Service in the Sharing Economy

share

The sharing economy is on the rise as more and more consumers conduct business transactions through platforms like Airbnb to find lodging and Uber for transportation services. These companies have experienced explosive growth in the last couple of years and their financial value is skyrocketing among the investor community.  Indeed, Airbnb’s valuation is at $25.5Billion in their attempt raise an additional $1.5 Billion in funding and Uber’s valuation of $50B is higher than 80% of the S & P 500 companies.

A sharing economy platform is one that leverages information to empower individuals and organizations with information that enables distribution, sharing and reuse of excess capacity in goods and services.

Sharing economy platforms take many different forms, including:

  • Product-service systems – privately owned goods that are shared or rented out via peer to peer market places.
  • Redistribution markets – pre-owned good are passed on from someone who does not want them to someone who does.
  • Collaborative lifestyles – people with similar needs and interests banding together to share and exchange less-tangible assets such as time, space, skills, and money.

 

I also think of a sharing economy platform as having a number of basic elements. First, it uses technology to create a peer to peer marketplace.  Second, they are “open” meaning anyone can exchange goods and services with anyone else.  Third, goods and services are available on demand.  Fourth, payment in full is often made only after the service is delivered in many sharing economy platforms. Fifth, fixed costs are converted into variable expense through the sharing of resources.

The success of Airbnb and Uber has not only led to the emergence of competitors in the lodging and transportation market but also the creation of sharing economy platforms in other industries.  “Uberized” has become a commonly used buzz word in the business world by industry analysts and thought leaders.  This word is often juxtaposed within the question… Is our industry the next to be Uberized?

To a large extent, High Tech Service & Support is far along the path to becoming Uberized. For example, product – service systems like Rolls Royce’s “power by the hour” form that basis of the “Servitization” trend which is gaining appeal in the High Tech Industry.   In addition, redistribution markets have existed for decades within our industry; just think about all the businesses in the IT, Telecom, and Medical Electronics industries that trade used and refurbished equipment.  Collaborative lifestyle solutions are provided through companies like Field Nation, Work Market, and PC-SOS that enable individual field service engineers and small businesses to become a contingent workforce for larger companies.

However, in many ways the High-Tech Service & Support Industry is not truly “Uberized”.  For example, the platforms/solutions I’ve identified above are not truly peer to peer.  They typically involve an intermediary or aggregator that manages the redistribution of products and services. Equipment owners (i.e., end-users) are not leasing or renting unused capacity to other users.  Second, some of these models are not truly open.  There is often a thorough vetting process involved in becoming a member or user of these platforms and solutions.  On the other hand, the on-demand, pay for performance, and conversion of fixed cost to variable expense elements of the sharing economy do exist today within the High-Tech Service & Support Industry

Regardless of where you think our industry is on the sharing economy spectrum there is certainly room for new innovation.   Now it is your turn.  I’d love to get you answer to this question…. Is our industry (i.e., field service, reverse logistics) the next to be Uberized? Please cite examples and share your thoughts on why or why not the sharing economy can work in our industry.  You can also feel free to schedule a strategy session if you have a great idea you’d like to vet or discuss with me in more depth.

The Five Most Important Trends Impacting the ITAD Market

Recycle

In my last blog post, I provided a high level summary of key findings from the recent market research study we conducted for Arrow Electronics on the topic of IT Asset Disposition Trends.   Now that I’ve piqued your interest, I thought I’d share five important data points from the survey results:

  1. 9 out of 10 companies in 2014 have a formal end-of-life ITAD strategy
  2. Nearly 2 out of 3 companies surveyed choose to have a 3rd party service provider manage their end-of-life assets
  3. The most important factors in selecting a 3rd party service provider are adoption of compliance standards, well documented chain of custody, and high quality reporting
  4. 95% of companies feel that R2 and/or e-Stewards are the most important environmental standards related to ITAD
  5. Nearly 9 out of 10 companies feel that R2 and e-Stewards should be combined into a single standard

 

These findings validate the fact the ITAD has gained increased attention among not only IT Managers but C-suite executives as well.  However, these findings reveal that most companies do not view ITAD as a core competency.  Instead they choose to outsource it to 3rd Party Service providers.  This explains the increased level of competition within the ITAD market as more and more companies enter this space.  It is not just start-up specialized ITAD vendors that are pursing this opportunity but well established IT Service providers and distributors like Arrow Electronics who view ITAD as a natural extension of their product and service offerings.

