers receive many benefits for more
information, please contact Gailen Vick at [email protected] or 1-510-364-7631.

SURPLUS INVENTORIES

BMIONLINE.US
22 Fall 2006 Reverse Logistics Magazine

6025 Scott Way, Commerce, CA 90040

bmi_halfpage.indd 1

TELECOM EQUIPMENT

www.RLmagazine.com
T. (323) 722-5587 F. (323) 722-0751

TRANSISTORS
WIRE

7/27/06 9:38:27 AM

www.RLmagazine.com
www.RLmagazine.com

Reverse
ReverseLogistics
LogisticsMagazine
Magazine Fall
Fall2006
2006 23
23

RLTS LAS VEGAS CONFERENCE & EXPO

RLTS LAS VEGAS CONFERENCE & EXPO 2007

Conference Schedule

Expo Floor Plan

MONDAY - FEBRUARY 5, 2007

8:30AM

EXHIBIT HALL OPENS

RLTS Las Vegas 2006 Welcome

10:00AM Gailen Vick - President - Reverse Logistics Trends, Inc., Industry Overview Size and Forecast
Industry Keynote Address
10:30AM The Major Challenges Facing Reverse Logistics
11:30AM
- 1PM
Buffet Lunch - Exhibit Hall
Track A
1PM

Track B

Track C

Maximizing Revenue Opportunities Global Challenges in IT Asset

Real-Time Decisions, Taking Time
in Reverse Logistics Through
Recovery and Electronic End-of-Life Out of Reverse Logistics
Integrated and Outsourced Online
Marketplace Solutions

Track D
Using Technology To Lock In
Customers to Your Aftermarket
Sales & Service Strategy

Retail Reverse Logistics Issues

Revenue Opportunities within the

Reverse Logistics Process

Outsourcing Recovery Programs to Wireless Carriers, OEMs & 3PSPs

Increase Profits
- Working Together for Customer
Support

3PM

Customer Returns - A Delicate

Business - Will RFID Help?

IT Asset Disposition: A Unique

Reverse Logistics Challenge

Pioneering Customized Support

Strategies to Meet Dynamic
Customer Requirements

Industry Analysis on the Wireless

RL Market Size

4PM

Online Auctions - Changing the Way Predictive Analytics in Support of

We Do Business
Improved Quality

Channel Returns and Asset

Management

Developing an ERP with a strong

RL Component

5:007:00PM

Roundtable Discussions

8:30AM

EXHIBIT HALL OPENS

2PM

TUESDAY - FEBRUARY 6, 2007

Track A

Track B

9AM

Partnering for RL Solutions

10AM

Mid-Morning Breakfast - Exhibit Hall

11AM

Reverse Logistics Issues in the

Storage Industry

Track C

Track D

Reverse Logistics - Pros and Cons RL Operational Strategies for New Methods of Outsourcing
of Outsourcing
Product Releases

Options in the Reverse Logistics

Transportation Model

Entitlements - Managing Costs on

Returns and Warranties

Global Warranty Support

12:00PM Buffet Lunch - Exhibit Hall

Turning Costs Into Value with
Managing the Global Impact of
Innovative Reverse Logistics
Electronic Waste Legislation
Through Optimizing Your Customer
Service and Marketing

2:30PM

WEEE & RoHS Impact on OEMs

& 3PSPs

Challenges Associated with

New Ways to Streamline
Outsourcing Reverse Logistics and Operations, Drive Profits, and
Repair
Delight Customers

Supply Chain Sustainability Returns and Loss Prevention

Integration of Forward and Reverse Strategies
Value Chains

RL Shared Costs Between Carriers

and Manufacturers

3:30PM

Gailen Vick, President, Reverse Logistics Trends, Inc., Closing Remarks

4PM

LUCKY DRAWING for DVD RW, Portable DVD Players, External Hard Drives, Digital Cameras (you must be present during the drawing to win)

WEDNESDAY - FEBRUARY 7, 2007

7:00-11:00Golf Tournament
9:00AM Post-Conference Workshops
4:00PM

24

Fall 2006

Reverse Logistics Magazine

www.RLmagazine.com
www.RLmagazine.com

www.RLmagazine.com
www.RLmagazine.com

Reverse
ReverseLogistics
LogisticsMagazine
Magazine Fall
Fall2006
2006 25
25

Depot Repair
& the Reverse
Logistics Road
Trip
by Joe Costa

ou cant move forward on a

journey unless you map the
course. These days youd be hardpressed to find a road that hasnt
already been paved. However, when
moving through new ground, utilizing
a few necessary tools, thorough
research and the drive for success
you just might be able to make that
trip faster and more efficiently while
making some unexpected discoveries
along the way.

Know Where Youve Been

Traditionally, depot repair companies

provided little beyond a basic menu
of products, services, and prices
nothing more. There was no urgency
to extend value outside this standard.
With all efforts internalized the best
organizations focused on building
outstanding reputations for quality,
responsiveness and efficiency. Many
of these companies were incredibly
successful for a time, but where are
they today? While market forces
were changing rapidly, they continued
with emphasis on base line services
but did little to enhance their value
to customers. The price they paid
was a costly one consolidation or
extinction.
The needs and priorities of their customers evolved quickly and dramatically. Repair, while still important,
became proportionately less significant
to customers as they identified additional opportunities to gain efficiencies not directly related to repair. For
26

Fall 2006

service based companies, survival

and success in the burgeoning world
of Reverse Logistics and after-sales
support meant realigning resources
to achieve these advantages for
their customers.

Building Relationships
with the Locals

Building relationships is
key in all walks of life.
Maximizing yield from
any venture demands a
solid
working relationship
between customers
and
vendors. Both
parties
must strive
to develop a
true partnership. At the
outset,
companies identify
the
objectives, assign
responsibilities, define
mutual expectations, and
schedule time lines. Encouraging a team mentality from the
start energizes both sides positively
while minimizing bureaucratic obstacles. Each customer project is unique;
therefore the program for effective service must also be unique and flawless
for ultimate success.

Crush Canned Solutions:

Take the Road Less
Traveled

Service companies must have an internal organization in place to meet

the special challenges that will present themselves and all personnel must
compulsively provide and manage
solutions swiftly. Listening and un-

Reverse Logistics Magazine

derstanding specific needs and goals

will lay the groundwork for developing personalized programs that will
complement customers own internal
measurement systems. Canned solutions simply cant meet all of the specific demands of every customer; so
service organizations need to step out
of the box and be creative in designing
solutions that meet their customers
specific needs while never assuming
that customers can or should modify
their internal functions to fit into that
canned solution! Excellent results
are almost always possible when the
foundation of a service company is a
flexible workforce that is driven by
continuous analysis of the facts and a
consistent drive to improve quality and
productivity.

Although it is important to have flexibility within the workforce, it is

critical on the systems side as well.
Customers with highly complex ERP,
DMS, WMS and other systems are
reluctant to customize any aspect of
them for management of short-term
special projects. And they shouldnt
have to; the cost of modifying one of
these complex systems is usually too
large to justify the effort. Extended
time and the risk of corrupting or diminishing performance of the overall
system are other factors causing reluctance. Depot repair vendors must be
able to bridge this gap because effective use of systems can yield great results in managing customers Reverse
Logistics projects, so a means must
exist to overcome customers internal
limitations.

Adapt & Thrive with Each

Bend in the Road

Critical to filling a customer need is

the adaptability of a vendors software.

