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.

Understanding “the cost of change” is critical to organizations that are outsourcing or are considering changing service providers. While outsourcing supply chain management continues to grow, competition between third party logistics providers (3PL’s) is increasing as well. Many who have outsourced for years are now seeing the power of competition and use two 3PL’s where they use to use one for their entire networks.  Executives tasked with responsibility for managing 3PL relationships are getting smarter and negotiating tougher terms.

3PL’s find themselves in the unenviable position of having to bid on business they have had for years, knowing that their best case scenario is to retain the business at a lower margin.  Many retailers and manufacturers require an RFP process that often doesn’t recognize any value for past performance or loyalty on the part of the incumbent.  With the proliferation of systems across the spectrum of supply chain functions, more and more providers find their services and the associated value commoditized.  Most 3PL executives see requirements getting tighter, competition getting tougher, and margins getting squeezed.

Today, every 3PL is looking for ways to increase margins and increase the cost of change for their customers.  Increasing the cost of change is really referring to those intangibles costs that a customer must incur if they choose to switch from one service provider to another.

For example, if you were a customer of a bank and used their online services for years and then decided to change banks, there would be an additional cost of change because of the extra time and trouble you would experience in shutting down one account and starting up another. You would have to get set up on the other banks systems, figure out how to use their online features, and set up all of your bills for automatic payment. All of this is already done at your old bank and you may not have considered all of this effort when comparing the price between the two banks and the value you might receive from their programs.

If a 3PL is doing a good job of cultivating customer relations, they will make sure the customer is well aware of the cost of change.  Service providers should point out all indirect, internal customer costs and normal external costs they would pay if they change providers.  If you are a service provider, you owe it to your customer to point out all these different expenses.  I have personally pointed out to customers the costs their systems department incurred during start up and similar internal, under the radar expenses they missed.  Every time I have done this, my customer has thanked me because they hadn’t considered my points prior to my mentioning it to them.

In the world of outsourcing, the cost of switching from one provider to another can be very expensive, and could impact your customer’s customer. Changing service providers isn’t just about the lowest cost per unit.  The soft costs of change can be very expensive and should be carefully considered when deciding whether to go with a new provider or stick with the existing 3PL.  Remember the old saying “It’s the devil you know versus the devil you don’t know.”  Just be sure that you consider all the cost you could incur in either case.

There is a common mistake that many companies make that costs them additional transportation dollars, that could easily be avoided.  That mistake is that they use UPS, FedEx, or other expense shipping options to get product back from their customer and/ or send returned goods back to their suppliers.  This usually happens because nobody really thought about the mode of transportation used for returns.

Many companies will ship product back using the same mode of transportation that was used to deliver the product.  This is especially true for e-commerce and catalog retailers.  If the shipping requirements for outbound orders are first class, overnight, or similar forms of special delivery, many companies instruct their customers to return product using the same mode of transportation.  The majority of the time this is a big waste of money.

There is a big difference between outbound orders and returns. The difference is that nobody cares how long it takes for returns to get FROM the customer back to the company.  If an item that is returned takes two or three extra days, nobody cares.  Unless there are special handling requirement due to the type of item that is returned, set up transportation using the cheapest method available.

Of course, like everything else, one size doesn’t fit all.  Many will have some SKU’s that should be shipped back using the more expensive options.  However, for the majority of SKU’s, the cheaper transportation options will do just fine.   Retailers, distributors and manufacturers should all have systems that can tailor transportation directions based on SKU.  This is usually a fairly easy thing to do but can result in significant transportation savings.