Given the large playing field of competitors, end-customers are becoming increasingly selective about who they choose to conduct business with.  Among the most important factors are compliance standards, documented chain of custody, and IT reporting and analytics.  It is interesting that while R2 and e-Stewards are perceived as the most important environmental standards, an overwhelming majority of end-customers believe that they should be combined into one, single standard. This suggests that these standards are used interchangeably by end-customers.  Possessing one or both of these industry standards is simply not enough for an ITAD service provider to differentiate itself in the marketplace. While many companies can lay claim to a well-documented chain of custody and superior reporting capabilities, we believe that its additional industry standards such as RIOS, ADISA, NIST, and knowledge of best practices to minimize risk, reduce waste, and maximize recovery values that set one ITAD vendor apart from one another.  If you haven’t read the Arrow IT Asset Disposition Trends Report, we suggest you obtain a copy, click here.    To discuss the implications of this report on your company or business, feel free to schedule a free 30-minute strategy session with us today.

Key Performance Indicators and their impact on your business

kpi1

I gave a presentation a couple of years ago to a group of service managers and executives on the subject of key performance indicators (KPIs).  I was surprised by the fact that most of the audience could not give an accurate explanation of what a KPI is.  Most people thought it was a data point that was used to measure business performance.   However, this is not entirely accurate.

The true definition of a KPI is that it is a quantifiable measure of how successful an organization’s strategies are in meeting their goals.   To be effective, KPIs must be specific to your business needs, align with strategic goals, and bring overall benefit to your business.  Most importantly, it must inspire you to set new goals.

Unfortunately, many service managers confuse KPIs with industry performance benchmarks.  They are not the same thing.  In contrast to a KPI, a benchmark is a point of reference against which things may be compared or assessed. While a company might want to benchmark their KPIs against competitors in their industry, they shouldn’t assume that they must adopt the same KPIs as their competitors.  They might want to do this if their goal is to outperform competitors on every KPI they measure.  This may be neither practical nor feasible if their business needs and strategic goals differ from those of their competitors.

Let’s look at this from another perspective.  While there maybe dozens of different field service or reverse logistics activities that your company can measure, you’ll find that there are only a handful that ultimately drive the success of your company’s business strategy.  You’ll want to make these specific measurements your KPIs.   For example, your strategic goal may be to consistently meet your customers’ expectations for timely service.  There could be multiple factors to consider when measuring this outcome like response time, wait time, resolution time, call drive time, etc.  However, you may determine that SLA Compliance is the KPI that best measures your success or failure in meeting this strategic goal.  On the other hand, your strategic goal might be to deliver high quality service to your customers.  While this could be determined through factors like trunk stock fill rate or calls closed incomplete due to lack of parts, you determine that First Time Fix Rate is the best KPI measuring service quality.

When establishing KPIs, it is important that you answer these four questions:

  1. How will I know when my goals are reached?  This is a quantitative target that you want to establish for your KPI. It could be expressed as a raw number (i.e., 4 hour average response time), a progress measure (e.g. 98% SLA compliance), or incremental change (i.e., 10% improvement in Customer Satisfaction).
  2. What are the key success factors in reaching this goal?   A description of the core functions, activities, or business practices that must be performed in order to reach this goal.
  3. What critical actions do I want to take from the KPIs? It is important to anticipate how your company will react to the KPI measurement that it actually achieves. What steps do you take if you miss your target? What if you meet or exceed it? For example, hire more resources, retrain personnel, improve processes, implement new systems, etc.
  4. What results do I achieve through these actions?  Examine how these actions will impact your business.  In what timeframe will they impact your KPI and at what cost?  Are there other aspects of your business that will be impacted?