Tracking Each Journey to

Ensure Future Success

Well defined reporting will lead to

greater productivity on both sides,
and guide improvements within
the customized repair/inspection
processes. Screening, testing, shipment
tracking, parts replacement criteria,
labeling and packaging are reevaluated
and upgraded as needed. Once the
reporting fields are identified, they

can be further modified to yield more

positive results in the future. An
example would be the use of failure
data to enhance outside call center
operations. With accurate updated
information and regular training, a
call centers effectiveness increases
as end user satisfaction improves
and the customer realizes significant
reductions in valid warranty claims-and an increase in their bottom line.
The Open Road to Success
The economic realities of this age
demonstrate the huge shift in business
thinking over the last 25 years. We
have moved from independence to
interdependence. The advantages of
this change have been reduced waste
and inefficiency, higher productivity,
better quality in products and
servicesin brief a series of benefits
unimaginable a short time ago. With
focused attention and cooperation
between customers and depot repair
vendors, this trend will continue. The
continuous review and analysis
of processes and data by team
members insure that projects yield
projected results, some pleasant
surprises along the way, and a road
map for additional successes in the
future. RLM
Joseph Costa is
President of Depot
America, Inc.
one of the largest
independently owned
service companies
in the US. He holds
a BS in accounting
and an MBA, both
degrees from the University of Southern
California. In his career he has been
controller of a food manufacturing
business, VP Finance & Administration
for NYSE member firm, William
ONeil & Co., Inc. and for the last 25
years partner or co-owner of service
companies including Depot America
during the last 18 years.

Be Flexible: A Small
Detour Can Save Big $

A flexible workforce provides

management with powerful
tools for developing innovative services. Personnel with exposure
and
working experience in
multiple areas
of the
business have
a higher confidence level
when designing programs
with customers.
Employees
who are effectively cross
trained have more
range and
readily adapt to
the constant change in the
Reverse
Logistics and
after-sales
environment.
www.RLmagazine.com

If the expense and time involved

in customizing software is minor
compared to the overall project scope,
then the team can realize significant
benefits. Together the customer and
vendor can outline the initial needs
necessary to implement the project
and the customer can have access to
all phases of the operation as if the
project were in house. This seamless
integration generates a rapid response
from customers who readily see the
value in obtaining real time data from
their service operations.

Today, Mr. Costa and Depot America

have successfully expanded into the
Original Equipment Maintenance
market, as well as the Self Maintainers
market. They plan on continuing
to enrich their services by adding
complementary products to their already
impressive line.

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 27

circumstances for operators, and

similar work days, i.e., same time
zone. Convenience also refers to
access to the kind of technology your
call center requires, i.e., high-speed
networks, interfacing capabilities, etc.
Cost refers to overall cost of the
location of the call center, i.e., wages,
travel expenses, benefits, capital costs.
In short, it can be measured by the cost
of each transaction, be it per sale, per
call, per return, etc. When determining
cost, it is important to look for hidden
costs such as attrition.

The Five Cs of Outsourcing

by Mark DeLong, Bob McCallister and
Brad Hendrick

young executive gazes

absentmindedly out his airplane
window as his fingers drum on the
top of his closed laptop. He looks at
his watch and thinks of his wife and
kids just getting home from a soccer
game. This is the third trip this month
hes made to his companys off-shore
call center. He knows his company
is saving money by locating its call
center there, but he wonders if its
really worth it; the travel, the phone
calls in the wee hours of the morning
and the comments from customers
who have become frustrated by
multiple calls to get what they need.
He wonders if there isnt a better way.
Well, there is, and its a new trend
sweeping the country. Near-shore
outsourcing combines the best of both
worlds.
Off-shore outsourcing refers to any
place that takes an entire day or more
of travel time to and from. Most
people think of places like India, the
Philippines and China in this respect.
These are places that generally have
different time zones, wages lower
than the U.S., robust labor pools and
English as a second language.
On-shore outsourcing refers to
anything within the continental United
States. Its usually divided into two
28

Fall 2006

categories, urban and rural. Rural is

just what it sounds like, any site that
is not a major city. These sites are
usually close as far as globally, but
can require connecting flights and
drive time, so short travel time
isnt always a given. Urban sites
are usually more accessible, and
travel time is such that you can
get there, put in a days work and get
home that evening.
The term near-shore refers to places
that are near enough to the U.S. that
travel time is very similar to on-shore.
Usually near-shore refers to places like
Canada and Mexico, but the term is
also used for Panama and Costa Rica.
There are advantages and
disadvantages to each of these; cost
isnt the only consideration when
choosing a site. Corporations must
determine the kind of experience they
want to provide to their customers as
well as what kind of call center they
need, then make a decision based on
what is most important. There are
always trade-offs, and businesses must
prioritize.
Arvato has developed The Five Cs
of Outsourcing, a system that can
help corporations make an informed
decision on which type of outsourcing
best suits their needs. The Five Cs
consists of: culture, convenience, cost,
complexity and customer satisfaction.
Off-shore, near-shore and on-shore
rate differently in each of these areas.

Reverse Logistics Magazine

Complexity refers to the needs the call

center is fulfilling for the company.
Taking an order or answering a billing
question requires far different needs
than trouble-shooting or organizing
returns or repairs. The more technical
the call, the greater the complexity
needs.
Customer Satisfaction refers to
the expectations of your customers
1831
rev logistics
9/8/06
and their
experienceFALL_06
with your
Corporations
must decide
which of the Five Cs are
most important to them.
This ratings scale measures the
strengths and weaknesses of each site
with 5 being the highest rating and 1
the lowest.

organization. Were their questions

answered? Were their expectations
met? Would they recommend your
services to a friend? Can you provide
one-call resolution?
The significance of each of these
varies according to the needs of your
business.
In order to prioritize these areas,
companies need to take a good, hard
look at what is most important to their
business. If you need to have frequent
in-person communication between
your company directors and the staff
at the call center, then convenience is
a high priority to you. If the call center
handles complex issues where supply
chain issues come into play, then
complexity may rate higher for you.
If most of your customer base speaks
another language, say Spanish for
example, then culture is a high priority
for you.
The Five Cs are intertwined to some
company must decide

1:53 degree
PM Page
and1 a

PACKAGING THAT

Its also important to know that there

is a lifespan for the location of a call
center. You may find an area that is
virtually invisible to competitors with
the kind of labor pool you need, only
to find that others follow your lead.

Manufacturers know that packaging their equipment

in Pelican Protector Cases reduces their cost-per-use
when compared to disposable packaging. Pelican
Cases deliver exponentially more uses than disposable
packaging and the associated savings drop straight to
the profit line.
When high-value asset remanufacturing/refurbishing,
warranty programs, and efficient RMA management
are your concern, look to Pelican Protector Cases.
Theyre built tough, reusable, customizable, and guaranteed for life. Youll streamline the reverse logistics
process, eliminate goods damaged in shipment, and
cut overall handling cost. Everyones a winner.

Culture refers to colloquialisms,

language and life experience. The
biggest differences in culture between
customer and operator generally take
place with off-shore outsourcing. The
nearer the call center, the more likely
cultures are similar to the callers. In
some cases, near-shore call centers
are actually a better cultural match to
the callers such as with Mexico and
Spanish-speaking customers.

www.RLmagazine.com

When making decisions about where

to locate a call center you need to
keep a few other issues in mind as
well. Its important to take a good look
at the labor pool in the area you are
considering. In the past 10-20 years,
India and the Philippines have been
popular areas because of the educated
labor pool and wage scale. These
places have become so popular that
companies are now competing for
labor, increasing costs for attrition and
wages.

