Reverse Logistics

By Martin Murray,

At a company that does not operate reverse logistics any item that has been returned from a customer may be received into the warehouse and stored until it is examined by the quality department or scrapped, this could be hours days or months. Not only does this scenario use precious warehouse space, but it fails to address the potential benefits of repairing items for customers or refurbishing returns for potential resale. Both of these options can turn the loss due to the cost of disposal into a profit for your company as well as improving customer satisfaction.

The value added processes that are performed on customer returns, as well as the whole returns process, have been described by the term “Reverse Logistics”. This process covers the method by which items are returned from the customer and the processing of the returns by servicing and returning to the customer, putting the material back into stock or refurbishing the items for resale. The returns process has now become an important part of the processing that takes place in the warehouse.

Helping The Customer

When a customer receives an item from your company that are unhappy with and then has to return the item, their satisfaction with your company would have decreased. If your company then has a poor returns process whereby there are hurdles in retuning the item such as paying for shipping, or restrictive freight carriers, delays in issuing a refund, etc., your could lose the customer’s business in the future.

The first step of a best practice implementing a reverse logistics solution, would be to supply the customer with a return label, when the item is shipped, that includes the customer’s order number in barcode form so that you can inform the customer as to when the item is received in the warehouse. The receipt could also trigger a replacement or credit memo to be processed. Communication is crucial in keeping the customer happy.

Warehouse Operations

Customer returns can arrive at the warehouse without prior knowledge or authorization. This can cause capacity issues with warehouse resources as warehouse managers try to plan their resources based on the inbound and outbound deliveries in the system. When returns arrive they can take a long time to process as information has to be found about the item and this wastes resources. By having a package with a barcoded label, the warehouse does not have to spend any time investigating the details on the return. The item can then be placed in a location specifically for returns processing.

Refund, Restock, Refurbish

When the returned item is inspected, the quality department can determine whether the item is suitable for a customer refund. By inspecting the item the quality inspector can identify whether the item is covered by the returns policy, if not then a refund should not be processed. Many companies automatically refund the customer despite a different item being returned. If the quality department inspect the item and find it to be sub-standard, then a replacement or refund can be issued to the customer. However, if the quality department finds that the item can be repaired and resold this can create revenue for the company. Items should not be scrapped just because they are returned. Many items are returned because the packaging is damaged and these items can be repackaged and placed back into stock. Cosmetic imperfection on an item may not be able to be corrected, but the item still could be sold as a second and generate revenue. 

Recycling

A facet of the reverse logistics process is that companies should offer end of life recycling for items they sell. When a customer purchases an appliance such as a washing machine and it reaches the end of its service life, the customer will often not know how to deal with that item. Your company should review how it deals with this type of situation. Many items that are sold contain toxic components, such as heavy metals and as consumers become more environmentally knowledgeable. They are more concerned about the effects of dumping items on landfills and companies are beginning to offer a recycling program where consumers can send items back when their service life has ended. A benefit of this for your company is that the recycling of items can lead to a small revenue stream, especially in recycling certain metals. Although this may not be a major source of revenue it may offset the cost of disposing of toxic items, and the customer goodwill would be significant. 

Source: http://logistics.about.com/od/greensupplychain/a/revese_logistics.htm

Supply Chain Perspectives

The Intellectual Risk of Complexity

By Robert A. Malone, 

As multiple sourcing strategies continue their inexorable march across the world, the resultant supply chain complexity makes it more difficult for companies to protect their intellectual property rights.

The rules of business in a global world are thorny and often intractable. As supply chains grow more complex and outsourcing gains favor, long-range risks become harder to judge, or even understand. One consequence of a complex global supply chain is a subtle shift in the nature of intellectual property and how it factors into supply chain risk management.
What is intellectual property and why should we worry about it? Some see it as a way large organizations repress small organizations. Others see it as a monopoly of rights. Those in a more restrained frame of mind perceive it as a collection of existing laws, rules, and regulations that includes patents, trademarks, designs, and copyrights.

Breaching any one of these rights can lead an organization or individual to take aggressive action against another, making one believe that intellectual property was invented by lawyers. It is assumed that a company wants to protect its intellectual property as it might be, in fact, all that a company actually has.

How can outsourcing affect intellectual property? Let's look at Boeing and its suppliers as an example. Boeing's 787 Dreamliner project, which has been called the "UN of sourcing," seemed like a good idea when it started as aircraft development designation 7E7 in January 2005. As the aircraft was designed and contracts were inked, parts and sub-assemblies were sourced from here, there, and everywhere. The so far ill-fated 787 is two years behind schedule, and counting.

The Dreamliner's tails are being made in China, its ailerons are from Australia, and horizontal stabilizers come from Italy. Japan supplies the fuselages and wings, Canada the fairings, and passenger doors are manufactured in France. Sweden is creating the cargo doors, General Electric and Rolls Royce are building engines, and to keep it simple, floor beams are sourced from India. The nose sections are being made in Wichita, Kansas. Final assembly takes place in Everett, Wash.

