Top 3 Tests Facing CFOs with Reverse Logistics
A CFO’s world is all about balancing cost with what the company needs to grow the bottom line. On bad days, improving operational efficiency while controlling costs associated with reverse logistics seems like an impossible job, one that’s heaped on an already large pile of responsibilities. The following three tasks are some of the most crucial. How you respond to them can make all the difference for your company’s long-term growth, its customers, and reputation.
1. Controlling TCO
Defining total cost of ownership (TCO) is a challenge, particularly in the reverse supply chain. TCO calculations have to include the entire product lifecycle: R&D, sales, manufacturing, service/repair, and end-of-life management.
Important considerations include:
- Freight costs: Airfreight costs can be as much as 10 times higher than ocean shipments, but sea voyages keep units out of service for months. In countries where infrastructure is inadequate, you may look into in-region test and screen options.
- Inventory levels: Inventory is a huge cost driver in both manufacturing and service costs. You have to determine the right mix and quantity of parts required to support expected needs, handle a crisis, and keep downtime to a minimum.
- Duties, taxes, and paperwork: Just one paperwork mistake can delay a shipment in customs by days or even weeks. Improper product classification could mean higher duties and tariffs. Failure to follow import/export control laws could lead to substantial fines or even jail time. Make sure your trade compliance team is experienced and up-to-date on the latest rules and regulations governing international trade.
- Service and repair costs: Forget neatly packaged pallets. The service department has to deal with an ungainly assortment of units in various states of disrepair and disorganization.
- Hidden costs: Overseas expansion incurs many hidden costs that often aren’t factored into TCO in the beginning. These expenses include things like travel, training employees in the languages and customs of the new market, relocation, and finding experienced people to staff a new trade compliance department.
Solid, accurate data and sound planning make it possible to reduce TCO by addressing the hidden costs and uncertainties unique to the reverse logistics supply chain. When carefully executed, your service supply chain can be a source of positive ROI instead of a drag on profits, but many complex pieces have to come together for that to happen.
2. Managing Growth
When you hear the words “explosive growth,” they sound positive at first. However, consider that an “explosion” is a rather violent occurrence where something (your company?) may fly into pieces or break up violently. Up to two-thirds of the fastest-growing companies are likely to fail, partly because they grow too fast and can’t adapt.
In order to reap the rewards of growth, finance officers must work with cross-functional departments to devise processes that meet the challenges while controlling costs associated with expansion, particularly on the international stage. Questions to ask your company:
- Supply chain management: Can your inventory and logistics systems support end-to-end service supply chain visibility and monitoring? You need dynamic information to respond quickly to a crisis.
- Inventory control: How will you balance the needs for “safety stock” in remote locations with the financial need to control inventory carrying costs?
- Customer service and support: How will you provide 24/7 support across time zones and in multiple languages?
- Managing remote operations: Suppose a large customer’s SLA requires 24-hour service and support. Can your company afford to operate in-country – or in-region – service depots to fulfill those obligations?
- Regulatory compliance: Does your staff understand the rules and regulations? Do they stay up-to-date on the latest news about Brexit, Chinese tariffs, and trade agreements and understand how they might affect your company?
3. Anticipating Risk in Reverse Logistics
Practically every news cycle brings word of new trade tensions, tariff threats, and political squabbles, so risk management is more important than ever. Yet, about half of companies don’t have a chief risk officer (CRO). Someone has to think about it though because risk management is a crucial part of managing reverse logistics in a global service supply chain where every disruption carries a price tag.
Here are just a few of the many situations that can increase a company’s TCO, disrupt production and deliveries, and damage a company’s reputation:
- Labor & political strife
- Natural disasters
- Protectionist tariffs and trade wars
- Cyberattacks and data breaches
- Regulatory changes and compliance
As someone charged with managing the company’s finances, CFOs and financial managers understand the critical need to anticipate risk and make contingency plans, especially if the company doesn’t have a CRO.
Flash Global Can Help You Save Money and Make Money
If a spare part isn’t available when your customers need it, they don’t care why; they just want a replacement pronto. Ideally, you have systems in place to anticipate issues and proactively solve problems before you receive complaints. Flash Global can help streamline your reverse logistics program.
Our dynamic software, FlashTrac, paired with our warehouse and distribution model, can help your company meet or exceed your KPI targets in shipping and receiving accuracy, on-time performance metrics, inventory accuracy, and dock-to-stock on-time performance. All these achievements can save your company money, help satisfy customers, and protect your brand.
Look at what FlashTrac can do for you:
- Provide end-to-end visibility into your global parts inventory. You’ll know where each part and assembly is at any time.
- Allow you to place and fulfill orders based on stock and availability by location.
- Help you reduce inventory costs and manage product flow.
- Facilitate accurate trade compliance documentation completion, delivery, and storage to comply with ever-changing regulatory requirements.
Flash Global has the experienced personnel and infrastructure to help your company manage growth and expansion. We offer:
- Scalable operations and resources when you’re expanding into new markets.
- Rapid support in more than 130 countries.
- Country-specific regulatory and trade compliance guidance.
We can help you better support your customers and save money. It’s win-win scenario. Contact us today to learn more.
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