PELICAN

These metrics are basic issues that

greatly affect both your customer
satisfaction and your bottom line.

Convenience goes hand-in-hand with

accessibility. This refers to location,
i.e. travel times, ease of making
travel plans, parking or commuting

what is most important. Sometimes

customer satisfaction outweighs cost
and may be directly related to culture.
Sometimes what looks like a big
savings in cost ends up costing you
money if convenience and complexity
needs arent met.

To learn more, call us toll free at 866.934.2556 or

visit us online at www.PelicanOEM.com/rlo

Log on to PelicanOEM.com/rlo
or call us at 866.934.2556
for a free OEM Solutions Kit

23215 EARLY AVENUE, TORRANCE, CA 90505 TEL 866.934.2556 (TOLL FREE) 310.326.4700 FAX 310.326.3311 WWW.PELICANOEM.COM/RLO
1831

All trademarks and logos displayed herein are registered and unregistered trademarks of Pelican Products, Inc. and others.

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 29

Your great find may become too

costly as competition for labor and
attrition costs rise.
Is there a best of both worlds?
When choosing a site for a call center,
what you really need to do is keep the
customers experience at the forefront
of your decision. After all, if you lose
your customers, the rest dont really
matter that much.
We are finding that near-shore
outsourcing is solving many of the
problems businesses have encountered
with off-shore and on-shore
outsourcing. Near-shore outsourcing is
convenient as far as travel and access
to the technology needed. Call centers
located in Canada provide customers
with operators of similar cultural
backgrounds, usually increasing
customer satisfaction by eliminating

language barriers, etc. For companies

with a high rate of Spanish-speaking
clientele, locating a call center in
Mexico eases language issues as well,
as most of the labor pool there is
bilingual.
Near-shore outsourcing is still less
expensive than on-shore outsourcing
and provides most of the benefits. It
really depends on your priorities. RLM
Mark A. DeLong, DirectorTechnical Support Services
at Arvato Services Inc.,
has over 25 years RL
experience in the wireless
industry. He has extensive
experience with wireless
carriers such as McCaw
Communications, AT&T
Wireless and T-Mobile. Mark has been
with Arvato Services Inc. since 2005 as
a consultant and employee, managing a
technical services outsourcing project for a
national wireless carrier.

Bob McCallister has been

in the CRM business for
25 years with 15 years
dedicated to the wireless
industry. Bob spent 10
years in AT&Ts Direct
Marketing Services
division before joining
McCaw Cellular/AT&T
Wireless in 1992. Bob spent 4 years with
AirTouch Cellular/Verizon Wireless as the
Director of Telesales before joining arvato/
Bertelsmann in January of 2005.
Brad Hendrick has over
22 years RL related
experience with companies
including Nokia Mobile
Phones, Solectron Global
Services, Sprint PCS and
most recently as President
and CEO of Applied
Resource Technologies.
Brad has been with Arvato Services as
Executive Director of Sales and Business
Development for the Wireless Sector since
2005.

On the Move in Reverse Logistics

Robert R. Auray, Jr. has recently
been named president and chief executive officer of GENCO subsidiary,
GENCO Marketplace, which markets
and liquidates customers surplus
inventory to maximize the financial
return on their assets. Mr. Auray
will be responsible for increasing
GENCOs position in the liquidation
market and leading business activities, including strategy and business
development as well as operations
management. With 26 years of
executive management experience,
Mr. Auray has proven success in
leading high performance teams in
developing and executing strategic
plans and successful acquisitions,
which generate significant increases
in shareholder value.
Scott Selle has been named the
president of EADS North Americas
Fairchild Controls Corp. subsidiary,
which develops, produces and supports power conversion and control
30 Fall 2006

electronics, environmental control

systems and turbo-machinery for
military and commercial customers
worldwide. Scott brings significant
expertise in supply chain management, aftermarket services and
quality assurance. Prior to Fairchild
Controls, Scott was the Director of
Component Aftermarket Services for
Honeywell Aerospace.
Warren Sumner has been named
Vice President of Marketing and
Strategy for ClearOrbit. Mr. Sumner had served as ClearOrbits Vice
President of Professional Services for
the past five years. Sumner has over
20 years of experience in manufacturing and supply chain operations,
software, and consulting. He joined
the ClearOrbit Executive Team in
2002 as Vice President of Professional Services and was responsible
for the implementation and enhancement of all ClearOrbit and partner
products.

Reverse Logistics Magazine

Read the Press

Full articles available from:
RLA News Center
Wal-Mart Launches Five-Year Plan
to Reduce Packaging
Wal-Mart Stores, Inc. (Bentonville,
Ark.) plans to measure its 60,000
worldwide suppliers on their ability
to develop packaging and conserve
natural resources. This initiative,
scheduled to begin in 2008, is
projected to reduce overall packaging
by five percent. The announcement
came at the conclusion of the Clinton
Global Initiative in New York City.

Reverse Logistics Association

Membership Benefits
RLA Membership has its benefits!
RL Quote, Publication Subscriptions, Exhibit/Sponsorship
Discounts and much, much more.

Platinum

Newgistics Strengthens Customer

Service with Enhanced Returns
Resource Team
Newgistics Inc., the leader in
returns management solutions for
direct retailers, today introduced
enhancements to the Returns Resource
Team, a group of highly experienced
client service professionals that
provides personalized consulting
services to support effective returns
management. To ensure maximum
operational efficiency, the Returns
Resource Team works in close
partnership with customers to ensure
a rapid and seamless end-to-end
implementation of Newgistics
intelligent returns management
solution.
Breaking Down the Walls:
Leveraging a Virtual Contact Center
for Skilled, Global Customer Service
Most people can visualize the classic
customer service environment
hundreds of agents sitting sideby-side in a large contact center, all
working off the same script, working
the same shifts and being monitored
in the same manner. The mass media
has reinforced this vision of customer
service facilities as work farms located
in the middle of nowhere, staffed with
unhappy employees.

www.RLmagazine.com

Reverse Logistics Association Membership

www.RLmagazine.com

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Reverse Logistics Magazine

Fall 2006 31

RL Road Show Series of Seminars Highlights

Industry Events
The Reverse Logistics Association
staff takes advantage of every
opportunity to evangelize the
reverse logistics message thus
raising awareness of the process and
increasing visibility for our association
and its members.
Gailen Vick, President of RLA
regularly speaks at industry events
including the recent Ingram Micro

The Reverse Logistics Road Show

Series of Seminars continues to cross
the United States, bringing leading
reverse logistics professionals to
key service locations throughout the
country. Recent RL Seminars have
highlighted returns processes, retail
strategies, and environmental issues in
reverse logistics.

Indianapolis
In July, the Reverse Logistics Road
Show Series headed to Indianapolis
and hosted more than 50 reverse
logistics minds from 33 different
companies. Mike Snell of NCR,
Mark Wallace of AT&T and Laura
McDougall of HP shared experiences
and strategies in returns and vendor
relations.
Attendees then boarded the shuttle
for the GENCO-sponsored Best
Buy Repair and Returns Facility
Tour. They got a first-hand view of
one of retails most efficient repair
and returns facilities. The afternoon
featured Warren Sumner of ClearOrbit
reviewing various examples market
development within the RL sector
and an interactive panel discussion
featuring the days speakers.
The productive day ended with
an evening reception sponsored
by Telamon. The mingling and
networking went into the night and
attendees left with new strategies,
knowledge and contacts.
32

Fall 2006

If you would like to have RLA present

at an event or if you have an event
you would like to publicize in RL
Magazine, please send an email to
[email protected].