 

By answering these questions, you’ll have a strategic road map for achieving operational excellence in your business.  It’s all about getting clear about your goals, making sure you measure the right things, tracking results on a consistent basis, taking corrective action when needed and, of course, celebrating success. Do you want to learn more about how to achieve geometric results in your field service or reverse logistics business?  Schedule a free strategy session today.

The Gift of Competition

competition1

I received a very interesting email last week from a manufacturer of industrial automation equipment. It was a marketing piece promoting the use of their “original” spare parts over “generic” parts sold by third party providers.  I gather this manufacturer was losing market share in the Aftermarket and was taking steps to rectify.  I don’t know how I got on this mailing list because I don’t own any of their equipment.  Nevertheless, what I found so troubling about the email was that it attempted to discredit “generic” parts by claiming that they were cheaper in price because they were of inferior quality.

I find these types of claims troubling for three reasons.  First, they “trash the competition”.   Effective marketers and sales people know that going negative is not good for business.  Most manufacturers would not use this approach when it comes to selling their equipment in their primary market. Yet some believe anything is fair game in the Aftermarket.  The second reason why I oppose this type of advertising is because it’s just not accurate.  The truth is that generic spare parts can be more reliable than original parts. This is because third party manufacturers often spend many hours reverse engineering original parts in order to learn how to design and manufacture new ones.  In doing so, they can find ways to improve upon the design and reliability of the original part. This is particularly true of remanufactured parts.  Third, in some markets the parts used by OEMs and Third Parties are the exact same parts.   For example, a device assembled with commercially available off the shelf (COTS) parts.

The bigger issue is not about false advertising but about what role Third Party Maintainers (TPMs) also known as Independent Service Organizations (ISOs) and Generic Parts Manufacturers play in the Aftermarket.  Obviously, these providers create competition for OEMs.  However, this type of competition is really not a bad thing for a number of reasons:

  • It legitimizes the market – – Markets are defined by the presence of competition. In order to win business, competitors must actively market their products and services. As a result, customers become more aware of the options available to them and purchase more quantities and more frequently.
  • It creates choice – Competition offers customers the freedom of choice. The theories of capitalism and free trade are built on this basic premise.
  • It improves quality & efficiency – Competition in the Aftermarket forces third parties and OEMs to continue find ways to improve the quality of products and services offered while at the same time finding ways to cut costs and improve efficiency.   In other words, competition raises the bar and results in better prices for customers.
  • It leads to innovation – In addition to raising quality and improving costs, competition drives service providers to become more innovative. Without competition, it is hard to know whether or not service providers would focus on finding ways to add value. Would service providers be just as compelled to invest in new systems and technology like SaaS, Mobility, and IoT if not for the impact that competition has on innovation?
  • It leads to greater cooperation – OEMs also have the choice to subcontract service to TPMs/ISOs. This can help them improve their own cost structure, fill in white space in service delivery, and obtain access to capabilities that they may not otherwise be able to build themselves. Under this scenario, OEMs and ISOs can learn from each other and use this knowledge to drive innovation, reduce costs, and improve quality

In summary, competition in the Aftermarket is good for all parties concerned.  Everyone benefits; from the customers to the OEMs and third party providers. Even the technology vendors benefit from competition in the Aftermarket.  Quite frankly, any company that feels that is has to trash their competition is probably troubled in some way.  Rather than resort to this tactic, a company that is very concerned about their competition is advised to look within their own organization to find ways to leverage competitive forces to their strategic advantage.

Please share your thoughts and reactions to this post.

Fundamental Concepts about Successful Service Marketing

Marketing business sales

Where would we be if not for marketing?  It plays such a critical role in generating sales.  Indeed, marketing is about finding a need and turning it into a want.  For example, you may need an automobile that can transport you family to and from their activities. However, you find that you want a BMW SUV because it’s a quality car, that drives well, is safe to drive, and has a great audio system. How do you know this? Marketing!!!

