It’s been sitting at the back of my mind for a while now – reverse logistics and the implications of process management excellence in this particular phase of successful reverse supply chains. Pushing inventory through the lines of allocation, staging and then towards Post-Goods-Issuance (PGI) fulfillment is definitely an arduous task itself, BUT discovering when a Returned Materials Acquisition (RMA) needs to be addressed; then the cold-sweats starts. What was just fulfilled in the first instance has to occur in reverse now to bring back the item(s).
As an after-thought to S&OP (Sales & Operations Planning) activities, reverse logistics (or RMAs) has emerged and revolutionised to extents that warrants substantial operational processes and management overview. The changing landscapes from any End-to-End (E2E) supply chains operational management stand-point requires efficient Standard Operating Processes (SoPs) to monitor through-puts from the front-ends up until the back-ends; fulfillment. But the technicalities to manage the process excellence for reverse fulfillment definitely revolves around, and begins with COLLABORATION.
1. Collaboration with Finance
An essential management approval is a requirement prior to any possible reverse logistics execution. Reversing the Accounts Receivable (AR) records and procedures would pre-define the Days of Sales Outstanding (DSOs) and revise the buying limits including the credit terms. Such adjustments decide on the S&OP capacity in fulfilling future or forecasted orders without any set-backs with red-flags or limit holds. Oh, oh! Don’t forget the age-old institution of Sarbanes-Oxley (SOX) compliance…nobody wants to be responsible for financial compliance errors during audits.
2. Collaboration with Logistics (or 3PLs) plus Warehousing or Distribution Centers (DCs)
Yes…another essential collaborative partner – cycle counting to update SKUs for replacements and back-count to update Materials Master (MM) indicating that the RMA’ed item is returning into inventory (ie. Quality or R&D, obsoletes or scrap, or even residual re-usage to manage and re-cycle waste in any green supply chain management efforts). Physical pick-up or shipping instructions at destination back to origin, cost of freight returns including handling charges and shipping documentation becomes a necessity. Nothing can be better managed with all the professionals in this arena being thoroughly pre-alerted when an RMA is approved. Let’s not get into hand-carries for the small item(s) to save costs and time, if any of the Sales folks were co-incidentally visiting the said customer.
3. Collaboration with Trade Compliance (or Export Controls, as required)
Where do I begin in this most complicated area of concern? Just analyzing the RMA notification requirements to the governmental licensing agencies including Customs and Border controls could possibly create an imagery that you’d wished all the trade compliance personnel on-the-ground (including yourself) were co-joined Siamese Twins! What was done to obtain origin exporting licenses and various exporting landed costing (ie. duties, taxes, quotas or hand-books reconciliation, etc…based on your agreed incoterms) with possible replicated complications at destination(s) – it would need to promulgate backwards to facilitate a single RMA!
4. Collaboration with Quality or R&D
If it was a Quality Acceptance Rate (QAR) problem, well…these divisions have to get their ducks-in-a-row! If it originated from 3rd party vendors or suppliers (external or contracted manufacturing), it would be an exciting adventure to reciprocate all the RMAs’ OPEX for the vendors or suppliers to bear; but alas, reputation tainting takes quite a while to clean-up internally with the customers or end-users.
5. Collaboration with Customer (Voice of the Customer – VoC)
Can’t stress more on honesty and sincerity! Listen to the complaints or negative feedbacks instead of just focusing on the positive compliments. There’s nothing further to be achieved if complimented for a product well-developed and 100% fulfilled. However, there is always a BIG necessity to know what is expected to go wrong and where it possibly could go wrong! Differing markets call for product integration and multitude New Product Introduction (NPI) life-cycles.
Managing these differing collaborative requirements is similar to managing the varying different divisions within the operations and the variety of differing phases in the supply chain. I cannott stress enough on ‘collaboration’ being essential to any successful reverse logistics process management excellence.