Upcoming Events

Boston

Denver

The Boston RL Seminar featured

insights, strategies, and challenges
in retail and consumer products.
Mike Perkins and Barb Wood of L.L.
Bean shared returns management
philosophies. They examined the
critical role reverse logistics plays in
operations and highlighted specific
challenges of retail and apparel. Len
Wierzbicki of Black & Decker talked
about launching a reverse logistics
operation. He shared figures of how
much reverse logistics can impact
profitability and took questions
on organizational structure and
collaboration.
Attendees toured the Appleseeds
returns and distribution facility in
Beverly, MA. They looked at the
returns processes and structure
utilized by Appleseeds, a leading
catalog retailer, and were able to
see how it ensures that its reverse
logistics strategies increase customer
satisfaction and loyalty.
After the facility tour, Lee Norman
of ClearOrbit explored finding
hidden value through visibility,
automation and reconciliation in
returns management. Ann Grackin
of ChainLink Research led a group
discussion on RL challenges and
successes and outlined her views on
the current state of reverse logistics.

In September, RL Seminars tackled

Environmental Issues of Reverse
Logistics. Steve Simpson of Sun
Microsystems talked about Suns
approach to Eco Responsibility
and shared supply chain effects of
regulatory requirements and showed
how exercising eco responsibility
can be a profitable strategy. Jade Lee
of Supply-Chain Services covered
current regulatory requirements, the
impact legislation has had on business
practices and how pending laws will
affect businesses and consumers
before and after the purchase.

Reverse Logistics Magazine

Logistics 2006 Annual Supply Chain

Executive Summit attended by a
diverse group of logistics executives,
academics and industry experts.

RFID Implementation: How to

Evaluate, Justify and Deploy Your
RFID Solution
November 1315, 2006
Las Vegas, NV
www.continuinged.ku.edu/programs/
rfid/implementation/
CPI FOR AIRCRAFT
MAINTENANCE
Phoenix, AZ
November 14-15, 2006
Arizona Biltmore Hotel
www.aviationweek.com/forums/

Attendees visited the Sun/StorageTek

Reverse Logistics Warehouse and saw
the challenges and opportunities within
Suns center for storage products
returns. Anne Peters of Gracestone led
the speakers and audience in a session
focused on further environmental
issues, challenges and regulatory
requirements facing these businesses.

RL Seminar
Miami, FL
Hilton Miami Airport
November 15, 2006
www.rltshows.com/mia06_event.php

Reverse Logistics Association Road Show

Series of Seminars will continue to provide
attendees across the U.S. the chance to
engage in high-quality discussions with
their reverse logistics colleagues. For the
complete schedule and more information,
please visit www.rltshows.com.

Smart Label Summit Europe

November 15-16, 2006
Hotel Okura Amsterdam
Amsterdam, Netherlands
smarteurope.labelsummit.com

www.RLmagazine.com

AIAG Interoperability Showcase

November 15, 2006
Rock Financial Showplace, Novi MI
www.aiag.org/

www.RLmagazine.com

RL Seminar
Phoenix, AZ
December 6, 2006
www.rltshows.com/phx06_event.php
Storage Visions
Las Vegas, NV
January 6-7, 2007
The Flamingo Hotel
www.storagevisions.com
Consumer Electronics Supply Chain
Conference
Las Vegas, NV
January 8-10, 2007
Las Vegas Convention Center
www.entertainmentsupplychain.com/
International CES
Las Vegas, NV
January 8 - 11, 2007
cesweb.org/default.asp
RL Seminar
Los Angeles, CA
January 11, 2007
www.rltshows.com/ont07_event.php

RLTS Las Vegas Conference & Expo

Riviera Hotel
February 5-7, 2007
www.rltshows.com/vegas.php
Asset Management Conference &
Expo West
San Diego, CA
San Diego Convention Center
February 21-22, 2007
www.assetexpo.com

5th Annual Global RFID ROI

Summit
January 29-30, 2007
ExCeL Conference Centre
London, UK
www.rfid-roi.com/index.asp

Reverse Logistics Magazine

Fall 2006 33

and Switzerland exceeds 160,000.

Drop-offs are certainly more efficient,
since there are no failed pick-up
attempts. The consumer simply
decides when and where he wants to
drop-off the package.

A New Value Proposition for

Reverse Logistics in Europe

by Gerben Willems

Creating valuable consumer insights

while managing costs and increasing
customer satisfaction

omeday you will see your products

back, whether you like it or not. A
growing number of manufacturers are
increasingly aware of this new reality,
but many have yet to realize that
product-returns can also work to their
advantage when consumer goods are
concerned.
Whereas in the mid-1990s,
photocopier manufacturers were
amongst the first to take advantage of
the integrated business proposition
that Reverse Logistics offered
them, the majority of manufacturers
have now integrated this concept
into their supply chain. In contrast
to Business- to-Business Reverse
Logistics, Consumer-to-Business
Reverse Logistics is still relatively
immature. With developments in
the areas of warranty, recycling and
recalls, manufacturers need to evaluate
the way they are handling returns of
smaller and medium sized consumer
products and find new ways to turn
costs into value.
There are a number of issues when
evaluating Reverse Logistics for
smaller sized consumer products in
34

Fall 2006

Europe. Costs are often relatively

high in relation to the actual product
value and, when using Express
solutions, can vary significantly per
consumer. Another obvious challenge
is that Europe is incredibly diverse.
Each country comes with its own set
of rules, regulations, tax regimes,
consumer preferences and language.
Manufacturers on the other hand
want to ensure that they have a single
solution in place across all of Europe.
But the most important issue and at
the same time biggest opportunity is
that many manufacturers simply do not
know who their end-consumers are.
They sell their goods through different
channels and have not been able to
establish direct communication with
their consumers. This is a real concern
for manufacturers and should actually
be one for their shareholders as well.
Innovative Reverse Logistics solutions
can help to re-connect manufacturers
with their consumers.

Turn around time, cost, reliability and

consumer experience vary largely
across these different concepts and
channels.

The main categories for product

returns of small sized consumer
products, excluding distance sales,
are warranty returns, product recalls,
end-of-life products, and the WEEE
Directive (for consumer electronics).
Manufacturers, the logistics industry,
and to some extent the relevant
authorities, have developed a variety
of concepts and channels to assist the
consumer when returning a product.

results. For example, turn-around-time

is critical but certainly not uniform
across all types of products. Another
question is whether one should use
drop-off or pick-up solutions. Many
may argue that drop-off solutions are
more consumer-friendly, provided
there are enough drop-off points
available. The number of drop-off
points of postal companies in the 25
EU countries, combined with Norway

Reverse Logistics Magazine

How can Reverse Logistics be more

cost-efficient? Evaluating cost should
be part of a broader discussion that is
centred on the question if the solution
is suitable to achieve the desired

The main categories

for product returns of
small sized consumer
products, excluding
distance sales, are
warranty returns,
product recalls, end-oflife products, and the
WEEE Directive (for
consumer electronics).