Unfortunately, marketing can be a daunting task for those of us in the services industry. That’s because most of what we are taught in business school about marketing is product oriented.  Let’s face it; products are easier to market because they have a form, fit, and function. They are tangible.  Services, on the other hand are intangible. So how can you effectively market them?  Using a product approach to market a service is like trying to hammer a square peg into a round whole. It just doesn’t work.

Service marketing maybe difficult but it doesn’t have to be impossible.  To become successful at service marketing you need to understand three (3) basic strategic concepts about services:

  1. Value is based on perception: That’s right! The demand your customers have for your service and the amount of money they expect to pay is based on their perception of you. It’s your responsibility as service marketers to manage this perception through your brand and communications strategy. More importantly, their perception must be consistent with reality. Otherwise, you’ll lose your credibility. You can’t expect customers to pay a premium price for your services if the perception is that you are a low cost provider.
  2. Capability to serve versus actual service: It order to effectively market and sell services you have to give your prospective customers assurance that services will be there when needed. This means that you have to define your capability to serve before they buy and receive the service from you. Capability can be described in terms of service offerings (i.e. portfolio), processes, skills and infrastructure that make the actual service possible.
  3. Value-in-Use and Time:  Another factor that influences your customers’ willingness to purchase a specific type of service from you at a specific price is their value-in-use for that service. This is defined as the value of the service to the customer in the absence of its presence. In a service business, we often measure this in terms of time. For example, it may cost your customer hundreds of thousands of dollars if their data center hardware is down for more than 2 hours. The higher the value-in-use the more they’ll be willing to pay. Knowledge of your customers’ value-in-use provides leverage in how you price and market your services.

To summarize, it’s all about perception, time, and capability. How well do you incorporate these concepts into your portfolio design, your pricing, and your marketing communications program?  Just think about how effective you become if you do.   Let me know your thoughts.

These strategic concepts provide an underlying framework upon which all great service marketing programs are built. However, they are just the tip of the iceberg of what you need to know.  To help you succeed, I’ve created a new online course that will educate you on the fundamentals of successful service marketing. You can learn more through this link:

Successful Service Marketing ™

I encourage you to watch the brief video overview.  The course is perfect for anyone who wants to become more effective at marketing their service business.  You can also schedule a free consultation with me if you’d like to learn more.

Predictions for 2015 and their impact on Lifecycle Services – Part II

it trends 1

In Part 1 – my last blog post on this subject, I discussed some of the trends that are creating uncertainty for companies who participate in the IT Service Supply Chain.  This uncertainty stems from conflicting data with respect to market drivers in the IT Industry in general and Lifecycle Services Market (e.g., hardware maintenance, asset recovery, depot repair, services logistics, etc.) specifically.

For example, more than three quarters (78%) of workloads will be processed by cloud data centers and almost a quarter (22%) by traditional data centers according to the Cisco Cloud Global Index.  In addition, public cloud and hybrid cloud will grow dramatically faster than traditional datacenters.  Most of this computing power will be housed in mega data centers.  However, IDC predicts that by 2017 industry consolidation will lead to a market comprised of only 6 to 8 mega global players.    The strategic implication is that there will be less IT assets distributed throughout the world resulting in less demand for onsite maintenance.

On the other hand, IDC predicts that IT spending on big data will grow 30% in 2015.  In addition data volumes will exceed 6 trillion terabytes.  Furthermore, data created by Internet of Things (IoT) will nearly quadruple by 2018 from 2013 creating twice the amount of data end users transmit to data centers and it will be 47 times greater than total data center traffic that exists today.  This means that there will be increased spend on data storage and network management.  As a result, services associated with the installation, management, and maintenance/ repair of storage devices and network equipment may increase.

