Return To Sender

Feb. 1, 2004
Misunderstood? Underappreciated? Underpaid? Rip out this page.

Read it first. Then rip it out and send it to your boss. (If you are the boss, you'll appreciate what follows.)

You have one of the hardest jobs in your company. That's why this magazine has lasted for nearly 60 years. The ability to get products to customers undamaged and on time will always be needed. And when it's done right it's hardly ever noticed — until it's not done right.

Supply chain management is a dismal failure at some companies. A recent Booz Allen Hamilton global survey of nearly 200 heads of manufacturing, purchasing or logistics; "CXO"s (CEOs, CFOs and COOs); general management; and supply chain directors analyzed the reasons why senior executives at large companies worldwide believe SCM has failed to live up to its promise. After all, more than $19 billion has been spent annually on information technology systems to improve supply chain performance around the world. That stuff should have made your job easier, right?

Apparently not. Here are some of the survey's key conclusions:

-- In organizations where SCM is part of the business strategy — and, therefore, a CEO-level agenda item — annual savings improvements in the "cost to serve customers" were nearly double those of firms where SCM was a lower priority: 8 percent vs. 4.4 percent.

-- Companies willing to reorganize the supply chain achieve savings in two key cost measures that are 36 percent and 55 percent greater than companies willing only to make adjustments within the existing supply chain structure.

-- Nearly half (45 percent) of survey respondents said their supply chain Information Technology (IT) solutions have failed to live up to expectations, suggesting that for SCM to reach its full potential, technology alone won't do.

If material handling logistics isn't even asked about at the upper elevations of your organization, you've got to be the answer. Now answer this: if your forward supply chain is as problematic as this research indicates, how are you handling the reverse channel? (If you answered what reverse channel, you've made my point.) As the article on page 24 reports, reverse logistics is a multi-faceted discipline. If you're not handling returns as well as you could, supply chain reorganization might be necessary. Just remember, the opportunity to screw things up is even greater in the reverse channel.

I asked Steve Nied, the principal of the Booz Allen operations practice, how our readers could avoid the mistakes made by many of his study's respondents — particularly in the area of returns.

"You need an information infrastructure that allows you to understand why things are being returned and then correct the root causes, either through better education of customers or by correcting design flaws," he answered.

You can't treat returns as an afterthought. It must be part of tactical planning, in the same context as sales and operations planning. However, those disciplines are usually focused on the forward supply chain. You need to not only forecast sales but return activity, as well. If you can find out what's being returned and why, you'll be well on your way to improving your entire supply chain.

"In many places, there's a considerable amount of such low-hanging fruit," Nied told me, "because returns haven't been getting attention. Even if there have been a lot of cost reduction activities that have been picked over, reverse logistics gets past the radar screen or is a lower priority."

Can you relate to that? Getting past upper management's radar screen? Okay, now you can rip this page out and interoffice it to the C's in your company – or just send them the whole magazine. Show them you're thinking strategically and deserve their attention. Ask for a raise while you're at it.

Even if this page comes back with a big fat "NO" scrawled on it, at least you got them thinking about returns.

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