www.RLmagazine.com

How can Reverse Logistics be

effective on a pan-European level?
It is important that the concept
should be similar throughout Europe,
bringing ease of management and
ease of implementation. Consistent
and detailed information about the
returned products needs to be achieved
throughout the pipeline and as close
as possible to real time. The solution
should be simple and cost effective
for all parties involved. For example,
being able to better structure product
returns from across Europe enables
a manufacturer to optimize resource
planning, optimize defective to good
stock-control as well as inventory
management, better control the
administrative process and save
costs in both handling and resources.
Reducing the number of contracts with
logistics service providers also brings
the benefit of reduced costs across the
board.
How can Reverse Logistics solutions
help to re-connect with the consumer?
Currently, most consumer products
are sold through the retail channel.
This means the manufacturer does
not know the majority of its endusers. The benefits of obtaining
information about the consumer are
numerous, and open up the possibility
to turn Reverse Logistics into value.
Optimizing communication with the
consumer brings additional benefits,
such as being able to launch targeted
marketing campaigns, consumer
loyalty programs, and to enhance the
channel strategy. Both manufacturer
and consumer should be able to track
and trace the product throughout the
logistical pipeline. Now more detailed
information about the product and the
consumer is easily accessible through
a database, and suitable for Customer
service, communication and marketing
purposes. The access to real-time
information about the consumer and
www.RLmagazine.com

the logistic process helps to improve

the average speed of answer which
is a key call centre metric. It will
even decrease the total number of
calls since traffic can now effectively
be redirected to the website and
consumers will pro-actively receive
information.
It is obvious that there is a real drive
to find innovative concepts in Cto-B Reverse Logistics. The sheer
number of seminars and workshops
held on this topic reflects the global
demand. It seems that almost every
manufacturer is seeking better, and
more valuable, concepts in Reverse
Logistics. The need to achieve the
best possible results is driven by more
then just the desire to reduce costs.
Integrating Reverse Logistics into
the supply chain and complying with
relevant rules and regulations can help
a company to achieve a competitive
edge.
Manufacturers will constantly need to
review the way they have organized
their product returns since it has
become a critical instrument to reconnect to their consumers. Through
close cooperation with leading
universities, European authorities,
logistics branch-organizations and
the logistics industry, companies
can ensure they have access to the
latest research and
information. RLM
Gerben Willems is CEO
and one of the founding
partners of Cycleon.
Headquartered in the
Netherlands, Cycleon is
the only dedicated provider of pan-European
Reverse Logistics solutions, leveraging
the postal networks for the first-mile and
creating valuable consumer insights for its
clients. Gerbens professional experience
includes a career as management consultant
at McKinsey & Company where he has
worked across multiple industries with a
particular focus on strategic development,
restructurings, M&A and turn-around
management. Gerben holds an MBA from
INSEAD and has extensive entrepreneurial
experience.

Reverse Logistics Magazine

Fall 2006 35

Service Parts Management

by Stephen Buckler

Beyond Planning, Success Through

Market Execution

odays macroeconomic
environment of globalization,
outsourcing and consumer market
visibility has resulted in the
commoditization of products and
erosion of margins. This has put
pressure on manufacturers to not only
drive efficiencies from their supply
chain through outsourcing of non-core
competencies, but to distinguish their
products through superior levels of
customer service. After-market service
has not only proven to be a critical
component of customer satisfaction
but is a key component of top line
revenue and profit. According to
the Aberdeen Group, after-market
service generally accounts for up to
20% to 30% of gross revenue and
40% of profits. To realize these gains
manufacturers must have end-to-end
supply chain solutions that encompass
planning and execution with equal
weight. The selection of strategic
partners throughout the supply chain
is critical to the success of any service
parts management program.
The challenge of maintaining
a seamless supply chain in the
technology sector that preserves
customer satisfaction where product
quickly falls into obsolescence is
critical to maintaining a companys
36

Fall 2006

reputation and brand loyalty.

Challenges identified by manufacturers
are many. Lack of visibility into
inventory levels and demand, resulting
in stock-outs, excess inventory, and
poor response time to customers
have proven to be critical pain points.
Manufacturers quickly realized that
their existing systems and planning
software, geared towards production
runs, were ineffective in managing
their service parts programs. This in
combination with relentless pricing
pressure and revenue demands
has resulted in OEMs parceling
out processes that are not core
competencies to strategic partners that
are better suited to drive efficiencies
from their after-market service
programs.
Use of strategic partners within the
electronics industry, such as third
party logistic providers (3PLs) or
electronic manufacturer service
(EMS) providers, has helped original
equipment manufacturers (OEMs)
improve service levels of after-market
services (AMS). The purchasing
function of execution within the
electronics industry takes three forms:
direct from manufacturers, franchised
distribution, and independent
distribution to support repair demand.
However, many AMS programs fail to
realize the full potential of their supply
chain by failing to apply the same
due diligence when selecting an open
market supplier. To realize the gains

Reverse Logistics Magazine

of effective planning one requires

best in class execution throughout
the supply chain. Selection of best
in class distributors that understand
the AMS business model, possess the
tools, requisite quality systems and
strategic relationships that drive out
inefficiencies and mitigate risk within
the supply chain is critical in driving
superior revenues and customer
satisfaction levels.
In selecting a supplier as a strategic
partner, it is critical that they possess
the required insight into the AMS
providers business model with the
proper focus on items that will drive
the greatest value into the supply
chain. By narrowing down the list
of service parts to the highest cost
and highest failure rate components,
the best service parts supplier is able
to focus its services and business
model on supporting the line items
that cause AMS programs the most
difficulty. Industry research has
identified storage and display as two
of the highest cost and highest failure
rate items impacting the AMS supply
chain for computing and technology
applications. It is important that
the selected distributor structures its
business model and services to best
support those line items that give the
AMS the greatest value in terms of
market intelligence, cost reduction,
quick response times, and redistribution of excess inventory.
www.RLmagazine.com

Identifying independent distributors

that have the necessary tools that give
the AMS supply chain visibility into
the global market will prove critical in
supply chain execution. An example
of such a tool is software that allows
customers to create pre-established
preferences of price, quantity, utilizing
both their internal and manufacturers
part numbers, which monitors global
supply and demand on a real time
basis. Such a database leverages
the liquidity of the global market by
aggregating LCD and storage supply
and demand globally by matching
past, present and future product supply
against customer defined metrics.
When a match occurs, the customer
is immediately alerted. Such tools
give AMS providers critical agility
by having the ability to monitor
global supply and demand on a real
time basis. This greater visibility
and control in supply, allows AMS
providers to make critical adjustments
to their supply chain, resulting in
reduced stock outs, improved response
times and a reduction in excess
inventory.
In addition to analytical tools and
global sourcing capabilities, the
supplier should have relationships
with component manufactures to
fulfill end-of-life part number demand.
As an example, for storage products
this may mean being an authorized
distributor of Seagate and Western
Digitals factory re-certified hard
drive programs. One of the major
markets for factory re-certified hard
drives is fulfillment of repair demand
for Enterprise, Desktop, Mobile
Computing, and Consumer Electronics
applications.
The last requirement of a best in class
distributor is mature quality systems
that are ISO 9001:2000 certified. As
well as a global logistics footprint and
the resources to fulfill value added
programs required in AMS fulfillment
such as testing, repair and firmware
updates, ensure that your suppliers
track critical metrics on a real time
basis, offering full documentation
of their quality procedures. A few
www.RLmagazine.com

examples of metrics to look for

include Customer Satisfaction, OnTime Delivery, Supplier Performance,
In-Bound Non-Conformance and
Sourcing Fill Rates.