Given these conflicting perspectives, what can companies involved in Lifecycle Services do to ensure profitable revenue growth in 2015 and beyond?   Here are six (6) things that service providers can do to achieve long term success:

  1. Have a clear understanding of your planning horizon: Remember the impact from the trends described above will not be felt immediately. They are likely to occur over a 5-10 year horizon. You need to anticipate where the market will be in the future and create a road map to get you there.
  2.  Focus on micro economic business trends: While it’s always a good idea to review market data from industry analysts, this macro level data may not reflect the actual dynamics, buying behavior, or purchasing decisions within your target market. That’s why primary market research is so important to your planning process.
  3.  Decide on where you are going to play: This requires asking critical questions about the condition of your target market today and where it is headed in the future. Will you continue to sell into a down market? Do you expand into new markets that are synergistic with your existing capabilities? Do you develop new capabilities and diversify into higher growth markets? These decisions require that you take a structured and disciplined approach to market research and strategic planning. You can no longer rely on top of the mind pontification or gut level decision making to plan for your future.
  4. Have a clear exit strategy: Regardless of your decision about your future growth, it is important to plan with an exit strategy in mind.   As a business owner or executive, you probably have good idea of the financial objectives your company needs to achieve before it exits the business. If not, you need to establish these targets right now even if your service business is a division or subsidiary of a larger company and there are no immediate plans to sell in the next 5-7 years. Exit planning will force you to consider what your business needs to look like, how it needs to operate, how it needs to go to market, what type of growth rate it needs to achieve, and how much profit it needs to generate in order to exit. The actions you take to achieve these outcomes will benefit your company whether or not it actually exists.
  5. Maintain a highly efficient infrastructure: One thing is for certain, end-customers will continue to seek operational efficiency when managing and maintaining their IT assets and related operations. It is inevitable that they will continue to place downward price pressure on their service providers. A highly efficient infrastructure and service delivery processes is an imperative for winning and keeping customers as well as maintaining healthy profit margins.
  6.  Market on all cylinders:  Your customers face these same challenges that you do when it comes to planning for the future. They are likely to be confused by all the options available to them. The way to win their hearts and minds, and share of spend in a competitive market is by positioning yourself as an expert in their market. It requires that you implement an education based marketing strategy. This approach builds trust because you demonstrate that you understand your prospective customers’ needs. When implemented effectively, it defines the criteria that your customers should consider when choosing a service provider and establishes your company as the standard by which they should consider.

Your future can be bright as long as you are prepared to do a little work to prepare for it.  It is only a problem if you do nothing at all.   One way to ensure you and your team achieve optimal success is to seek guidance from an objective, independent advisor.  With over 25 years’ experience in completing similar assignments in the High Tech Industry and extensive capabilities in key practice areas (e.g., market research, strategic planning, service marketing, and productivity & efficiency improvement), we believe that Blumberg Advisory Group possess the skills to help you succeed.  To determine if we have a solution to meet your needs visit our website or schedule a free consultation today.

A Baker's Dozen: Getting an extra month out of your year

Baker's Dozen of Donuts

I’ve always been fascinated with the concept of a “baker’s dozen”. Buy twelve (12) donuts and get the thirteenth one free. A great concept! Did you know that this business policy was created thousands of years ago to prevent bakers from cheating their customers? It was a way for bakers to ensure that they never undercounted their customers’ orders by adding one more. Wouldn’t it be great if we could apply this same concept to other aspects of our business? For example, having one extra month in the year? Just think about what you could accomplish.

Why cheat yourself out of the best year ever? You can have a 13th month year and it starts this month. That’s right the way to having an extra month in 2015 is to use this December to plan for next year.  Sure, you are probably thinking that you’ll just wait until December 31st to write your New Year’s resolutions. And you’ve kept these resolutions every year? According a study from the University of Bristol, almost 90% of people who set New Year’s resolutions fail to achieve them. The reason is because their goals are too general and lack focus. More importantly, they lack a plan for achieving their goals.

What’s that? You’ve already developed an annual business plan. That’s great you are doing better than 80% of businesses. However, writing a business plan does not guarantee success. Unfortunately, too many plans become static documents that sit on a shelf and collect dust. To excel, you’ve got to take action. So let me give you a framework for creating a dynamic business plan, one that will get a jump start on 2015 and give you the extra month you need to meet and even exceed your goals.

