chapiter 11 telecommunications logistics

CHAPTER 11 TELECOM LOGISTICS

INTRODUCTION

Supply Chain measurements or metrics such as Inventory Turns, Cycle Time, DPMO and Fill Rate are used to

track Supply Chain performance. Commonly used by Supply Chain Management, metrics can help you to

understand how your company is operating over a given period of time. Supply Chain Measurements can cover

many areas including Procurement, Production, Distribution, Warehousing, Inventory, Transportation, and

Customer Service - any area of logistics.

» Backorder Reporting

» Balanced Scorecard

» Cycle-Time

» DPMO

» Fill Rate

» Inventory Accuracy

» Inventory ABC Classification

» Inventory Finance

» Inventory Turns

» On-Time Shipping/Delivery

» Perfect Order Measure

» Performance to Promise

» Transportation

TRANSFORMING

TELECOM LOGISTICS

ACROSS

VALUE CHAIN

Missing Bricks for Value Creation

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SUPPLY CHAIN REMINDER

1. Tracking your Metrics allows you to view your performance over time and guides you on how to optimize

your Supply Chain. It allows management to identify problem areas. It also allows for comparison to other

companies through like industry benchmarking. 2. Certain metrics, such as Inventory Turns, have a widely

accepted definition. Other metrics, such as Backorders, may need to be customized for your particular industry

or logistics business model. 3. Measurements alone are not the solution to your weak areas! The solution lies in

the corrective actions that you take to improve the measure. The solution comes from process and/ or system

improvements. 4. Measurements should have owners....people or departments that are responsible for

achieving an agreed upon target on the metric. Supply Chain Management needs to encourage and support the

process changes to achieve the desired targets.

SUPPLY CHAIN METRICS TO IMPROVE LOGISTICS OPERATION

1. The first step is to identify the metrics that you want to use. Do not use every metric available. Rather, focus

on the vital measurements that mean the most to your business. These can be considered your KPI's (key

performance indicators). You should have 3-5 KPI's per functional area. If you decide to include numerous

measurements, you may encounter "analysis paralysis".

2. Next, you need to understand the meaning of these metrics. It is not enough for management to simply view

these measurements; they must also understand the meaning behind them.

3. The next step is to learn the mechanics behind the measurements. What drives them...positive & negative.

Try to understand the various factors that influence your results.

4. using this information, identify weakness or areas of improvement in your current processes.

5. Set goals based on these improvement areas. The goals should be aggressive, but yet obtainable. Goals can be

based on benchmarking against like companies or goals can be set to reflect a specific percentage improvement

over past performance.

6. Put corrective action in place to improve your processes. Make sure that these corrective actions do not

negatively affect other areas. Also, check that all affected areas have a clear understanding of the changes.

7. Monitor your results. Did your corrective actions yield your desired results? If so, what is your next area for

improvement? If you did not get the desired results, what went wrong? Try to identify the root cause of your

undesired results.

VARIOUS SUPPLY CHAIN METRICS:

Inventory Months of Supply:

Inventory On Hand / Avg. Monthly Usage

(the Avg. Monthly Usage is typically the yearly forecast divided by12)

Inventory Rationalization:

An analysis that categorizes your inventory by various categories. Examples-

- Current Inventory levels of A,B,C products

- Inventory turns of A,B,C

- Value of Slow Moving product (those products you may have more than "x" number of weeks’ worth)

Material Value Add:

- Sell price minus material cost divided by material cost.

Upside Flexibility:

The ability of a manufacturer to meet additional demand requirements. This is usually compared as a

percentage over the original order. This is protection for the buyer. It allows for the actual demand to be higher

than the forecasted quantity.


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SETTING GOALS FOR YOUR SUPPLY CHAIN METRICS:

Once you have an understanding of basic Supply Chain Metrics, focus on a limited number of measurements

that add value. Choose those metrics that will track your company’s true performance. You don't want to get

into the trap of "analysis paralysis". Over-analysis leads to confusion and sometimes conflicting goals. I would

recommend picking 5 - 7 key measures per functional area. These measures are sometimes referred to as KPI's

(Key Performance Indicators).

Once you have identified these metrics, you can then set your goals. This will enable your

organization/department to track it's performance to expectations. But how do you set these goals? How do you

determine what to target? At what point have you achieved Supply Chain optimization?

Your overall company goals should be considered when setting your Supply Chain targets. You want to make

sure that your Supply Chain goals do not conflict with your company objective. Targets can reflect how

aggressive you want to be in pursuing change.