RL Job Center

Todays business environment requires

a robust supply chain with flawless
end-to-end execution that contributes
to net revenue while delivering
a superior customer experience.
Selecting best in class suppliers with
the requisite database management
tools, strategic relationships, quality
programs encompassing test and
repair, global footprint and logistics
capabilities will allow AMS providers
to realize the full benefit of their
supply chain. RLM
As Vice President of
Business Development,
Stephen Buckler brings
a decade of industry
experience to Horizon
Technology. Along with
being responsible for
the advancement of the
company brand, Stephen
will align Horizons quadrant focus with its
strategic account development.

industry cant afford

If you are a job seeker or a hiring

manager looking to staff positions with
a Reverse Logistics focus, the Reverse
Logistics Association Job Center is the
place for you. Posting positions on the
site is a member* benefit. Let us help
you find the staff you seek posting
is quick and easy. Position posting is
generally approved and posted within 24
business hours. Check out the positions
currently posted at the RLA Job Center.
For more information, contact RLA at
[email protected].

to miss any RLTS

*Job posting is a benefit of

Professional Members and above.

In todays rapidly
growing marketplace,
anyone with an
interest in the
reverse logistics

event
- Jim Hunt,VP Business
Development, Jabil Global
Services
Reverse Logistics Magazine

Fall 2006 37

RLTS AMSTERDAM 2006 RECAP

RLTS AMSTERDAM 2006 RECAP

Presentations Included:

RLTS Amsterdam
Conference & Expo
Over 150 companies gathered in
Amsterdam in June for Europes
largest reverse logistics conference.
Reverse logistics professionals from
throughout Europe met to share
best practices and discuss the most
pressing reverse logistics challenges.
We ran out of standing room,
said Gailen Vick President of RLA.
Attendance increased by 50% over
2005. In addition, 2006 saw the
addition of a third track of sessions.

Philips returns management strategies

and reviewed their short term and long
term reverse logistics goals.
The afternoon keynote featured Jack
Allen, Director, Global Supply Chain
Processes, Scientific Atlanta. Jack
presented The Best Defense is a Good
Offense ... Reducing costs in Reverse
Logistics by creating better Forward
Logistics.

Companies participating included

Philips, IBM, Nokia, Cisco, HP,
DHL, Flextronics, Erasmus
University and Flanders Institute
of Logistics just to name a
few.

Running concurrently with the

sessions was the Expo where
attendees had the opportunity to meet
with Exhibitors such as Cycleon,
DHL, Spring and many more. There
was a lot of traffic in the exhibit
hall and we were able to connect
with the right people, said Jennifer
McLendon, Marketing Specialist at
Technology Conservation Group.
The first day ended with Round Table

Pre-conference workshops were

held on Monday as well as a
reception for exhibitors, sponsors
and speakers. On Tuesday the
conference began with a Welcome
Address by RLA
President and CEO, Gailen Vick,
and was followed by the keynote
address by Tony Sciarrotta, Director
of Returns Management at Philips
Consumer Electronics. Tony drew an
overflow crowd when he presented
Reverse Logistics: Understanding
the Business Impact of Returns: Who
Do We Serve? which highlighted

38

Fall 2006

colleagues
across the
Industry
are
tackling
the most
pressing
reverse
logistics
issues.
Jesse Sibarium,
Director, European Business
Development, Arvato Services.

Conference sessions and panel

discussions focused on industryspecific issues such as Returns and
Warranties, Reverse Logistics versus
Service Logistics, Managing WEEE
and Outsourcing Reverse Logistics.

Day two began with a keynote

address by Tim Postel, Service Parts
Operations Executive, EMEA at IBM.
Tim presented Moving Reverse
Logistics to the Forefront.
Additional conference sessions and
panel discussions followed with
the conference concluding with the
announcement of award recipients
including the Best Use of VIP
Program presented to Andre Olde
Hampsink of Cycleon and the much
anticipated Lucky Draw.

Andre Olde Hampsink, Sales

Director, Cycleon on RLTS
Amsterdam 2006

Make plans now to join us in Amsterdam for the 2007 RLTS Conference & Expo to be
held June 25-27. For more information about speaker opportunities or to exhibit, visit
www.RLTShows.com.

Timely discussions on a subject

matter that affects everyone. The event
allows you to have visibility into how

Reverse Logistics Magazine

Discussions hosted by the session

speakers where attendees got to
meet with the speakers and continue
discussing topics introduced during the
sessions.

Our vision is
turning costs
into value, which
is exactly what
participating at the
Reverse Logistics
Trade Show has
been. Very valuable
to meet our clients
and future clients at
this exciting event!

Reverse Logistics versus

Services Logistics
(M. van Duijnhoven)
Managing WEEE in a Business
to Business Context
(A. Dickinson)
Challenges Associated with
Outsourcing RL and Repair
for OEM Mobile Phone
Business (M. Bellwood)
Options in the RL
Transportation Model
Strategies (J. Tarantino)
Supply Chain Sustainability
and Integration of Forward
and Reverse Value Chains
(S. Zanone)
Effective Close Loop Supply
Chain Sustainability
(J. van Nunen)
Entitlements Managing
Costs on Returns and
Warranties
(B. de Sousa, T. Sciarrotta)
Turning Costs Into Value
with Innovative RL through
Optimizing Your Customer
Service and Marketing
(A. Olde Hampsink)
Returns and Loss Prevention
(P. Junger)
RL Trends in the Flanders
Region
(S.Verstrepen, K. Neyens)
Managing the Global
Impact of Electronic Waste
Legislation (L. Antal)

www.RLmagazine.com

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 39

facility visits

Hans and Gailen discuss a recent article in RL Magazine

Concluding the tour, Dick showed

Gailen around the shipping area.

RMA Service in the Heart of Europe

During the June 2006 trip to
Amsterdam, Gailen Vick, President
of Reverse Logistics Association,
had the opportunity to visit multievent participant and long-time RLA
supporter FRS. The company has
been operating for almost 25 years as
a leading provider of repair, logistic
and distribution facilities for the
ICT and Electronics industries. The
Almere facility is located not far from
Amsterdams Schiphol Airport and
situated in an area of Europe that is
key to efficiently carrying out its many
service activities.
Hosted by Hans Cohen Rodrigues,

CEO, and Dick van der Vuurst,

General Manager, Gailen was guided
through the Amsterdam facility and
was impressed by the process volume
of more than 10,000 items every
month.

Hans Cohen Rodrigues and

Dick van der Vuurst

Technician working on Plasma Screen

40 Fall 2006

Dick pointed out the sophisticated

tracking system FRS uses for RMA
handling and technical support. Upon
arrival at the receiving area, each
product is entered into the system and
is bar-coded for internal tracking and
tracing.

Reverse Logistics Magazine

Dick also led Gailen through the

various areas of the technical
department where customer products
are repaired.
First, they saw the Optical Repair line
where for more than 15 years products
such as CD, DVD and combination
drives have been repaired. Next,
Gailen was shown the station
where Point of Sales terminals are
refurbished and tested, followed by
the station where FRS repairs and
refurbishes laser printers and, finally,
the station that handles LCD and
Plasma Display repairs.

FRS handles over 10,000 items per

month
www.RLmagazine.com

FRS recognizes that reporting is a very

important part of the whole process
and Hans demonstrated how FRS
has set up a wide range of web-based
reporting options for its customer base.
Customers can track the progress of
their products and receive the current
status of repair processing.
Quick Facts about FRS:
Service provider targeting
OEMs, Computer Manufacturers,
Distributors and Field Service/
Depot Repair Centers.
Support includes assembly, repair,
distribution and logistic services.
Provides advance exchange (next
day delivery) throughout Europe.

Administers various forms of

warranty claims of end users,
dealers, service organisations and
computer manufacturers (RMAprocedures).
Experienced with end-of-life
support, including the transfer of
non-profitable repair lines.
Experienced in Assembly, Rework
and Engineering changes.
Repair/logistic services include,
but are not limited to, the
following products:
Notebooks, PCs
LCD TVs, Plasma Displays
HDD, Storage Products
Laser Beam Printers
Optical Drives
Modems
Communication Products
Electronic Boards

Worker repairing circuit board

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 41

What we learn from this illustration

is that the true value of aftermarket
services is growing well beyond
warranty repair.