In order to develop a good plan that leads to measurable results you must ask good questions; ones that are relevant and produce rigorous answers. Here are some examples of the questions that I like to ask:

  • What was great about the last year?  I think it is important that you start off any planning session by celebrating your successes over the past year.   This allows us to build upon our strengths and move to our next level of success.  The best part of this past year for me was creating new online courses on the subject of service marketing and disruptive technology. I’ve also established a couple of partnerships which other industry consultants that will allow us to better serve the Aftermarket Service and Reverse Logistics community. What about you? Did you develop any new service offerings, implement any new improvements, or win any new clients?
  • What do you still need to complete next year from the previous year? To make 2015 a success, I still have to leverage my accomplishments from 2014. This means that I must implement a consistent marketing program as well as institute an effective customer service policy to respond to issues that emerge from my new offerings. What are the things that you need to follow-up on? Maybe you’ve built a case for acquiring a new software system but now you’ve got to develop a well thought-out implementation plan with a manageable timeline and budget.
  • What are the game changes in your industry that you need to focus on? While still an emerging technology, industry analysts are predicting an upsurge in connected devices. That’s right, over the next 2 years we are expecting to see a 40% increase in the number of sensors that are connected to products. Not just fixed electronic devices but wearables! This will likely place new demands on the Service Supply Chain. One of my objectives for 2015 is to help industry participants anticipate these requirements and implement new profitable business models. I expect to accomplish this outcome through my new online course, “Thriving Disruptive Tech”.
  • What are the small things that you must do consistently? In Orson Wells’ great radio show, “The War of the Worlds”, tanks and guns could not destroy the aliens. They died because they could not survive earth’s environment. The lesson… not paying attention to the small things can kill you every time! Contract renewals and new service sales are two of those areas. Renewals maintain your base and new sales enable growth. Without the two, your business is facing possible death. That’s why we are continuing to help our clients with customer satisfaction measurement and improvement. I will also be launching a new online course in a few weeks, “Successful Service Marketing”, which will provide you with the knowledge, strategies, and tools to achieve exponential growth in your service revenues.

 

Once you have these answers you can start working on your plans for 2015. I recommend you start with writing out your year-end goals, followed by a list of your 9 month achievements, 6 month milestones, and 90 day action plan. Continue to update you action plan every 90 days. Work backwards to plan forward! The first 90 days are crucial in this industry and will set the stage for future results, so make sure they are aligned.

I recommend that you and all the members of your team follow this process on an individual and collective level, even if you already have a formal business plan. It’s easy to become complacent this time of the year. Stay sharp during the holidays and keep your winning edge intact for the new year. If you feel you are lacking resources or need some extra guidance; contact me today for a strategy session.

A Blueprint for Big Data Logistics

New_York_Panorama_2013

 

How can big data help reverse logistics?

This is a little like asking “How can duct tape help in an emergency?” According to Blumberg’s Law of Big Data, the answer will be unique to every problem that calls for lots of data. No list of applications can hope to be comprehensive, and no generalization can provide detailed guidance for each case and industry. But that doesn’t mean that a list of generalizations isn’t worth making.

In our last post about big data, we told you that our job is to help you build bridges from the problems you have to the data you need. So let’s draw a map. The challenges found in reverse logistics form an organic whole…not unlike the neighborhoods of Manhattan. And some of those neighborhoods need bridges to the sprawling datasets and powerful analytics that have just recently emerged. Here we imagine a branch of commerce that never sleeps as a City that Never Sleeps, and connect the Big Apple to big data.

Brooklyn

Elegant, austere, mathematical, and once the only game in town, the study of service supply chains could reap huge dividends from big data. The quantitative tools of chaos, fluid dynamics, and traffic theory can be used to model the flow of goods and currency in forward, reverse, and their confluence. Where the conceptual framework of an Enterprise Resource Planning (ERP) or Supply Chain Management (SCM) system meets modern data collection and storage, there is an inviting playground for data scientists. Logistics experts from every specialty can now reach out and touch the crisp contours of service flow as they evolve minute-by-minute. With help from operations research, consultants can design safeguards against bottlenecking, turbulence, state transitions, and other logistical nightmares that can arrest normal service for days on end. Big data can also resolve long-term rate distributions with greater precision, allowing firms to make homeostatic adjustments and keep service delays within tolerance.

