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2014

In a previous article we introduced reverse logistics through definitions and questioned its usefulness in business transactions.  Today I would like to introduce four reverse logistics issues and show how all four can be solved though the use of system software.

 

Reverse logistics is a poorly understood field in the overall supply chain.  Perhaps, this is because it is a relatively new discipline.  But one that needs a quick learning curve. Many of the leading issues can be solved through the use of technology.  These problems include the following:

 

Tracking value

Tracking of warranty and routing status

Handling of dealers and contractors

Driving efficiency in repair process


Tracking value: In normal logistics, that is a finished product shipped to customer, cost is a simple number. What happens when a technician is sent to replace an item at a customer site and he swaps out a good product for a bad one?  If the technician sends back the defective item for repair what is the value?  It is not worth the original full price nor is it worth zero as the company might be able to change a component and move it to the parts supply inventory.  The software that handles reverse logistics must be able to all this into account and track the unit based upon the new cost.   

 

Tracking warranty & routing status:  Sometimes an item may be under warranty from your supplier.  In some cases these warranties can be shorter or longer than the warranty that you offer the customer. The reverse logistics software can track these secondary warranties back to the third party and produce claims for the service provided.  A company with a robust system can claim millions in warranty reimbursements from their supplier that previously would have been lost.

 

Dealers & Contractors: The concept of reverse logistics becomes even cloudier when there are third parties involved such as contractors, subcontractors and distributors involved.  If the distributor purchases a sub-assembly they might turn it into their own product or sell it directly to the customer.   In taking this course of action they might send back boxes of these repairable components to the manufacturer. Sound reverse logistics software will take into account the quality of the business relationship – rules can be set up to send replacement parts upon notification of parts return through a return material authorization.  When the replacement parts are sent the system needs to be able to track the returning parts.  Keeping track of reverse logistics between trading partners on a manual basis is an unworkable task.  The ability to track these transactions has a direct bearing on the financial well being of company.

 

Driving efficiency in repair process:  A short video can be provided to the engineer. Through visuals a company can demonstrate how a component is built, disassembled, and perform preventative maintenance.   Thus, we can employ someone not as skilled on the product, and through the use of visualization tools, can actually work on the item. 

 

Business requirements for reverse logistics are multifaceted.   Additionally, can change as relationships with customers, contractors and distributors change over time.   A vigorous software system should solve challenges stemming from quality information, tracking and monitoring repairs and repairs of sub assemblies.  With the right software all of these issues can be overcome to allow the company to concentrate on profitability. 

As John Lennon said: IMAGINE!! 


Imagine political unrest erupts in some region, threatening more than half of the world’s production of medical instruments.


Imagine a typhoon hits Southeast Asia and hospitals are unable to receive latex gloves required for surgery.


Imagine a pandemic causes a demand spike for medical and health care products, thus a global shortage occurs.


The world’s supply chain is the basis of our global economy, security and health, and the risks thereof are numerous. The five “P”’s - powerful weather, pandemic, political instability, port closures and primary sourcing – can easily cause massive disruption for millions. Take Hurricane Sandy, which destroyed shoreline of New York and New Jersey two years ago. Sandy’s effects were greater than society was prepared for – hospitals were shuttered due to power outages and gas lines (I’m sure some of us were reminded of 1979) prevailed as tankers couldn’t deliver fuel to the ports.


Narrow regional sourcing also sets us at risk. More than half of the world’s production of medical and dental hand instruments is processed in South Asia and 90% of exam and surgical gloves are manufactured in Southeast Asia.


Health shocks present another clear case of risk. Since influenza vaccine production is in the hands of a few multinational companies it is safe to say that there would be an insufficient amount of vaccine during a pandemic.  In addition, the increasing resistance to antibiotics will make pandemics more of a likely occurrence than ever before.


What can and should we do? Well, no one can predict the how or when, but a plan should be in place for the disruption that will come.  We speak to supply chain resilience, well that must become a reality. Secondly, sound business methods, including investments, a robust global network to ensure flexibility, analysis of past disruptions to reinforce contingency planning and detailed disaster preparedness.


Many believe the e only effective solution is private-private partnerships – during the SARS epidemic Henry Schein received a pressing call from the government of Hong Kong for masks.  The ability to deliver on this demand reflects well on the close relationships with transportation partners, government officials and suppliers.


The same type of partnerships must be present when natural disasters strike.  Referring back to Henry Schein, who has developed the model of collaborative public-private partnerships; all companies should have or be developing such as plan. When the next disaster takes place do we want to be starting from scratch?  Henry Schein has set aside part of their warehouses with pallets earmarked for emergency medical supplies.

No one sector of the supply chain can face these challenges by themselves.  Collaborative partnerships, proactive planning, open communications and effective coordination are the solutions.  It is not a matter of if, or when, but if we remain passive, it will be how bad...