Some Guidelines.....

First, make sure you understand exactly what it is your measuring. What drives this measure? What causes

failure? Where do you need improvement? Once you can answer these questions, you're in a better position to

set your goals.

Some companies use a guideline of 10% improvement per year. But, this is a very general guideline.

Benchmarking: One way to set your goals is Benchmarking. There are various benchmarking services, which for

a fee, will compare your company to other "like" companies. You submit your answers to a set of questions.

Those answers are averaged in with other company’s submissions. Averages are calculated and World Class

levels are set.

As an example, if the average Fill Rate for your industry is 93% and your performing at a 80% level, then it's

obvious you need to set an aggressive goal. However, if the industry average is 93% and you're at 94%, you may

want to target a minimal gain. Your aggressive efforts should probably be focused in other areas. The caveat

here is defining "like" industries. Make sure the comparison your making is a fair one.

SMART GOALS:

Specific: Provide enough detail so that there is no question on what is being measured and no question how the

metric is calculated. You should be specific as to the measurement, goals and responsible people/department.

Measurable: Here is where you use your metric. Make sure you have a reliable system in place that will

accurately measure your performance

Attainable: Will the Supply Chain projects you have scheduled for the year produce results that will achieve your

goal? The person setting the goal and the person responsible for achieving the goal should agree with the target.

If results are un-attainable or unrealistic, they will have a de-motivating effect on your employees.

Realistic: Don't plan to do things if you are unlikely to follow through. Better to plan only a few things and be

successful rather than many things and be unsuccessful. Your Supply Chain goals should be challenging, but

realistic in relation to the improvement projects you have in place.

Time frame: Identify when you’re targeting to hit your goal.

Example: Your current Fill Rate is 87% and your Supply Chain projects should improve your measure to 93%. But

is the 93% goal for the final month of the year OR is it averaged out over a specific timeframe?

Customer Service Policy:

Additionally, make sure that your Supply Chain goals are aligned with your Customer Service Policy.

Example: Your agreement to your customer might be a 95% Fill Rate, with an Order Cycle Time of 10 days. Make


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sure that your goals reflect these customer agreements. Supply Chain optimization is difficult to achieve. But

with the right metrics in place and proper goals set, it is possible to know where to focus improvement projects.


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SUPPLY CHAIN MISSION

Operator Logistics will create added value for the operator by assuring, with minimal costs and capital

employed, a maximal service for

- Planning

- Ordering

- Storage

- Delivery

- Return of materials

Logistics will therefore provide supply chain expertise

to customers to improve existing processes, implement

new concepts and systems and will train and support

their customers.

Logistics - (business definition) Logistics is defined as a business planning framework for the management of material,

service, information and capital flows. It includes the increasingly complex information, communication and control systems

required in today's business environment. -- (Logistix Partners Oy, Helsinki, FI, 1996)

Business Logistics - The science of planning, design, and support of business operations of procurement, purchasing,

inventory, warehousing, distribution, transportation, customer support, financial and human resources. -- (MDC, LogLink /

LogisticsWorld, 1997)

Operator Logistics - ...the process of planning, implementing, and controlling the efficient, effective flow and storage of

goods, services, and related information from point of origin to point of consumption for the purpose of conforming to

customer requirements." Note that this definition includes inbound, outbound, internal, and external movements, and

return of materials for environmental purposes. -- (Reference: Council of Logistics Management, http://www.clm1.org/mission.html, 12 Feb 98)


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DISTRIBUTION CENTERS

Mid-size Operator Logistics usually have two distribution centers for

telecom engineering material, spare parts and consumer products.

• Capacity +1.000.000 order lines / year

• e-fulfillment capacity 125.000 order lines / year

• 6300 trucks received / year

• Dock to stock time maximum 4 hours

• 99% of orders entered before 1 PM shipped next day at 6 AM

• Inventory accuracy of 99,9%

Distribution center

for all heavy materials

Cable cutting & distribution

...at the right time

...at the right place

...at the right specifications

• 2000 m² indoor; 16000m² outdoor storage

• Cable cutting for reels up to 3m diameter

• Cutting capacity big reels (diameter > 1,2m)=5.000cuts/year

• Cutting capacity small reels (diameter < 1,2m)=4.800cuts/year

Unit load handling up to 20 Ton/m


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All trucks are well equipped and have scanning equipment for parcel traceability till final destination

Daily national transports from DC to

regional transhipment Hubs; transport

of goods from national suppliers

DISTRIBUTION NETWORK

Best in Class Operator Logistics has an efficient own distribution operation for delivery and return of goods

Regional hubs with daily routes covering the country territory.


