Posts Tagged ‘strategy’

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.

As the first quarter is coming to a close many companies are happy to see the volume of returns slow down to a more reasonable rate. Some are happy to be finished with processing peak volume while others are wondering how they will ever get caught up.

There is one truism about returns, regardless of whether you are talking expensive hi-tech gear or a plastic toy and that is that returns don’t get better with age.  In fact, for hi-tech equipment you can count on loosing 10% in value about every 30 days.  What this means is that you must have a strategy to turn your inventory in less than 30 days in order to maximize the value of the goods in your reverse pipeline.

Strategy?  Many executive responsible for returns processing never think “strategy”.  They just kind of know what is going to happen and they hope they survive.  As the old wise man said “Hope is not a strategy.” Without a well thought out plan, that is flexible, the chances of maximizing the value of the inventory flowing through your reverse pipeline is slim.  What is the “Value of Inventory” in a reverse logistics pipeline?  Here is a simple formula that captures the idea:

Returned Asset Net Value = (Original Value X Recovery %) – Total Cost to Process

So why does the value drop on returned items so quickly?  First, goods flowing through the reverse pipeline are handled an additional 8 to 10 times which adds a lot of wear and tear on the items.  Second, returned goods generally aren’t packaged and transported with the same high quality outer packaging, pallets, and protection like similar new goods.  These goods are often shipped without packaging at all and are not stacked on neat pallets, with standard Ti-Hi arrangements that help secure the freight during transportation.  As a result, this stuff get beat up.  Many manufacturers will tell you that a lot of their returns are fine when they enter the reverse logistics pipeline in the back of their customer’s store, but by the time they receive and finally process the goods, it is barely recognizable in some cases.

Another factor is obsolescence caused by technology improvement and age.  For example, a few years ago one of my facilities was receiving Apple iPods.  We were processing these iPods and selling them on the secondary market for about 50% of original value.  Right in the middle of the returns season, Apple introduced a new iPod that was much improved over the previous model we were handling.  Overnight, the value on the secondary market dropped from 50% to 30 % of original value.  The asset recovery buyers knew that in 60 days their current market that justified paying 50% on original retail would drop dramatically as demand for the newer model grew.

It is for these reasons that when it comes to reverse logistics timing is everything.  However, in order to get the most out of returned assets, a strategic plan of action must be developed that addresses the following key variables:

• Volume - Peak returns volumes can be between 30% to 150% higher than an average month and can include additional recalled items, return to stock goods and other asset profiles not normally processed.  Estimated volume, type of returns, profile of the assets and disposition are critical pieces of information to know in order to properly plan.
• Space – temporary space will be needed to handle higher inbound volumes at the start of the season and then used for holding outbound surges as the volumes are processed.
• Labor – additional shifts will be needed which will require hourly labor and additional management. Many often forget they will need more trained supervisors, who will require more time to get up to speed.
• Disposition Partners – Communicate expectations to liquidators, recyclers, and others you ship to so they understand your plans and the volumes they will need to be ready to receive.  A word of caution on dealing with liquidators: don’t expect a liquidator who barely pays for product in normal times to be able to pay three or four times as much during the first quarter when their sales are down.  You will need to qualify, inspect, and select other buyers to keep your asset recovery product flowing.
• Red Flags – Develop metrics to be used to monitor inbound, processing, and outbound activities.  Have a plan of action if the key metrics get out of tolerance.  For example, you might track inbound trailers in your facility and set a metric of 12.  If you see there are more than 12 trailers coming in, the action will be to rent one storage trailer from company X for every trailer over 12.

Remember, the biggest difference between a normal distribution center and a reverse logistics operations is that in the latter, you don’t know what you are going to get until you open the door.  In a warehouse, you have somebody placing orders and you know how much you are going to receive and when it is going to get there.  Not so in a return center.  The key to building a good plan to deal with returns is to build in flexibility.  You have to be able to increase or decrease each component based on what is going to come in the door and you won’t know that until it gets there.  Simply hoping the flow is smooth and things work out is asking for trouble and will cost money.

