Introducing Greve Consulting – Same Guy, Different Name
Today I am launching my new web site under the new company name of Greve Consulting, formerly known as Metreks. The focus of my practice is to help companies develop their returns management, aka reverse logistics capabilities. Viewers will find a lot of useful information on returns including the Reverse Logistics Podcast, which will feature industry leaders from the world of reverse logistics, and my blog which is packed with articles and information to help service providers, manufacturers, retailers, and liquidators make more money.
Register to get the blogs sent to your desktop automatically or save www.GreveConsulting.com as a favorite on your browser. Your comments, questions, suggestions and feedback are encouraged. I will use your feedback to improve the value delivered from the site.
Check in from time to time to see what is new. For example, you might want to check out The Cost of Doing Nothing. This is a form you can fill out to find out how much opportunity you and your company have in developing your reverse logistics capabilities.
Whether you call it returns management or reverse logistics, it’s all about improving returns and maximizing profits. I hope you enjoy the new site and get a lot of value out of GreveConsulting.com.
Execution – The Key to Strategic Planning
Bill Fields, the former head of Wal-Mart Stores Merchandising Divisions, use to say “Execute or be executed.” He always said this with a smile but we all knew he meant it. Execution is the key to having a great strategic plan. However, execution is where the wheels fall off most strategic plans.
If you ask most business leaders to describe the outcome of their strategic planning process they will talk about the development of a big binder that sits on a shelf until the next year, when they do it all over again. To make matters worse, most companies pay a strategic planning consultant a lot of money to have them develop the big binder.
The big binder has no value if it isn’t the basis for action. In the same way, a strategic plan is worthless unless it is the basis for the leadership of a company to actually do something different than what they would have done as a part of their normal work activities.
To have an effective strategic plan and supporting process, you must spend as much time talking about how the organization is going to execute the plan, as you do developing the plan. You will also need to spend twice as much time following up on the execution as you did talking about the plan. Businesses need to have a well developed method to track and follow up on the execution of the strategic plan or they will end up wasting time and money on strategic planning.
It’s all about execution. Bill Fields was right “Execute or be executed!”
Returns Mistakes Manufacturer’s Must Avoid
Over the course of the next eight weeks, most consumer goods manufacturers will receive and process between 30% and 50% of this years total returns volume. How they deal with this tidal wave of volume and the reconciliation of credits with their retail customers will have a profound impact on their future relationships.
As the former head of Walmart’s reverse logistics division, I use to be amazed at how many manufacturers set themselves up for a fall. Many seemed to go out of their way to earn a poor reputation that would carry over to the spring when the buyers place their orders. Before I go on, I realize that Walmart was tough to deal with and overly demanding in many cases. However, as the head of all reverse logistics for Genco, the largest third processor of returns in the world, I saw the same behavior even for smaller, seemingly nicer retailers.
There are number of things a manufacturer can do to avoid taking a customer service hit resulting from how they deal with returns. Regardless of the retailer, manufacturers can set themselves up to actually improve their standing in the eyes of their retail customer, as opposed to becoming the target for ridicule and revenge come deal making time in the spring.
The biggest mistake that many manufacturers make is to shut down their factories and returns operations in January or February for maintenance and retooling. The impact of this on the retailer is huge. The reverse logistics pipeline gets backed up and that usually means damage rates go up, accuracy goes down, and tempers start to rise. If you must shut the factory down, fine, just don’t shut off the flow of returns during the most important time of the year.
Another area of consternation is around what “cost” to use when processing returns. This is perhaps the biggest area of debate between the retailers and manufacturers. To exacerbate the situation, arguments over cost usually land on the buyers desk, in spring, just when he is getting ready to negotiate the next year’s deals. Great timing.
To avoid this, the manufacturer should proactively address what cost basis will be used for returns, when they negotiate the terms of sales in the first place. Along with the cost basis for returns, manufacturers should ensure that the following impact items are clearly defined and agreed to:
- Consolidation fees if the retailer uses a return center
- Freight charges from movement of returns
- Product condition and packaging requirements
- Model or serial number ranges that are acceptable, if appropriate
- Restrictions on throwing the product away or selling it on the secondary market
Keep in mind that the above points of clarification and resulting financial terms will vary depending on if the item returned has been sold to a customer and returned or it is a guaranteed sale item.