Triborough

Quality control in reverse logistics is a different animal. It’s not a true field like its manufacturing namesake, but the busy crossroads of a few nameless subfields. What unites them is the goal of recovering value on resale goods…at a lower cost than making them from scratch. Quality control in forward logistics has its hands full churning out a uniform, working product in the controlled conditions of a factory. If your products come from the messy world outside factory walls, you’re going to need more hands. Who can say exactly what an item may have been through before its warranty was up? Maybe a malicious eight year old took it apart, stole the hard drive, replaced it with its weight in dirt, and then lovingly reassembled the product before polishing the screen. The only way to quell such paranoia is to perform every test that the industry can offer – in other words, to replicate the US healthcare system on returned products. The name of the game is detecting tiny but consequential probabilities, and making testing protocols that reflect them. For that you’ll need lots of data.

GW

The science of long-distance shipping costs should take Manhattan’s longest bridge. When companies pay for shipping, they have created a thorny optimization problem, in which the cost of building and running maintenance centers offsets the cost of longer shipping distances…to a point. Both parameters are bound to evolve with the size and geographic distribution of consumers, and may be abruptly reset by the closure and creation of mailing routes. In the war rooms of service management, big data will provide plenty of actionable intelligence.

Queensboro

Like Manhattan and Long Island, forward and reverse logistics are too rarely integrated. Where auditing and other conventional probes fall short, product flow in forward and reverse supply chains can monitor product screening and satisfaction. Robust baseline measurements for the magnitudes and ratio of forward and reverse product flow can serve as a performance index for front-line screening. With enough data, deviations from baseline can be a real-time window to the effects of reorganization and new service protocols. Similar metrics could pave the way for a revealed preference analysis of product features.

Manhattan

The tension between customer satisfaction and short-term revenue calls for a subtle feat of engineering. If you match the rate of salvageable returns with the rate of resale, you eliminate free replacements, but at a greater risk of issuing faulty products. If your resale standards are uncompromising, resale may not cover replacement, and if a dynamic bottleneck forms at testing and repair, those may become sunk costs – insult to injury! Long-term, conditional rates revealed in big data analyses can control for these risks by setting a time range on testing and repair – lower bound to limit defects on resale, and upper bound(s) to keep repair congestion syndrome at bay.

Eager for details? Get in touch for a consultation, and we’ll see how seizing the data can make you an industry power broker.

 

Thou Shalt Not: Reverse Logistics Sins in the Tablet Industry

moses

 

“Moses then turned around and came down the mountain. He carried the two covenant tablets in his hands….When he got near the camp…he hurled the tablets down and shattered them in pieces at the foot of the mountain….The Lord said to Moses, ‘Cut two stone tablets like the first ones. I’ll write on these tablets the words that were on the first tablets, which you broke into pieces.'”

That’s right: Moses started reverse logistics for tablet repair. We doubt his CV needed it…

We also doubt he would recognize the field today. Tablets are a bit cheaper and have some new capabilities – though turning to sand, summoning angels, and melting faces are not (yet) among them. The market has also grown; archaeologists find it far simpler to locate modern tablets, and most tablets are, in fact, easier to have delivered if you don’t live on a mountaintop.

Above all, manufacturing firms are not almighty, and that’s what makes things interesting. Tablets don’t do well when hurled to the floor in anger, but inconveniently, most returned tablets have not been. Yet any manufacturer who plans to stay in business must swiftly process every tablet returned under the warranty, maintaining efficient product flow for resale, repair, and disposal options – to say nothing of replacement. And any manufacturer who plans to thrive must look under the humming hood of customer service, and check that the engine doesn’t waste fuel. The tablet industry has gone from zero to 60 in the blink of an eye, and shows no sign of slowing, but with that kind of speed comes unpredictability, and tablet repair is already associated with distinctive logistical problems.