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DECREASING INVENTORY LEVEL

• Manages processes and systems

needed for efficient inventory management

• Assures appropriate stock levels

• Reorders material from supplier

• Follow up of deliveries

• Challenges forecasting

• Responsible for material master data integrity

• Gives input for financial postings & reporting

• IT Systems used SAP or Oracle


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MAIN OPTIMIZATION PROJECTS

Demand Planning

Linking the materials requirements planning with the product and service forecast, will result in lower

inventory level, less obsolesces and more agility in the Supply Chain

RELOOP

Reverse Logistics Optimization simplifies the processes related to the return flows of network

infrastructure equipment and optimizes spare parts management.

Supply Chain Portal

Enables e-collaboration with suppliers: now for RELOOP, plans for delivery scheduling, forecast sharing,

VMI, Subcontracting….

Cable Mgmt System

New system for cable yard operations and cable supply management

Work-order BOM

Link material ordering to closing of work orders by technician.

Increase revenues and yield; reduce field stock.

SLA & KPI IMPROVEMENT


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PRODUCTION PLANNING AND FORECAST PROCESS

Current situation:

� Monthly Build-to-Order production limits procurement,

production and delivery flexibility

� Order lead-times are 6-8 weeks

� Inventory levels throughout the Supply Chain is high

� Late order confirmation from Sharp

Approach:

� Provide Sharp with Vodafone Spain’s Planning and Forecast Process of Vodafone

� Provide Sharp with electronic demand planning process

� Organize working session among logistics teams

- To identify topics to be addressed

- To agree sub-teams, responsibilities and deadlines

Results

� Changing the production planning process from monthly to weekly will increase flexibility at Sharp and

therefore reduce the order lead-times. This will finally lower inventory levels throughout the Supply

Chain.

CUSTOMER CUSTOMIZATION PLANNING

Current situation:

� Built-to-Order gives no customization flexibility

� 2nd customization can only be done at Vodafone, which e.g. limits the flexibility for marketing

campaigns.

� Early customization increases risks of obsolete inventory

� Delivery flexibility is also limited by current process

Approach:

� DHL to provide Sharp with Business Case Model Template

� Sharp to complete the template

� Evaluation of the results in workshop

Results:

� Sharp has proposed three customization schemes (in China or Europe) and identified that production

and customization in China is the most effective process. We will re-evaluate this analysis based on

figures to confirm Sharp’s result.

� An optimization of the customization scheme should result in more flexibility for production, delivery,

marketing campaigns and therefore total cost reductions on both sides.

CASE STUDY

MANUFACTURER & OPERATOR OPTIMIZING SUPPLY CHAIN INITIATIVE


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MANUFACTURER LOGISTICS ORGANIZATION OVERVIEW

Logistics EVP


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CONTRACT MANUFACTURING IMPLEMENTATION

Group Logistics Manager

Contract Manager

International Transport Managers


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4 © 2005 Nokia V1-Filename.ppt / yyyy-mm-dd / Initials

Company Confidential

Demand Planningis needed for many purposes

DO Supply Planning:material and capacity

Nokia & Customer DP & LE

DPA metrics

Nokia/NET Latest Estimate SNM/DEM Sales Availability

Management

Logistics Service Providers

Subcontractors

DMS/PS Resource planning

Nokia/NET Management

NET

NET

NET Management

Supplier & Operator

DEMAND PLANNING IS REQUIRED FOR THE VALUE CHAIN EFFICIENCY

The purpose of demand planning is to enable just-in-time deliveries of the site equipment

and services. The capacity of the delivery chain is dimensioned based on the demand plan.

DEMAND PLANNING IS REQUIRED FOR A EFFICIENT & WELL FUNCTIONING VALUE CHAIN


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CUSTOM CLEARANCE

It is critical to plan in advance the custom clearance for international shipments to avoid painful delays and

additional fees affecting customer satisfaction and project execution.

Custom clearance can be an important activity for regional offices to manage the regional logistics center.

Many global manufacturers find it is worthwhile to establish regional hubs to centralize regional logistics

activities and making sure to be compliant to the local custom clearance rules and regulations.

Regulations may change in a regular basis and procurement organizations need to be updated at all time


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INCOTERMS

The International Chamber of Commerce (ICC ) published the 8th and current version of its International

Commercial Terms, also known as INCOTERMS® on January 1, 2011.