Manufacturers should view returns as an opportunity to differentiate themselves to their customers. “Easy to do business with”, does not mean “make bad business decisions”, or “negotiate a bad deal.” If your sales person can engage the buyer upfront with a proactive approach to deal with the realities of selling products and dealing with returns, the overall relations benefits.
Networking – Key Growth Strategy
There is a lot of debate about the value of tweeting, facebook, and building online networks like on Linked In. For the most part, all the successful online networking sites have two things in common. First, the successful ones are free. The paid one are failing and cannot get traction.
The second thing all online networking groups share is that without a complementary personal network, it’s hard to get any tangible benefit from it. Businesses grow through relationships and contacts. You must “press the flesh”. That’s why if you haven’t been networking, you may be working hard, but not smart.
Advertising, cold-calling, and direct mail are ways to grow your business and this is true for online networking also. The old saying is true: It’s not what you know, but who you know. The smaller the business the MORE important networking is to your growth. To effectively network, you have to work at it but you have to do so with a purpose. Check out the Networking Goals below curtesy of FranNet.
Networking Goals
If you aim for nothing, you’ll probably get nothing. Set your networking goals early and revisit them often to see if they’re still working for you. Don’t be afraid to modify, revise, or scrap one if it just isn’t the right one. Here are some to get you started:
• Connect with other business owners for advice, tips, ideas, and support
• Create a solid and reliable network of suppliers
• Access a wider client base
• Build confidence in yourself and your business
• Learn about your industry, trends, and changes
After you have established your networking goals, the next step is determining how to effectively execute on them. That means figuring out what tools are at your disposal. Once you’ve tapped into the local networks, THEN you can reach out to them online and link up or follow them on Twitter.
My personal method for networking is what I call my 1-2-3 Networking strategy and it is something I focus on every week. My weekly strategy is:
- Attend one networking event a week
- Meet at least two new people that could positively impact my business
- Go to breakfast, coffee, lunch, drinks, or dinner with somebody from my business network each week.
This strategy has been developed over the last two years and has resulted in new customers, development of valuable alliances, and has enabled me to pick up many best practices and ideas that help me make more money. After all, growing your business and making more money is the ultimate goal of networking.
Manufacturer’s Guide To Year End Recalls
Tis the season to be jolly. Enjoy it because immediately following this jolly time of year is the season for recalls. Roughly 50% of all returns from a retail store in January is product that was never sold. It is being pulled off the market because it was sold under a guarantee sales agreement.
A guaranteed sales agreement is when a retail buyer agrees to buy a lot of product from a vendor but can return unsold product for a full refund. Guaranteed sales agreements helps the retailer minimize their risk and it helps the manufacturer maximize sales. Often the product is pulled from the shelves and sent to the vendor who may repackage the product to remove that Christmas Tree on the side of the box.
After the packaging is complete they will redistribute it to their customers or they may simply hold it for future orders. Some of the more seasonal items will be liquidated on the secondary market. This is especially true for soft lines or product that has a short shelf life.
When negotiating the terms of the recall there are five variables that you need to address. Below are the five major variables to negotiate followed by a brief explanation of each:
- Item condition requirements for return
- Cost per unit to be used when returned
- Who is responsible for freight from the retailer to the manufacturer
- The consolidation fee for returns being shipped from a return center
- The time window that recalled product will be received
Items conditions usually require each item to be in pristine condition with all price labels and tags removed. In short, the manufacturer should have the same expectations as the retailer when they received it. No displays allowed. Open boxes, damaged items, shrink wrap torn, or any other “violation” results in NO credit being issued for that specific item.
Next, the cost used is to process the return is usually the last cost charged to the retailer. It is common, especially in some categories to negotiate a percentage of full cost. An example would be 95% of the last cost, due to wear and tear. The best advice here is to keep it simple. The credit equals the number of “pristine” items returned multiplied by the last cost per unit on an invoice. You don’t have to worry about cash terms as the retailers will simply deduct the amount from the next invoice they owe the manufacturer.