When big and small parts are delivered from thousands of miles away and come from different cultures, mind sets, and political persuasions, fixing supply chain glitches is not easy. Nor is maintaining control over intellectual property and competitive intelligence.
When does knowing how to design and build a 787 tail become knowing how to design and build a plane? In order to manufacture the tail, Chinese suppliers have to know a few things about the plane in general and what the tail connects to in detail.

Boeing CEO Jim McNerney is hot on China as a supplier, and he is considering designing and building the next plane there. Such a decision would simplify the logistics process, but would also open up an intellectual property can of worms. Litigation may be a legitimate recourse in the United States, but it is assuredly more difficult elsewhere.

Here's the rub. Supply chains are complex. Why make what is complex more complex?
Boeing is learning this lesson the hard way with the long-awaited debut of its Nightmareliner. There are economical justifications for outsourcing complexity, just as there are competitive reasons for keeping suppliers and business intelligence close to the vest. Global companies have to factor in intellectual property risk as part of the total landed cost of orchestrating offshore supply chains. For many, that's an entirely new can of worms.

Source: http://www.inboundlogistics.com/articles/scperspectives/scperspectives1109.shtml

Measures Of Warehouse Productivity

By Martin Murray,

Warehouse productivity is a number of measurements that management will analyze to monitor the performance of their warehouse operations. The basis of many of the measures used in warehouse productivity is based on how much it costs to perform an operation. The study of labor productivity started with the analysis of repetitive operations in a manufacturing environment. Time and motion studies were performed by industrial engineers, who would observe how long line operators took to do certain operations and would then mathematically calculate standard times for operations. The warehouse operations are unlike production as they are not repetitive, but a number of measures have been devised to help measure warehouse productivity.

Benefits Of Labor Measurement

The warehouse operation is not the same as a production line and warehouse staff do not perform the same repetitive tasks each shift. However, they do perform a number of similar tasks over a period of time. To measure the warehouse productivity, the management must apply standard measurements that can be used for operations that occur in the warehouse, for example, perform physical inventory or placing goods in picking area. However in the warehouse there are any numbers of factors that can change the time taken to perform a task. The use of enterprise resource planning (ERP) systems can easily calculate the length of time an operation can take to perform, but a standard measurement must be calculated using a sampling method or time study. Only after the standard measurements are agreed upon can the benefits of any labor measurement can be enjoyed.

The major benefit for warehouse management that is the standards can help when any changes are to be made to warehouse layout changes, loading or shipping dock changes and staff reduction. The standard labor measurement combined with the number of operations performed in the warehouse on any shift or series of shifts can result in an accurate picture of the performance of the warehouse.

Issues With Labor Measurement

There are a number of issues with the use of labor measurement that can bring into question the validity of any analysis of warehouse performance. The standards for labor measurement can change over a period of time. Technological changes, including the warehouse software and hardware, can change standards and therefore the analysis becomes void. The type, size and variety of materials moved in the warehouse may change over time, which could increase or decrease standard measurements. In addition changes to the warehouse layout or process changes could drastically change the standard measurements. It is important to remember that standard labor measurement does fluctuate and if warehouse decisions are based on these measurements, they should be as current as possible and based on the current warehouse operations.

Pre-Engineered Standards

The pre-engineered standards take a normal warehouse operation and reduce it to a number of smaller elements which when combined together make up the complete operation. The elements include all the actual operation components, plus travel, rest, etc., based on the average warehouse operator. The time values that make up an operation are based on methods time measurements which reduce all motion operations down to a time measurement unit (TMU). A single TMU is equivalent to 0.00001 hour. These TMU’s have been developed in since the 1940’s for each movement an operator would make. The Department of Defense (DoD) published a handbook back in 1967 that described the basics for TMU’s called Materials Handling Standard Time Data. It is possible to use the TMU’s to calculate the length of time required for any operation.

Summary

In measuring warehouse productivity the warehouse management does have a number of options to calculate the performance based on sampling, standard operations or time studies. Although all these options have benefits and issues, the measurement should be taken as a guide and performance measured against that guide. In this way the performance of the warehouse can be fairly judged. 

Source: http://www.inboundlogistics.com/articles/scperspectives/scperspectives1109.shtml

Logistics Functions In SAP

By Martin Murray, 

SAP is the number one vendor of standard business application software and the third largest software supplier in the world. SAP delivers scalable solutions that enable its customers to further advance industry best practices. SAP is constantly developing new products to help their customers respond to dynamic market conditions and help them maintain their competitive advantage.

The current versions of SAP are the result of the nearly forty years of development that has been driven by the needs of customers. This article will examine the elements of logistics within SAP, and the logistics functionality and how it can help you manage key logistics activities.

There are many components to the logistics functions in SAP. The components include the following SAP areas:

Materials Management (MM) – the materials management component is the foundation for the logistics functions of a company. The component includes purchasing functionality, inventory movements, accounts payable and the material master file, which contains the information on all materials and services used at a company.

Sales and Distribution (SD) – the sales and distribution component incorporates the processes from customer order to the delivery of the product to the customer. The component includes the sales functions, pricing, picking, packing and shipping.

