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The return process ensures that previously sold products are supported, collected, and dispositioned according to business policies and customer
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Metrics of top performance in deliver.
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Best Performer Advantage Over Median/Average Discrete Process Discrete Process Discrete Process 4 times faster 4 times faster Spend 42% less Spend 31% less 43% less days 36% less days
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Order Fulfillment Lead Time for Make to Stock Products Order Management Costs Days Sales Outstanding
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CHAPTER 2 Core Discipline 2: Develop an End-to-End Process Architecture
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agreements and covers all activities from return authorization to financial settlement. The primary drivers behind return differ by industry but typically include the return of defective, wrong, or unsatisfactory products; maintenance, repair, and overhaul (MRO) based on service agreements; excess channel inventory returns; and recycling/refurbishment/reuse. Different activities may be associated with each of these return types. Return is a reverse supply chain process and has specific requirements and characteristics that differ from the forward supply chain. For example, return involves capturing item-level data from the point of return, tracking a product until disposition, and managing warranties for the complete product life cycle. It also requires capturing a range of analytics, including the causes of returns, originating locations, costs, and credits. In addition, the return physical network entails specific challenges. For example, returns typically feature small volumes of many different items with irregular frequency. Companies must find a way to collect, sort, and distribute this array of items as efficiently and economically as possible. Often, central collection points provide a way to aggregate volume in a cost-effective manner. For return process excellence, follow these four key principles:
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Create a distinct supply chain for return, such as deciding whether a product can be returned, how it will be disposed of, and how to manage supplier or customer credits and other financial transactions. Return requires a separate supply chain, with its own end-to-end processes, information systems, performance scorecard, and organizational responsibilities. Feed back return information quickly. Provide timely information on returns to guide both disposal and preventive actions. For example, procurement will deal with suppliers appropriately, based on return information. Production, engineering, and logistics will learn from return information and use it to take corrective action in their respective areas. Return managers will use data on costs, credits, and revenues to manage reverse supply chain operations. Base return policies on total cost of returns. Set up an explicit return policy for each item sold, whether manufactured internally or purchased for resale. Consider using an external returns specialist depending on the nature of the return, the total costs of the return including assessment, collection, sorting, and disposal and your company s existing return capability.
Strategic Supply Chain Management
Maximize revenue opportunities. Define your company s return processes and policies with an eye toward revenue enhancement. Identify multiple revenue-generating disposal paths, including resale, supplier return for credit, recycling, auction, and so forth. For purchased items, disposal policies should integrate business rules that are preset with suppliers.
To be effective, your company s return process must be integrated with other supply chain processes. For example, by integrating with the plan process, return makes sure that the resources it needs are available. By integrating with the source and make processes, return can provide information on defects and faults to ensure the quality of purchases and manufacturing. Return also provides information to deliver on products to be picked up from customers and brought into the reverse supply chain. For MRO items, return provides information to source, make, and deliver for execution of the activities needed to process returns according to customer agreements. An effective return process also requires integration with other core business processes. For instance, integrating return with the technology, product, and service development process ensures that information on product defects and poorly understood product features is used to improve existing products and develop better new products. Integration with the marketing and sales process ensures that returns policies are consistent with customer terms and conditions. Top performers in the return process achieve the superior performance of the metrics shown in Figure 2-13.
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