The revised rules, originally designated "INCOTERMS 2010", contain a series of changes, such as a reduction in

the number of terms to 11 from 13. The DAF, DES, DEQ, and DDU designations have been eliminated, while two

new terms, Delivered at Terminal (DAT) and Delivered at Place (DAP), have been added. INCOTERMS 2010 also

attempt to better take into account the roles cargo security and electronic data interchange now play in

international trade.

WHAT INCOTERMS ARE - INCOTERMS are a set of three-letter standard trade terms most commonly used in

international contracts for the sale of goods. First published in 1936, INCOTERMS provide internationally

accepted definitions and rules of interpretation for most common commercial terms. In the US, INCOTERMS are

increasingly

WHAT INCOTERMS DO - INCOTERMS inform the sales contract by defining the respective obligations, costs

and risks involved in the delivery of goods from the Seller to the Buyer.


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WHAT INCOTERMS DO NOT DO - INCOTERMS BY THEMSELVES DO NOT:

- Constitute a contract;

- Supersede the law governing the contract;

- Define where title transfers; nor,

- Address the price payable, currency or credit terms.

- These items are defined by the express terms in the sales contract and by the governing law.

INCOTERMS ARE GROUPED INTO TWO CLASSES:

1. TERMS FOR ANY TRANSPORT MODE

EXW - EX WORKS (... named place of delivery)

The Seller's only responsibility is to make the goods available at the Seller's premises. The Buyer bears full costs

and risks of moving the goods from there to destination.

FCA - FREE OPERATOR (... named place of delivery)

The Seller delivers the goods, cleared for export, to the operator selected by the Buyer. The Seller loads the

goods if the operator pickup is at the Seller's premises. From that point, the Buyer bears the costs and risks of

moving the goods to destination.

CPT - CARRIAGE PAID TO (... named place of destination)

The Seller pays for moving the goods to destination. From the time the goods are transferred to the first

operator, the Buyer bears the risks of loss or damage.

CIP - CARRIAGE AND INSURANCE PAID TO (... named place of destination)

The Seller pays for moving the goods to destination. From the time the goods are transferred to the first

operator, the Buyer bears the risks of loss or damage. The Seller, however, purchases the cargo insurance.

DAT - DELIVERED AT TERMINAL (... named terminal at port or place of destination)

The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the

Buyer's disposal at a named terminal at the named port or place of destination. "Terminal" includes any place,

whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The Seller

bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place

of destination.

DAP - DELIVERED AT PLACE (... named place of destination)

The Seller delivers when the goods are placed at the Buyer's disposal on the arriving means of transport ready

for unloading at the names place of destination. The Seller bears all risks involved in bringing the goods to the

named place.


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DDP - DELIVERED DUTY PAID (... named place)

The Seller delivers the goods -cleared for import - to the Buyer at destination. The Seller bears all costs and risks

of moving the goods to destination, including the payment of Customs duties and taxes.

2. MARITIME-ONLY TERMS

FAS - FREE ALONGSIDE SHIP (... named port of shipment)

The Seller delivers the goods to the origin port. From that point, the Buyer bears all costs and risks of loss or

damage.

FOB - FREE ON BOARD (... named port of shipment)

The Seller delivers the goods on board the ship and clears the goods for export. From that point, the Buyer bears

all costs and risks of loss or damage.

CFR - COST AND FREIGHT (... named port of destination)

The Seller clears the goods for export and pays the costs of moving the goods to destination. The Buyer bears all

risks of loss or damage.

CIF - COST INSURANCE AND FREIGHT (... named port of destination)

The Seller clears the goods for export and pays the costs of moving the goods to the port of destination. The

Buyer bears all risks of loss or damage. The Seller, however, purchases the cargo insurance.

PRACTICE POINTS

BE SPECIFIC:

If you use INCOTERMS in the Sales Contract or Purchase Order, you should identify the appropriate INCOTERM

Rule [e.g. FCA, CPT, etc.], state "INCOTERMS 2010" and specify the place or port as precisely as possible.

RECOGNIZE WHERE THE RISK OF LOSS TRANSFERS:

A common misconception when the Seller pays the freight is that the Seller has the risk of loss until the goods

are delivered to the place or port specified on the bill of lading or airway bill. Actually, when using INCOTERMS

CPT, CIP, CFR or CIF, risk transfers to the Buyer when the Seller hands the goods over to the operator at origin,

not when the goods reach the place or port of destination.

Understand that under CIP and CIF, the Seller is only obliged to obtain insuranceon minimum cover.

