THIRD-PARTY ROUTE TO HIGH-TECH ASSET RECOVERY
Two companies show how collaborating with a third-party logistics service provider can improve the efficiency of returns programs.
Volumes of obsolete, end-of-life, and returned products in the high-tech sector are growing – and so is their value as assets. Outmoded, damaged, and discarded electronics can generate revenue by being resold, repaired, or recycled. Moreover, prompt, effective returns processes improve service quality and promote customer loyalty, which pays off in future sales growth.
To get a sense of how much value is potentially available through asset recovery, consider that four to 10 percent of consumer electronic devices are returned, and that some 20 to 50 percent of those items can be characterized as “no fault found” and can therefore be resold, says Mark Watson, Vice President, Global Technical Services, DHL Supply Chain.
The challenge for high-tech companies is to develop the efficient recovery processes they need to realize the full value of these underutilized assets. An approach many are taking is to partner with a third-party logistics service provider (3PL) that provides asset recovery services. This option offers a number of important advantages.
For manufacturers, extracting value from used electronics, whether that entails reselling, repairing, or recycling items in consumer or business-to-business markets, is not one of their core competencies. The logistics of these operations can be quite complex, and a 3PL offers deep logistics expertise and freight networks that are specifically geared to asset recovery processes. Operational complexity extends to the types of activities that make up a recovery service, such as repairing electronic devices. A 3PL that provides asset recovery services can partner with external specialists to carry out this work as needed.
Moreover, an independent logistics specialist is likely to develop a more efficient and cost-effective supply chain solution than, say, a contract manufacturer. That’s because the latter often require product to be returned only to their facilities, even when it may be less costly and speedier to set up receiving centers in other locations. In addition, says Watson, a 3PL is an independent entity; “we don’t have a stake in the product itself,” he explains. As a result, he says, the 3PL will be more objective than the manufacturer when identifying product-related problems that need to be addressed, such as recurrent faults.
Let’s look at two companies that have gone the third-party route. Both are manufacturers of electronic products, and both have reaped substantial benefits from these partnerships.
Speedier, More Accurate Process Boosts Customer Satisfaction
The first company designs, manufactures, and distributes headsets for business and consumer applications. Headset sales spanning 10 countries were generating about 100 to 150 returns daily, and the company’s reverse logistics arrangements were in need of urgent review. Customers were waiting up to one week for the replacements they were entitled to under the company’s warranty agreements. Turnaround time had to be reduced, but a lack of supply chain visibility as well as flawed eligibility and validation checks made it difficult to diagnose the problems that were hampering the returns process. These issues also impeded efforts to efficiently recover the value of returned products, because incoming items were not being properly screened and categorized.
The company collaborated with DHL Supply Chain to develop an integrated reverse logistics and technical services solution. At the heart of the solution is a DHL hub in Beringe, Netherlands, that handles the manufacturer’s headset returns for the EMEA region. Screening, testing, and repair are carried out by a new partnership with a strategic repair services provider.
Two types of warranties are in use: the Standard Warranty Return (SWR), where a faulty headset is returned before replacement, and the Advanced Warranty Return (AWR), where items are replaced in advance of the faulty product’s return. Under the new arrangement, incoming items are screened to determine which warranty agreement applied and which replacement items are needed, and to identify No Fault Found (NFF) devices that could be made available for reuse.
When a customer submits a return claim via the company’s website or customer service team, the information is captured by DHL’s IT solution, and instructions for sending back the product are communicated by e-mail to the buyer. An integrated warehousing system developed in conjunction with DHL’s express and mail business units initiates product collection and allows customers to track their returns. Each claim is verified against proof of purchase and date of manufacture at the returns hub, and the relevant action is triggered. Testing facilities identify NFF products, and these items are prepared for reuse.
The integrated solution has cut the average wait time for a replacement product from up to seven days to just two or three days. Improved product screening means that more fault-free devices are being reused, enabling the tech manufacturer to save up to €250,000 a year. The company has achieved important customer service gains, too. Warranty-related call volumes have dropped by more than 20 percent, and customers can instantly get updates on the status and expected arrival of their replacement item.
Integrated Solution Handles High-growth Business
A leading provider of satellite-based television services in South America wanted to improve its repair and service operations in order to take advantage of the huge growth in high-definition (HD) television. To achieve this goal, the company needed to reduce unit repair costs, which were too high. In addition, the company needed the capacity to handle the larger number of equipment repairs required for this fast-growth market, and set an initial target of completing 5,000 repairs per month. Another key element of its growth strategy was to integrate returns/repair operations with logistics and transportation, in collaboration with a single provider. This would enable the manufacturer to streamline and simplify its repair service while taking risk out of the transportation of parts and equipment.
The company chose DHL Supply Chain as its service provider. DHL built a repair and service area for the operation, and staffed it with 17 specialist electronic technicians. The 3PL also accelerated the adoption of regional and global best practices – a new benchmarking system that accurately tracks productivity, for example – that helped the company to adapt as its product mix shifted from standard definition (SD) televisions to HD TVs.
The result is a simplified repair function operated by DHL Supply Chain that is integrated with the 3PL’s logistics services. Productivity has increased from the initial target of 5,000 equipment repairs per month to 7,000 per month in less than two years – a 40 percent improvement. And these gains have translated into higher customer service levels. The integrated logistics system, which encompasses warehousing, inventory management, customer service, recycling, repair, transportation, reverse logistics, receiving, and shipping, improves supply chain visibility, thereby minimizing the risk of damage and loss of parts in transit.
As these two examples show, high-tech companies can capture the huge value locked inside used electronics by partnering with 3PLs that offer the right expertise and resources. With the help of these third-party experts, they can manage product flows more efficiently, tap into new sources of revenue, and leverage the benefits of improved customer service.