Put simply, explosive growth means outgrowth. Take the scarcity of regional maintenance facilities. A behavioral economist might say that the cost associated with building them is more certain, tangible, and discrete than the cost of shipping without them – which is nonetheless higher. This may help account for an industry-wide failure to drive down aggregated shipping and facility costs, by investing in far-flung sites for cleaning, screening, and repair. What’s clear is that the customer base for tablets has outgrown the maintenance infrastructure, with expensive consequences.

Market size has also outgrown screening efficiency. The combination of high model turnover and overwhelming choice belies an immature market, and the result is a high return rate from “buyer’s remorse.” Many support organizations routinely incur avoidable costs from inefficient testing and repair, usually through a third party service provider (3PSP).

Weak front-line screening and diagnostics represent a third revenue sink. Though robust technical support boosts customer satisfaction and limits frivolous transit and testing costs, the tablet industry has been head-scratchingly slow to catch on. Industry standards that were ubiquitous in the “PC era” are still percolating. Until the tablet industry heeds the unwritten commandments of screening and diagnostics, it will be smitten again and again by its reverse logistics supply chain.

These inefficiencies are easier discussed than solved. You may even be tempted to smash your iPad in frustration, or to mail it to California so a 3PSP can check whether it’s been smashed. We recommend taking a few deep breaths, and tuning in to our upcoming posts from Blumberg Advisory Group on the tablet industry. We’ll give you our take on how companies everywhere can optimize forward and reverse logistics velocities, hold down costs, and face the future in top gear.

 

How is the Liquidation Market Evolving?

liquidation

The Liquidation industry has changed a great deal over the past ten years or so. What was once a marketplace built upon relationships between buyers and sellers as well as price of inventory has shifted its focus towards the optimization of excess inventory. These days, its all about sophisticated methods for repurposing that excess and recovering the value within distressed assets. Retailers and Manufacturers (i.e., suppliers) now have a wide variety of options when it comes to liquidation of excess product. Suppliers need their vendors to act as trusted business partners now more than ever. What do vendors, retailers, and manufacturers need to know about the changing landscape of this industry so they can maintain a competitive edge?

The Importance of Information Technology

As technology grows more and more powerful every year, top-tier IT has become increasingly important to operate complex systems like transactions, purchasing trends, and inventory management. Liquidation vendors such as LSI, B-Stock Solutions, and Optoro have all utilized information systems to help them more efficiently manage their businesses. 

Liquidation Providers as Strategic Partners

Suppliers have recently realized that Liquidation is essential to exposing their product to budget-conscious consumers. They are now effectively championing these secondary channels. There are even a number of suppliers who are branding the liquidation platforms managed by 3rd Party Providers so they can sell liquidated products at a premium price. 

Self-Service Liquidation Models

Nowadays, as opposed to sending distressed assets from retail locations to a return center and then to a 3rd Party Liquidator, suppliers are trending towards self-service auction models. This is a solution that reduces logistical handling fees as well as transportation costs because it gives retails and manufacturers the freedom and flexibility to sell products directly from their own return centers. This method also allows the retailer or manufacturer to mark up the price of these products because they have effectively cut out the middle man.

Suppliers Need Flexibility and Options

Liquidation used to be all about selling products to the highest bidder, but no longer. Now, the primary focus has shifted to the optimization and flow of assets in the secondary market. Suppliers want options and flexibility when it comes to how, where, and to whom their products are sold. Its likely that a supplier might utilize multiple liquidators and look to their vendors to manage B2B and B2C liquidation platforms. Its also not unheard of for a B2B liquidation vendor to release a portion of the inventory, on the suppliers orders, to a competing B2C vendor. 

The new rules of the Liquidation marketplace dictate that vendors ought to have strong capabilities in IT management, e-commerce, quality control, and customer service. In particular, a vendor who has a firm handle on software and services has the opportunity to gain a competitive edge. Suppliers too are changing up the game in terms of how they approach the management of their liquidation channels. Suppliers must keep optimizing the flow and value of their products in the reverse logistics supply chain while continuing to build their brand; this demands that liquidation methods be factored into more decision-making than ever before. 

To learn more about how your company can grow to meet the demands of this continuously shifting industry, visit our site today and schedule a consultation for more information about trends and best practices.