For freight charges, typically the retailer is responsible for freight from the stores to the return center and the manufacturer is responsible for the freight from the return center to their location. If the product is not going through a return center, split the cost.
For retailers who do use a return center, the norm is to charge a consolidation fee of 1%-2% of the cost of the product to cover the cost of processing the goods and consolidating the shipment at the return center. However, this often gets negotiated to zero, especially if the retailer is getting full cost credit. This fee is added to the credit that the retailer will take when they process the total credit for the goods.
Finally, the window of time needs to be established for the goods to be returned. Keep in mind this is only for returning new goods that were not sold but purchased for the holiday season. Defective return terms are not impacted by recall terms. The window of time usually starts on New Years Day and usually runs for 60 to 90 days. Any product not RECEIVED by the manufacturer during the established time frame will not be accepted and should be returned to the retailer.
Seasonal recalls can be great for both the retailer and the manufacturer but you have to have your terms and conditions clearly spelled out in a written agreement. Hopefully this Christmas the shelves will be empty due to high sales and there will be little product returned. Happy Holidays!!
How To Manage Your 3PL
More and more companies are outsourcing critical supply chain functions to third party logistics companies (3PL’s). For the uninitiated, managing these relationships can be a bit challenging. When do you get involved? What do you do if you don’t like what they are doing? When are you being too hands on? How do help your 3PL avoid catastrophe?
The answer to all of these questions really comes down to one thing. COMMUNICATIONS! You have to establish multiple ways to communicate with your 3PL. There are three best practices you can use to ensure you have great communications with your 3PL.
First, talk with the single point of contact every day. For some 3PL’s this would be the facility manager, or the regional operations vice president. Titles don’t matter. You want to talk with that person who can give you answers, make decisions and cause change. Typically this isn’t the sales person or “account executive”. You want the operator. Get to know this person. Call them a lot and establish a relationship where you can work with them so they know your expectations and you understand their limitations, challenges and needs.
Just as important as regular informal communications is to set up a monthly review process. This is where you have a standard set of metrics you review every month. These metrics should reflect the metrics used in the contract and the budget process.The agenda for the monthly review includes the following:
- Results from last month
- What went well and why Areas needing improvement
- Action plans and updates on past action plans
- Expectations for the next 30 days
This monthly review can be done on a conference call or in person. Once the format is established you’ll find it takes no more than an hour and is a good monthly review. This is also a great way to review your billing issues in a timely matter.
The next best practice in communicating with your 3PL is to set up quarterly review meetings. These should be face to face meetings and should be done in the facility. Plan on taking the entire day. The agenda is similar to the monthly updates but with more content. Generally, you start off by touring the facility together with the 3PL leadership team. A lot of great information and issues will come from this tour. After the tour, you review the numbers but results are reviewed on a monthly, quarterly, and year to date basis. This is where you will be able to figure out if you will achieve your goals for the year and what you and the 3PL will need to do to meet expectations.
Companies hire 3PL’s because of their core competencies. However, there is an expectation of oversight and like all multi-million dollar expenditures, you will want to keep a close eye on how your money is spent. With a 3PL, it is all about communications.
Forklift Accident Caught On Tape
The most important program in any warehouse is the Safety Program. Often, people forget that when mistakes happen in a distribution center, somebody could get killed. Take a look at this video and you will see what can happen when someone get’s in a hurry and doesn’t watch what they are doing. Luckily, nobody was seriously injured…..this time.
Supply Chain VP’s Guide To Installing A New WMS
If you ever go to CSCMP or any other Supply Chain Management conference, you will see some people walking around with a glazed look in their eye. They look like they’ve been through a battle and ofter have scars to show for it. These executives suffer from PTIS or Post Traumatic Installation Syndrome. PTIS is what happens to supply chain executives after they have installed a new WMS.
The VP of Supply Chain and everyone reporting to them are often traumatized by the ordeal of designing, installing, and trouble shooting their new WMS. Throughout the installation, they are constantly reminded of the promised savings they have to deliver, many times realizing the ROI is “a bridge too far.”