The Evolving Model

in Electronics Reverse
Supply Chains

by Steve Manning

hink of aftermarket services or

reverse supply chain and you
probably think warranty repair. If
that is the case, you wouldnt be
completely wrong. But in the past 18
months, the industry has undergone a
quiet but profound transformation.
While warranty repair continues to
be a key area of focus in reducing
costs and improving the customer
experience, the trend toward providing
an end-to-end services supply chain
continues to evolve with the potential
to create even greater value for OEMs,
their channels, partners and end
customers. However, a drive toward
end-to-end services requires improved
efficiency throughout the entire reverse
supply chain to realize maximum
benefits.
Let me illustrate with an example.
For several years, a prominent PC
manufacturer had achieved significant
business benefits by outsourcing
warranty repair. The key factor that
drove the company toward outsourcing
was the rise in warranty costs as a
42

Fall 2006

percentage of cost of goods sold

(COGS), and its need to look for
ways to maintain or improve warranty
services while reducing costs.
By working with an electronics
manufacturing services (EMS) partner,
the company reduced warranty repair
costs significantly while maintaining
service level agreements and quality
metrics.
But as the OEM took a deeper look
into the entire services supply chain,
it found an opportunity to increase
efficiency, accomplish greater cost
reductions and improve customer
experience at lower costs through an
end-to-end approach.
As the firm evaluated its services
supply chain, it recognized that old
systems contained a lot of waste,
creating inefficiencies. These systems
were not viable when compared
with those in the companys peer
group. Additionally, costs were not
predictable and there was little room
for change. This led to inconsistent
customer experience and created
an additional drain on the IT
infrastructure.

Reverse Logistics Magazine

Today, the new model revolves around

aftermarket partnerships that cover
the entire supply chain, each partner
executing its own role in concert to
achieve a leaner, more flexible supply
chain.
In this model, the customer experience
is owned and delivered by the OEM
while the partner delivers whole unit
repair plus spare units and parts.
Commodity suppliers are linked
directly to the outsourcing partner
creating a unified relationship with the
OEM.
What are the results of such an
approach? Lets take a look at some
of the success metrics. One, by
collaborating together, the OEM and
its EMS partner dramatically reduced
inventory carrying costs and excess
and obsolete (E&O) levels. Hard drive
support inventory reduced by over
60%, with overall inventory going
from 60 days of supply to 14 days.
Second, reductions occurred while
maintaining best-in-class service level
order fill rates of at least 98%. Lastly,
no fault found on all commodities
reduced by 50%.
www.RLmagazine.com

Drivers of Change

Like many OEMs, speed and customer

expectations are rapidly changing the
aftermarket services industry. Today,
several market drivers are creating
opportunities to lean out the entire
services supply chain.
For one, product price erosion
continues to accelerate and
products are becoming more
complex. To stay ahead of
the competition, OEMs are
introducing new products at
ever-faster rates, adding more
products to the channel which
is creating greater service
challenges.
Meanwhile, growing global
environmental regulation is
forcing OEMs to look for ways
to turn costs associated with
disposing of products into
profit opportunities through
refurbishment, remarketing and
parts harvesting.
Of course there is the ongoing
challenge of protecting the
quality of all the products in the
channel new and old around
the world.
nd if that were not enough, end
customers are demanding greater
product reliability and uptime.
As a result of these market drivers,
there are several aftermarket services
trends to watch as the services supply
chain demands increased efficiency
through the optimization of the
extended services environment.

End-to-end services are replacing

siloed solutions, such as warranty
repair
Global outsource solutions are
emerging
Lean outsource approaches
require involvement from all
aspects of the same environment,
including retail service, parts
management, repair, asset
recovery and remarketing

www.RLmagazine.com

Today, the new

model revolves
around aftermarket
partnerships that
cover the entire
supply chain.
Aftermarket Services
Taking a Playbook from
EMS Sector

There are a lot of parallels between the

reverse supply chain today and where
the EMS sector was 15 years ago. In
the 1980s, competition for electronics
devices rose sharply. With the
increase in demand came an increase
in waste and inefficiencies within the
supply chain. By the early 1990s, as
competition among major electronics
firms increased, OEMs looked for
every opportunity to reduce costs by
enhancing efficiency through a lean
supply chain.
Over the past 15 years, EMS providers
have offered streamlined operations
and cost reductions achieved through
global scale, improved efficiencies
and productivity gains. Consultants
saw the problems within the forward
supply chain as a huge growth
opportunity to sell services, and
greatly increased customer supply
chain capabilities to address the
challenges facing the industry.
Technology and software firms also
introduced new products to automate
processes.
Similar patterns exist in aftermarket
services. At Solectron, we see
aftermarket services as the last mile
of the supply chain desperately in
need of greater efficiency. This has
been a key focus of ours for a long
time. Meanwhile, major consulting
firms have begun to invest heavily
in offering services to help OEMs
revamp the reverse supply chain, much
like they have in the forward supply
chain. Additionally, more tools are
being developed to address automation
of reverse supply chain challenges

from the factory floor out to the

enterprise.
What this suggests is that the
reverse supply chain has tremendous
opportunities to reduce waste and
variability within the extended
environment of partners. It means
the aftermarket must adapt to everchanging customer, business and
competitive needs through a leaner
environment.

Extending the Outsourcing

Model

To win in todays hyper-competitive

global landscape, its not enough to be
fast. Its not enough to be innovative.
Its not enough to be better.
For an OEM to have a successful
services supply chain, it will need
to pursue an end-to-end service
outsourcing model, work across the
company to reduce waste, leverage
best-in-class capabilities, never
lose focus on improving customer
satisfaction, and ruthlessly simplify.
Remember, the extended reverse
supply chain environment is always
changing. As it evolves, so must the
members within the environment
to maintain balance. Success will
be predicated on driving improved
customer value by leaning out the
entire services supply chain, focusing
on a complete end-to-end services
strategy and having the right partners
in place to execute results. RLM
Steve Manning joined
Solectron in 1999, with
extensive finance, sales
and executive management
experience. Manning is
senior vice president of
strategy, marketing and
business development
for Solectron Global
Services. Manning is responsible for overall
business management and development of the
companys global services accounts.
Solectron Corporation (www.solectron.com)
provides a full range of electronics
manufacturing and supply chain management
services to the worlds leading networking,
telecommunications, computing, consumer,
automotive, industrial and medical device
firms.

Reverse Logistics Magazine

Fall 2006 43

When the Time Comes to Sell

by James Goldstein

hen a business wants to sell,

the largest influence on the
price achieved is the fundamental
economic law of supply & demand.
Generally, people do not buy a
business for what it is; they will buy
for what the business does for them
- earn them enough money to repay
their investment, provide them with
a lifestyle, and build for the future.

