Reverse Lifecycle Management: The Next Opportunity In Field Service
By Michael Blumberg, president, Blumberg Advisory Group, www.blumberg-advisor.com
A better option has emerged for companies using disparate systems to manage reverse logistics.
Many field service companies that manage reverse logistics processes have had to deal with a myriad of fragmented, disjointed systems, leading to a series of issues and challenges. The fragmented nature of reverse logistics supply chains creates five unique and interdependent problems for field service companies:
- Lack of visibility of the volume, location, and disposition of inventory at various points within the reverse supply chain
- Inability to meet customer expectations and contractual obligations because of the lack of reliable and relevant data
- Limitations with respect to maximizing asset utilization and resources (e.g., labor, parts, etc.)
- Challenges with respect to benchmarking, optimizing, and improving operational performance
- Unavailability of knowledge about opportunities to generate income when a customer returns a unit (collections, upgrade, add on, extended warranty)
These shortcomings have severe, negative consequences on financial performance and customer satisfaction, resulting in lost revenue opportunities, increased operating costs, penalties stemming from compliance issues, and lower profit margins.
As the industry continues to seek an enterprise solution to these challenges, the concept of a Reverse Lifecycle Management (RLM) system has emerged. The ideal RLM enables end-to-end integration of business functions and processes related to reverse logistics (e.g., returns management, repair, warranty entitlement, warehouse management) as well as interfaces to other back-end systems such as CRM, supply chain planning systems, and financial systems. A true definition of RLM is that it provides for real-time visibility, tracking, and control of labor, material, and data throughout the reverse logistics pipeline. In turn, these features ensure better utilization of assets and resources that are necessary for optimizing both financial and operational performance.
Our research validates the fact that reverse logistics organizations are handicapped by the necessity of dealing with a fragmented and disjointed systems environment to obtain key feature functionality necessary for managing their businesses. This can be better understood by examining the reverse logistics process flows involved in supporting any type of mission-critical equipment. Multiple functions and touch points may be involved including warranty entitlement, parts shipment, field service dispatch, RMA (return material authorization), parts return, depot repair, and inventory replenishment.
It would not be uncommon for a company to use four or five different enterprise systems to manage the distinct functions involved in a spare parts transaction. It is easy to see why end-to-end functionality is important in managing a reverse logistics operation. Basically, it helps companies answer key questions about the status of events and activities within their operations such as: How much spare parts inventory do we have on hand? When will inventory in the supply chain be likely to be returned? In what time frame will it be returned? Where is the inventory? What is the disposition of the inventory? In turn, the answers to these questions provide the business intelligence necessary to plan and forecast resources and assets.
By implementing a state-of-the-art RLM solution, organizations can realize many benefits, including: cost reduction through better utilization and planning of assets and resources; protected revenue and income recognized when companies better understand how much revenue and income associated with spare parts is at risk; liability protection, as many companies in diverse industries are susceptible and exposed to legal and regulatory action because of environmental and governmental regulations; resource optimization by reducing inventory, transportation assets, and employee allocation; productivity and efficiency gains, by eliminating poor processes that take too much time, resulting in wasted money; improved customer satisfaction, through the implementation of selfmonitoring reverse logistics processes and systems; and refined business practices, such as issuing proper credit for returns, fast turnaround on sending products back to customers, balanced books, and issuing replacements.
RLM systems provide the ideal platform for achieving this strategic orientation and overcoming critical systemic challenges facing many organizations, whilst producing many measurable benefits that have direct impact on bottom line profitability and customer satisfaction. Given the enormous potential for cost savings, risk protection, and revenue gains, companies should seriously consider building a business case and ROI justification for investment in an RLM solution.