UNDERSTAND WHO HAS RESPONSIBILITY FOR LOADING AND UNLOADING CHARGES. FOR EXAMPLE:

DAT obliges the Seller to place the goods at the Buyer's disposal after unloading at the named terminal at port or

place of destination.

DAP and DDP oblige the Seller to place the goods at the Buyer's disposal on the delivering operator ready for

unloading at the named place of destination.

CPT, CIP, CFR or CIF on the other hand, require the parties to identify as precisely as possible the point at the

agreed port of destination because the costs up to that point are for the account of the Seller.

Under FCA terms, the seller satisfies his obligation to deliver when he has handed over the goods, cleared for

export, into the charge of the operator named by the buyer at the named place or point. The buyer is

responsible for inland freight, unloading at port of embarkation and loading on ocean operator/airline.


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REVERSE LOGISTICS

RECONDITIONING – when a product is cleaned and repaired to return it to a “like new” state

REFURBISHING – similar to reconditioning, except with more work involved in repairing the product.

REMANUFACTURING – similar to refurbishing, but requiring more extensive work; often requires completely

disassembling the product

RESELL – when a returned product may be sold again as new

RECYCLE – when a product is reduced to its basic elements, which are reused

CASH IS HIDDEN IN RETURNS

Some common objective for reverse logistics initiatives:

• Improved customer satisfaction and loyalty

• Reduced repair / replacement unit costs

• Reduced replacement turnaround times

• Feedback on hardware design and ease of use

• Feedback on OEM quality

• Feedback on end consumer education and first level customer support

• Improve understanding of real reasons for hardware returns

• Reduce overall level of returns

• Standardize returns processes across enterprise where possible/desired • Utilize common systems across enterprise and automate the returns process to the extent possible/desired • Handle increased volumes of returns due to new products, programs, business partners • Enable demand driven supply chain concepts for returned products • Differentiate company services from the competition


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REVERSE LOGISTICS AND THE SUPPLY CHAIN MATURITY MODEL

Improving the reverse logistics process starts with making selections from the list of objectives a firm wants to

accomplish with its attention to this generally neglected area of supply chain. Our list includes the following

common intentions:

• Improved customer satisfaction and loyalty – don’t lose customers because of a bad experience

• Reduced repair, replacement or re-shipment costs – handle the process in an effective manner

• Gain feedback from the process to eliminate root causes – demonstrate to the customer that the firm

studies its problems and makes them go away

• Improve understanding of the reasons for returns – get to the bottom of why the system did not

function in a fail-safe manner

• Utilize common systems and automate the returns process to the extent possible – Find the way to turn

a problem into an opportunity for better customer satisfaction and a source of revenue

• Differentiate the firm’s services from those of the competition – Use the experience to gain customer

confidence and build new sales

With such a list in hand, the next step is to determine what is currently taking place to meet the objectives

versus what must be done to assure they are fully met. The procedure must follow some basic principles,

including:

• Move credit/flag product receipt point for returned product as close to the customer as possible

• Minimize shipping costs

• Minimize refurbishment/repair costs

• Minimize hand-offs between organizations, facilities, systems, etc. in order to reduce costs and overall

cycle time

The results were impressive:

• Re-designed business processes, new reverse logistics application capability and outsourcing of non-

core functions allowed them to expand and improve level of service to customers, increase sales

revenue stream by adding new customers, and increase overall profit margins

• The new reverse logistics solution enabled the following typical improvements for their business

customers (before versus after):

– Reconcile warranty credit – from 30+ days to <8 days

– Average cost recovered per returned unit – from $0 to $90

– Time to process return – from 45+ days to <10 days

– Average cost of replacement unit – from $150 to $100

– Enhanced diagnostic reporting and status visibility for business partners and end

consumers

In conclusion, reverse logistics should be taken out of the supply chain twilight and brought into the open, so it

can become an area of opportunity, as opposed to being a necessary evil. Companies should select one area of

the business, where they can test the concept and develop a model for using what takes place as a source of

knowledge for better satisfying customers and turning an area of cost into an area of profit.

MATURITY GRID – REVERSE LOGISTICS


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I

Process Optimization

Divisional

II

Internal Excellence

Intra-enterprise

III

Network Formation

Inter-enterprise

IV

Value Delivery

System

External

V

Value Delivery

Network

Total business

system

- Paper

intensive/Informal

returns process

-Reverse logistics

processes. Policies

and procedures vary

across sites/division.