Work-out periods are common, and

need to be valued and planned. So any
action that can be taken in advance to
help the process go smoothly, retain
customers, and support the key skills
within the organization, needs to be
put in place at the earliest opportunity.
In the global economy of the 21st
century, businesses need to consider
not only investors from the USA, but
also from overseas, particularly in

value, and demonstrate confidence and

efficiency in systems and processes.
Two such standards are ISO9001
(quality) and ISO14001 (environment).
When a company holds ISO 9001,
it is telling its customers, prospects
and suppliers worldwide that it has a
logical and documented management
system. Good quality systems improve
efficiency and open up market
opportunities.

with action stages, can increase the

valuation. However, many businesses
feel that conforming to these standards
is time consuming and costly, and
therefore are reluctant to proceed.
Using a supplier who will simplify the
process, by providing a fixed fee, fixed
timescale, integrated solution, with
qualified assessors who have specialist
industry experience, can really save
a lot of headaches, notes IMSM
Business Manager, James Goldstein.
When a business goes through the
process of becoming ISO9001:2000
Certified, it takes an objective look
at its systems and processes, then
streamlines and documents them.
The manuals add value to both the
company and the staff, which will
better understand how the organization
works. Certification is an added bonus,
helping a company to work with more
valuable customers, and get onto many
preferred supplier lists.

ISO 14001 looks at current practices

in an Environmental Audit, and
then helps the company develop an
Environmental Policy and action plan.
Simple elements include using natural
light to reduce the need for artificial
light, recycling or reducing the usage
of photocopier paper, and reviewing
packaging requirements.
The environment has no borders,
so we all need to show that we are
acting responsibly for the future of
the planet. he continues. We are
seeing increasing pressure as national
legislation is tightened. For example,
minimum recycling targets for all
types of waste are being raised, and
the recovery target for packaging
waste is also under review. It is just
this combination of environmental
expertise, ISO knowledge and both US
and overseas experience that can really
deliver total environmental control and
compliance for smaller companies.
Ultimately, any business is only

worth what you can get for it, at

the time you sell it. A mathematical
calculation of value is simply an
indication of potential worth, used
during the negotiation process. By
careful planning, and implementing
internationally recognized standards,
a company can attract more
buyers, locally, domestically and
internationally. Holding ISO standards
gives both buyers and sellers increased
confidence, while customers can
be assured of a continuation of the
relationship, with business as usual.
Author James Goldstein, PhD, IMSM
Business Manager. RLM
James is a resident New
Yorker managing a team
in the metropolitan New
York area for IMSM,
for IMSM, the quality
systems specialists. He
focuses on medium-sized
businesses that supply
major corporations helping them acquire
ISO standards for Quality, Environment,
Occupational Health and Safety and IT

Management systems add value by attracting new clients and

improving efficiency. International standards show customers
and suppliers that a business works to logical and documented
systems, which can fit with their own.

EBITDA (Earnings Before Interest,

Taxes, Depreciation and Amortization)
is an accountancy term that represents
the sustainable cash profits of the
business, assuming nil borrowing
costs.

Europe, the Far East, and the Indian

sub-continent. Many expanding
corporations are looking for a foothold
in the USA, as well as acquiring
US management and marketing
knowledge.

The decision to sell is always

complex: timing is essential; there
may be family or succession factors
to consider, while emotional ties can
prompt an over-valuation. For many
employers, there is a strong feeling
of loyalty to staff, and a desire to
see them help the new owner, and
work together for a rewarding future.

Being able to demonstrate financial

strength, working with a skilled and
experienced team, identified Unique
Selling Points (USPs), and holding a
sound customer base are all recognized
critical success factors. Conforming
to recognized international standards,
such as ISO (International Standards
Organization) can add significant

44

Fall 2006

Reverse Logistics Magazine

ISO 14001 is an international

standard that recognizes the actions of
responsible businesses in management
and control of their environment. ISO
14001 leads to lower distribution costs,
reduced waste, and identifies savings
in energy and materials.
Achieving ISO standards adds
value by differentiating from the
competition, improving efficiency
and attracting new clients. A set of
manuals, detailing the process from
beginning to end, and a carefully
thought out environmental policy,
www.RLmagazine.com

IMSM helps businesses around the world achieve these

international standards:

QUALITY ISO 9001

ENVIRONMENTAL ISO 14001
HEALTH AND SAFETY OHSAS 18001
INFORMATION SECURITY ISO 27001

IMSM offers:

A fixed fee- no hidden extras

Qualified auditors
Smooth integration of own systems Fast track- within 90 days
Streamlined processes
Potential 15-20% savings
Practical help with documentation and manuals
Documented procedures for consistent training

With more than 10 years experience, and some 5500 satisfied customers
on 5 continents, IMSM works with both manufacturing and service sectors.

Call Richard Beacham now to find out more:

USA: 646 246 7388
Email: [email protected]
www.imsm.com

www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 45

Want to connect with companies looking for the

exact services you provide?

Returning thoughts

Some parting thoughts on Reverse Logistics:

I have gathered a number of interesting

Reverse Logistics facts and figures
100 million cell phones are retired
each year in the U.S. Currently, only
a small percentage of those phones
are refurbished or recycled. Around
the world, more than 1.7 billion
people use mobile phones as their
primary means of communication
and every second of every day
about 23 new mobile handsets roll off
the worlds assembly lines.

$60 Billion annually is the value

of Retail returns in the USA
representing about 4 to 6% of all
Retail purchases.
$43 billion or 4.5 percent of the $950
billion that US companies spend
annually on logistics is related to
returns.
Once around the world is the length
of train required to hold the 20 -50
million tons of electronic product ewaste discarded globally every year.
$4.5 million is the savings generated
in the first year of a returns
eligibility program initiated by
Philips Consumer Electronics after
estimating that between 5 and 10 %
of their returns were unauthorized
or ineligible before they left the
retailers facility.
80% to 90% is the recovery rate
on returned items by companies

doing really well. Average companies

realize rates around 60% and for
companies doing poorly, 40% is the
norm.
40% savings in processing costs
can be expected by companies who
document their returns processes.
35% of product returns are
unplanned by the manufacturers,
wholesalers or retailers receiving
them.
30 to 70 days is the time it takes for
an average company to get a returned
product back into the market.
4 6 weeks is the time it will take to
get a replacement laptop battery from
a manufacturer recall.

Many happy Returns

Paul Rupnow

Advertiser Index
AER Worldwide
Aviation Week
Beacon Management Inc.
Consumer Electronics Supply Chain
Craters and Freighters
Depot America
E-Scrap
GENCO
Image Microsystems
International Management Systems
Jabil
Pelican
Spring Global Mail
Sun Microsystems
Teleplan
TIC Group
UPS Stores
46

Fall 2006

www.aerworldwide.com
21
www.aviationweek.com/forums
2
www.beaconmanagementinc.com
22
www.CESupplyChain.com
40
www.cratersandfreighters.com
17
www.depot-america.com
27
www.e-scrapnews.com
35
www.genco.com
20
www.imagemicro.com
44
www.imsm.com
44
www.jabil.com
15
www.PelicanOEM.com/rlo
29
www.springglobalmail.com/returns
13
www.sun.com/ecoresponsibility
3
www.teleplan.com
Back Cover
www.rlo.com.au/hm_home-fl.htm
30
www.theupsstore.com/efficiency
6

Reverse Logistics Magazine

www.RLmagazine.com

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www.RLmagazine.com

Reverse Logistics Magazine

Fall 2006 47

Excellence in Service

Your strategic after sales

service provider
specializing in:
Networking
Mobile
Storage
Videocom/Set Top Boxes
Gaming/Imaging
PC/Notebook
Displays/Printers

Teleplan offers flexible,

customized, reverse
logistics solutions:
Depot Repair
Failure Analysis
Refurbishment
Order Fulfillment
Warranty Management
Program Management
Custom Engineering

Teleplan has a strong global presence with principal sites in

North America, Europe, and Asia Pacific.

www.Teleplan.com

48

Fall 2006

Reverse Logistics Magazine

www.RLmagazine.com