How This One Reverse Logistics Process Makes Inventory Management Easier
As every driver knows, it’s far easier to operate a car in drive than in reverse. Therefore, it’s easy to understand why going in reverse is a primary challenge for service supply chain managers. New product moves through the supply chain in a predictable, orderly manner. In the reverse supply chain, however, returned units come back in a variety of packages and conditions, and from many different locations.
Somebody has to sort through the mess and bring order to the chaos. As always, the goal is to get products back into the field as quickly as possible at the lowest cost. Every high-tech manufacturer struggles with this, and many companies use a test-and-screen process to lower costs, streamline inventory management, and increase customer satisfaction.
Challenges of Service Inventory Management
Reverse logistics in a B2B relationship is more complicated than simply managing consumer returns. Manufacturers have to meet requirements and key performance indicators specified by their service level agreements (SLAs). Failure can carry financial penalties as well as the loss of customer trust and future business.
That puts service managers in a bind. Do they carry a lot of safety stock “just in case” or run a tight “just-in-time” operation that risks shortages and service delays? There are a number of important variables to consider:
- Visibility: Without reliable data on product failures and No Trouble Found (NTF) returns, it’s difficult to know when to replenish certain products.
- Demand: Customer demand changes constantly and SLA requirements may dictate repair/replacement within days or hours.
- Supply chain disruptions: Natural disasters, political upheavals, regulatory changes, and trade wars can all disrupt global supply chains, raise costs, and create shortages.
Of course, the easiest way to control inventory costs is to keep less inventory on hand. If your test-and-screen results reliably predict that 25% of returned units are NTF and don’t need repair, you can stock less inventory and get products back into the field sooner.
Testing and Screening is Key to Efficient Inventory Management
Test and screen is a simple two-step process:
- Screening: A technician physically inspects a unit for damage.
- Testing: A technician runs diagnostic tests to see what, if anything, is wrong with the unit.
The worst-case scenario for any service manager is having to replace a lot of returned units with new product – maybe even paying a premium for expedited air freight to meet SLA requirements.
Testing and screening can help you avoid that when it’s implemented early in the returns cycle. NTF units can go straight back into usable inventory or immediately back into the field. For example, global manufacturers who don’t have in-country or in-region distribution/service centers risk having to spend more in transportation costs to send products halfway around the world. Consider too, the time cost of having valuable units out of service for months if ocean shipping is used.
Testing and screening in-region results in two main cost savings and inventory management benefits:
- Purchase less inventory: If you identify the parts/units that return NTF, you can more accurately predict inventory needs and avoid shortages.
- Carry less inventory: This reduces holding costs and inventory management expenses associated with warehousing, shipping, and direct labor.
NTF Testing and Screening is an Inventory Management Win
Depending on the industry, NTF return percentages range from 10% to 75%! That is a tremendous opportunity for improved inventory management and cost control. Leverage efficient testing and screening to reduce downtime and control both inventory and transportation expenses.
Again, the primary goals are to:
- Troubleshoot on-site before returning units. Develop simple tests and troubleshooting guidelines for an on-site evaluation. There’s no need for a working unit to even enter the reverse supply chain.
- Collect and analyze failure data. Every piece of data is important to the engineers responsible for product improvement and serviceability. Testing and screening provides valuable data that is key to problem-solving and design improvements.
- Screen units as close as possible to end-users. If you can’t test and screen on-site, the next best thing is in-region. The benefits are clear and tangible. This lowers the total cost of ownership by reducing transportation and inventory carrying costs. It also improves the turnaround time that is so critical to SLA adherence.
Help with Inventory Management and More
For most small- to medium-size companies, global expansion and in-country testing and screening shouldn’t be a “go it alone” proposition. Why assume the legal and financial risks associated with inventory, transportation, service, and trade compliance when there are experienced reverse logistics partners available to help?
Flash Global is where you are and where you want to go.
We have operations in more than 130 countries. Our logistics specialists can support your unique requirements with in-region test and screen facilities, distribution centers, and forward stocking locations. Also, we can help you navigate the global trade compliance environment that is rife with constantly changing rules and regulations, trade agreements and tariff threat. We have the expertise, technology and local connections in the country where we operate on your behalf to help ensure adherence to all import/export laws and regulations.
Contact us today to learn more about how we can help you streamline your reverse supply chain and improve inventory management.
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