-minimal fault/reason

for return analysis and

metrics/minimal

tracking of hazardous

waste

-no end-of-life returns

process

-Inefficient

unauthorized and

blind returns

processing

-Return authorizations

(RMA) not linked to

original sales order

- Manual warranty

and return credit

processes

- significant post-

return data clean-up

and reconciliation

-Return centers that

enable a single

reverse logistics

process that spans

sites/divisions

-Electronic

transactions simplify

warranty and credit

processes

-Gated process that

separates simple and

Complex returns

-Tracking of metrics

for fault analysis is fed

into product design

process

- Single information

repository for returns

tracking

-Reverse logistics

process is linked to

key

costumer/supplier

processes

- Preventative

diagnostic

capabilities present

at return point to

minimize “no fault

found” returns

- return metrics

linked across key

value chain partners

- Efficient multi-leg

repair, refurbish and

exchange programs

- Increased velocity of

receipt to refund

process

- BPO of select

reverse logistics

operations

- Hazardous are

tracked and disposed

across the value

chain

- web-based tools

and RFID enable

product

identification at

return point

- Distribution of

returned spare-

parts and

refurbished product

through value chain

members

- Returns metrics

used to improve

product design

across the value

chain

- System wide asset

tracking drives

inventories and

returns capacity

- Synchronized

demand planning

across the value

chain limits excess

channel inventories

and returns

- Costumer self-

service for returns,

repair and warranty

inquiry and tracking

-New business

formation of

multi-costumer 4th

party logistics for

recovery,

refurbishment,

and repair

- Returns process

used to drive sales

though new

channels

- Integrated return

centers that

enable advanced

exchange,

recovery and up-

sell/cross-sell

opportunities

across the entire

value chain

reverse logistics can include a multiplicity of actions, from returning goods from a consumer to the retailer or

provider, receiving customer service or having field service take place to repair or fix the item in question, or

having the product sent to a third party for repair or replacement. The fact is that reverse logistics includes

virtually all of these services, and we counsel a broad perspective should be taken to not let this area be a

burden to the business. Most companies tend to place the involved operations in the hands of a subsidiary part of an existing logistics

function and pay little attention to the effect it can have on the company’s brand, financial performance or

supply chain efficiency. A better view is to take a harder look at this area of the supply chain and find ways to

turn what is typically a nuisance into something of value to the business. To make sense out of what we’re considering, let’s remember that reverse logistics includes all of the activity

related to the final disposition of products that must be removed from the supply chain system. Such activity

involves the processes related to removing products from a supply chain that do not have value for the


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customer or end consumer. These products may be the result of poor workmanship, over-stocked inventory,

outdated or obsolete design, damages, or general dissatisfaction with product performance. For whatever

reason, someone at the end of the downstream side of the supply chain says “I don’t want it” and the smart

supplier will make it easy to return the goods. The goal is to make certain the least damage is done to the firm’s brand and reputation, and to handle the

process so it results in a positive rather than a negative impression. A system of disposition management is

required to handle such situations in an effective and rewarding manner, with the understanding that reverse

logistics is far different than forward logistics. In the return situation, there must be a convenient point of collection for receiving the goods or to remove

these goods from the supply chain. This process step can require inspection, re-packaging, storage, and salvage

of any residual value that might exist; and the development of a transportation mode that is compatible with

the existing forward system of supply. The range includes credits for unwanted goods that are returned to

inventory, payment for damage that may or may not be a fault of the supplier, replacement of obsolete product,

and simply accepting the return of goods that have no apparent problem. Much of the goods in the last

category are re-conditioned or re-packaged to go back into the system or to an alternate buyer. There are many

examples of firms using this type of system to turn what used to be an out-of-pocket loss into a profit by re-

selling the returned goods to a satisfied customer.

Reverse Logistics Model – Small Logistics Partner

In the model depicted above, the partner receives the returned goods and makes a test to determine if the need

is for disposal, there is a major defect and the unit must be repaired, or there is a cosmetic defect and the unit

can be refurbished. In either of the latter cases, the unit is repaired and placed in stock for subsequent used

stock order fulfillment.

In a broader situation, as shown in exhibit 3, the process becomes more involved. Now we see the unit is

returned based on the “return from” location and goes to a designated center. The same type of processing

takes place, but may also include factory direct repair if authorized by the OEM. This model is more appropriate

where large volumes of product are to be processed.

chapiter 11 telecommunications logistics

Business

supply chain metrics

supply chain performance

supply chain reminder

supply chain management

inventory turns

areas of improvement

improvement areas

certain metrics