Quality Management (QM) – the quality management component is used to ensure and improve on the quality of your company’s products. The functions of this component include the planning and execution of quality inspections of purchased and finished products.

Plant Maintenance (PM) – the plant maintenance component is used to maintain the equipment that is used in the production of your company’s finished products. The component focuses on the planning and execution of preventive maintenance on equipment and tools used in the production process.

Production Planning (PP) – the production planning component manages a company’s production process. The functions of this component include capacity planning of a company’s production, master production scheduling (MPS), material requirements planning (MRP) and the shop floor functions of producing a company’s finished products.

Customer Service (CS) – the customer service component manages a company’s service that it provides to customers for repairs and warranties. Items can be sent back for repair or vistis made by staff to customer facilities. If a company makes finished products that are sold with warranties, then the SAP customer service component will help a company to service and repair those items with maximum efficiency.

Warehouse Management (WM) – the warehouse management component helps comapnies to accurately manage inventory and maximise storage capacity. This component can reduce time it takes to place and remove items from the warehouse by suggesting the most efficient location to store a material and the most efficient way to place and remove that material from the warehouse.

And of course there is additional functionality that integrates with the Logistics area, such as Transportation Management, Batch Management, Handling Unit Management, Logistics Information System (LIS), Variant Configuration, Engineering Change Management, Project Systems (PS) and Environmental, Health, and Safety (EHS). All of these can be important in the Logistics area, depending what a company requires. 

Source: http://logistics.about.com/od/supplychainsoftware/a/SAPLogistics.htm

Making Supply Chain Data Dynamic

Global supply chain management requires a commitment to thinking big and having the means to receive, process, and use complex, costly data.

By Robert A. Malone, 

Today's supply chain managers are hot for more data and greater integration. Their motive is simple. They recognize that they can wring profit by reducing complexity or isolating actions. It is hard to argue against this point of view, especially when companies integrate data with the goals of cutting costs, reducing working capital by holding less inventory, keeping service levels up while achieving the first two goals, and gaining systems flexibility in a global business environment.

But global business is not conducted on an even playing field. Companies require varied details and degrees of data to manage logistics parts or the supply chain as a whole. Channeling mass amounts of information to appropriate decison-makers warrants a funnel, not a cylinder, for aggregating, integrating, and digesting data that enables companies to be more responsive to both internal and external pressures.
The world recession has inflicted levels of pain on many internal parts of the supply chain. The global warehouse management systems market, for example, is feeling only minor pain; it shrank one percent in 2008, according to ARC Advisory Group. Given the times, that one percent looks good.

In other areas, however, the economic impact is far from moderate. Gross Domestic Product figures for the fourth quarter of 2008 were less-than-admirable around the world (see chart) and essentially a response to spikes in global oil prices, says Alan Reynolds, senior fellow in the Cato Institute. Think things are bad in the United States? Take a look at Taiwan.

Here's some more evidence of the uneven playing field. Dennis Lockhart of the Federal Bank reports that since January 2009 there has been a 31-percent decline in trade globally compared to last year. As a consequence, shipping rates have dropped in a tight credit period. As major exporters, China, Japan, and South Korea have been particularly hard hit, Lockhart adds.

These differing market and economic forces, internal and external, shape how logisticians and supply chain managers leverage the power of information and integration.
While transportation management and warehouse management systems can heal some economic pain by helping companies more efficiently manage their truck fleets or distribution centers, expecting to conquer global supply chain management is a matter of different scale. It challenges companies to gather the right information and make it accessible for both function specific and end-to-end optimization. But without proper integration even the best data can be detrimental.

When data appears in silos -- in different parts of the supply chain, for example -- its integration can create quality issues over a product or service's entire life cycle in a global marketplace. Identifying the relevance of data from world sources involves reconciliation, discovery, and profiling; in the right hands, these steps can lead to data quality improvement.

Integrating the operational systems used by manufacturing, distribution, and retail partners can lead to better supply chain efficiency. Higher-quality data further improves the efficiency and effectiveness of various processes. Poor data quality, for instance, results in extraneous costs when goods are manufactured or shipped incorrectly.
Informatica, based in Redwood City, Calif., specializes in the integration and quality control of business data. Its system comprises five steps in the data life cycle:
Access: The system enables access to almost all forms of data stored in a broad array of systems.

Discover: In the discover stage, the system helps to quickly identify the most relevant information.

Cleanse: Informatica puts data through a cleansing process to measure and improve quality.

Integrate: Through automation, the system reconciles and integrates structured and unstructured data.

Deliver: The system delivers data at the right time in the right format.
By automating the entire life cycle, Informatica addresses data integration needs at any scale, quickly and cost effectively.
Data quality improvement requires a continuous closed-loop process, which means working at it constantly. But the dividends are great. Better data can lead to better decision-making and better supply chain efficiency and customer service.
To tame the global supply chain, we will have to live in a world of giant volumes of data and data processing costs. We will pay for every byte we use. It had better lead to data integration.

Source: http://www.inboundlogistics.com/articles/scperspectives/scperspectives0509.shtml