How can this happen, with all the planning, the promises from the WMS provider and the focus of an entire team of trusted leaders? It is like a bad commercial.
“WMS Software $250,000.”
“Installation of WMS Software $1 million.”
“On-going customization to get the software to work…. Priceless.”
There are a few guidelines that can help you avoid a WMS disaster.
First, spend time, effort, and resources on defining your processes and process improvement before you talk technology. Many times, companies don’t define their processes until they are talking to the WMS provider during the design meeting, or as they are installing the system. Upon going live, somebody screams because something goes a rye and all hell breaks loose. Define your process and ensure every type of order, processing exception, reporting requirement, etc. is mapped out, in detail.
Remember, applying new technology to a bad process just enables you to make more mistakes faster.
Second, review your process, in detail, with everyone involved with the WMS sale, PRIOR to signing a contract or negotiating the final software agreement and price. “Everyone” includes your entire team, the WMS Sales person, the WMS project manager, programmers, DBA’s, and all the executives from the WMS company you can get in the room. Don’t let your company fall into the trap of having a sales person write all the checks that the WMS project team will have to cash. If things break down later, the sales guy is the first to be thrown under the bus.
Finally, have every single deliverable with time tables, milestones, and penalty clauses documented in a project schedule and included in the software agreement. Many Fortune 500 companies have bought software that cost twice the original price and took twice as long as promised because they did not have the details spelled out in the contract.
A new Warehouse Management System can dramatically improve inventory position, customer service, and supply chain productivity. However, you have to do it right or it will cost twice as much, loose valuable market share, and cost a lot of good people their jobs.
Planning For End Of Year Returns
Now is that time of year when your return centers, especially retail return centers, should be figuring out how they are going to process returns during the peak season. What’s the plan for January, February, and March?
Returns start picking up the first week in December but shipping slows dramatically between Christmas and New Years. This year, New Years falls on a Friday so nothing is going to really start moving until January 6. Adding five days to flow product into the facility, means most retail return centers need to be fully staffed and ready to rumble on or about Monday January 11.
If you run a manufacturing return center, you can add about two weeks, depending on your customer’s requirements and how much is going directly from the consumer vs through another return center. This means that for most manufacturers, they won’t be seeing peak inbound volumes until week of January 25.
So what should you be looking at between now and then? There are a few critical things every return center should consider when planning how to handle the additional volume of peak season.
First, how much additional labor will you need. Generally this is temp labor. Don’t forget, however, that if you are going to add shift you will need to get some of your trained hourly workers to move to the other shifts to help with training and processing. If you are going to add a shift, you need to ensure you have the management needed to run that shift as well.
You can generally count on your normal day shift to handle 50% of the volume, second shift 30% and third 20% or less. Productivity on weekends and during mandatory over time periods will drop by about 20%, so don’t expect to hit the productivity level you see today.
The next thing you need to think about is temporary space. There are two kinds of temp space to consider. Will you need a temporary building or storage trailers. What you will need depends on what your going to put in the building or on the trailer, for how long, and where is that product going from there. Are you going to store inbound freight, in process inventory, or finish goods ready for shipping, or some combination. Volume of each of these and the dwell time will drive how much space you need for how long.
Really think about how fast your will see product coming in, being processed, and shipping out. While you don’t want to go crazy, it is better to have more space than you need lined up than to not have enough. Full buildings lead to lost product, damaged goods, and accidents so don’t be conservative with the space requirement.
Once you have your volume estimates, labor & leadership plan, and your space needs defined, you are ready for the wave of returns and recall goods. The planning for all of this need to start happening now.
You will need to identify lead time requirement for recruiting, training and hiring both hourly employees and management. Temporary space takes times find the space and negotiate the lease terms. Storage trailers are easy once you find a provider with the equipment you need. In both cases, don’t forget plan for any additional security you may need.
Finally, remember that returns volumes, condition, and handling are always off significantly from plan so build in flexibility. It’s like my mentor Jerry Davis always said “It isn’t a good plan unless it’s flexible.”
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