Reverse logistics is like other functions in a supply chain.  In order to optomize performance you must have a goal but like the old saying goes “A goal without a plan is just a wish.”  For the average company, returns are over 8% of assets and the average company spends between 9% & 14% of revenue on these returned assets.  That is a lot of money to leave to chance.  Developing a strategic plan of action focused on maximizing the value of all assets flowing through the reverse pipeline is crucial to your companies success.

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!”

SEIU sent out emails today urging all members to sign up for mobile alerts so the SEIU can immediately rally their members “When your Senator or Congressman needs to hear our voices on the health insurance reform, Employee Free Choice, or immigration debates.

When our members — your brothers and sisters — require support at the workplace, the state capitol, or in the streets.”

This is more evidence of big labor investing and building infrastructure to sway political opinions and organize non-union businesses. Like the old song says, “these times, they are a chang’n”. Is your business keeping up? Do you have a Strategic Labor Relations plan to deal with all the legal changes, threats, and union tactics? If not, you need to take action now. The times may be changing, but time stands still for no man.

Most executives that have had significant roles for more than a couple of years have probably suffered through “Strategic Planning Sessions” that resulted in a big bill, a big book, and a big waste of time. The biggest impact on the company was to take up a little more room on everyone’s bookshelf with a big binder that never gets used.

There are a few simple things that you can do to ensure you get the most out of your planning session.

First, have a good idea of what you really want to achieve by going through a strategic planning process, in the first place. If you don’t have an idea of the desired outcome, cancel the meeting and save the money.

Second, do you pre-work. Make sure you take the time and involve the right team members so you will have a basis to work with. If you are going to download to the team, save the time, record a podcast and send it out free to anyone who wants to suck up to you and listen to it. Getting unbiased, uninhibited feedback from the team is the critical element to drive your planning process.

Next, make sure you have the right people in the room. There are those who can contribute and those with nice titles that are oxygen thieves. Only invite those that can and will contribute in a positive, can do, manner.

Keep the egos at the door and wet blankets out of the room completely. One of the best rules I’ve heard in planning is that nobody in the room was allowed to say anything negative about an idea for 15 minutes after it was introduced. Change is hard and new is easy to kill. Dare to dream a little.

Lastly, drive your team to focus on three or four major goals that require teamwork, can be measured, and will take the company in the right direction. Don’t allow small things, or “go do’s” to clutter your plan. Assign them to somebody with a due date and be done with it.

The resulting strategic plan should be three or four major goals that are in alignment with the strength, address the company’s weaknesses, makes the most of the company’s opportunities, and addresses the company’s biggest threats. These plans then get assigned to individuals who have milestones and due dates to which they are held accountable.

Follow these guidelines and your planning process will delivers results, not pretty binders.

Economic Conditions Snapshot, August 2009: McKinsey Global Survey Results
Executives’ optimism about their nations’ economies and their companies’ prospects continued to grow over the past six weeks, and many companies are focusing more on growth. Yet full recovery, executives say, remains far off.

Cautious focus on growth

Just over half of the respondents to this survey say they expect their companies’ overall financial position at the end of 2009 to have improved from its current state. More executives now feel optimistic about their companies’ 2009 profits now than were so in June, with roughly equal shares currently expecting an increase or a decrease (Exhibit 2).

Although executives at large, public companies and at small, private ones indicate that their organizations have been about equally hard-hit financially by the crisis, executives at the larger companies are much likelier to say their companies have cut jobs.

Another sign of financial improvement is that while the proportion of companies seeking external funding has remained stable, the share getting all the funds they’ve sought has risen to above half—53 percent—from 47 percent in June. The share seeking funds to refinance debt has increased since June, consistent with a slight loosening in credit markets generally.

Executives expect their companies to remain financially cautious over the next 12 months—vast majorities of those that have already cut costs or increased hedging, for instance, will continue to do so. Yet they also indicate some room for growth. More than a third of their companies, for example, plan to stop cutting capital investments over that period.

AUGUST 2009

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