Tip for OEM’s to Save on Reverse Logistics Transportation Expenses
Attention manufacturers, OEM’s, and retailers, you can work together to reduce the cost of transporting returned goods from the retailer to the manufacturer simply by working together. Most retailers do a lot more business with carriers than do their suppliers, manufacturers, and OEM’s. As a result, retailers are able to negotiate better LTL, Truckload, and small package rates.
However, many times when it comes to who pays transportation bills for goods moving from the retailer to the manufacturer in the reverse logistics pipeline, the manufacturer end up paying the carrier directly, at a higher rate. This is often the default assumption, but it doesn’t have to be.
If you are a supplier or OEM that does this, I have a great tip for you. Go to your retail customer and ask them to pay for shipping and bill you. Of course you will want to see what their transportation rates will be, but for the vast majority of suppliers, they will see a significant savings.
Savvy manufacturers often encourage their retail customers to work with them on this by agreeing on a mark up on the rates paid by the retailer, which is still lower than they would pay with their rates. With this arrangement the retailers make the spread between what they pay the carrier and what they bill their supplier. This also helps by providing the retailer more volume with their favorite carriers that the retailer can leverage to get better rates in the future on all their freight. The manufacturers saves big because they can dramatically reduce their transportation costs on returns by using the retailers rates which will be much better than what they can typically get from their carriers.
Returns Mistakes Manufacturer’s Must Avoid
Over the course of the next eight weeks, most consumer goods manufacturers will receive and process between 30% and 50% of this years total returns volume. How they deal with this tidal wave of volume and the reconciliation of credits with their retail customers will have a profound impact on their future relationships.
As the former head of Walmart’s reverse logistics division, I use to be amazed at how many manufacturers set themselves up for a fall. Many seemed to go out of their way to earn a poor reputation that would carry over to the spring when the buyers place their orders. Before I go on, I realize that Walmart was tough to deal with and overly demanding in many cases. However, as the head of all reverse logistics for Genco, the largest third processor of returns in the world, I saw the same behavior even for smaller, seemingly nicer retailers.
There are number of things a manufacturer can do to avoid taking a customer service hit resulting from how they deal with returns. Regardless of the retailer, manufacturers can set themselves up to actually improve their standing in the eyes of their retail customer, as opposed to becoming the target for ridicule and revenge come deal making time in the spring.
The biggest mistake that many manufacturers make is to shut down their factories and returns operations in January or February for maintenance and retooling. The impact of this on the retailer is huge. The reverse logistics pipeline gets backed up and that usually means damage rates go up, accuracy goes down, and tempers start to rise. If you must shut the factory down, fine, just don’t shut off the flow of returns during the most important time of the year.
Another area of consternation is around what “cost” to use when processing returns. This is perhaps the biggest area of debate between the retailers and manufacturers. To exacerbate the situation, arguments over cost usually land on the buyers desk, in spring, just when he is getting ready to negotiate the next year’s deals. Great timing.
To avoid this, the manufacturer should proactively address what cost basis will be used for returns, when they negotiate the terms of sales in the first place. Along with the cost basis for returns, manufacturers should ensure that the following impact items are clearly defined and agreed to:
- Consolidation fees if the retailer uses a return center
- Freight charges from movement of returns
- Product condition and packaging requirements
- Model or serial number ranges that are acceptable, if appropriate
- Restrictions on throwing the product away or selling it on the secondary market
Keep in mind that the above points of clarification and resulting financial terms will vary depending on if the item returned has been sold to a customer and returned or it is a guaranteed sale item.
Manufacturers should view returns as an opportunity to differentiate themselves to their customers. “Easy to do business with”, does not mean “make bad business decisions”, or “negotiate a bad deal.” If your sales person can engage the buyer upfront with a proactive approach to deal with the realities of selling products and dealing with returns, the overall relations benefits.
ATT Customer Service Lessons Learned
Recently my iPhone would not connect so I could not make any calls. I went on line and via SKYPE called ATT Customer Service. The lady who answered the phone was very polite, clearly reading from a screen that came up after I entered my cell phone number and then she started “trouble shooting” my phone.
For the next 23 minutes she put me on hold, asked basic questions like “have you turned if off and on then tried calling?” In all I was put on hold four times. The last two times, I could hear her supervisor telling her what to ask and I sat there as she parroted the question to me and my answers back to the supervisor.
After the “trouble shooting” list of questions were complete, none of which resulted in me doing anything with my phone, she told me that she needed to transfer me to “TECHNICAL support.”
Great, I had been on the phone for 23 minutes at this point.
Then she said, “I want to review what we’ve done and I need you to confirm that is right.”
What? Ok, I’ll play. She then walked me through the “trouble shooting process” at the conclusion of which she asked “Is that correct?” “Yes it is” I said.
Next she said “Sir, how would you rate our trouble shooting process. Would you say it was…”
At this point, I lost it. “Are you serious? Transfer me to somebody who can help me!” She was going to survey me about how she couldn’t help me!!??
She did transfer me and after spending two minutes repeating my account information to the lady in “TECHNICAL support” I was asked to do two things that immediately fixed the problem. This part of the call took less than 2 minutes.p>
There are three big lessons in customer service for you and ATT Wireless:
- ATT – next time make it clear on your site the difference between “Customer Service” and “Technical Support” and your customers won’t get so frustrated and your people won’t hate their jobs as much.
- ATT should teach their operators when to survey and when not to survey customers. Common sense should always trump computer driven scripts.
- ATT should have a much faster way to determine where you need Customer Service or Technical Support. If you can only handle billing problems then don’t waste time. Move fast, the customer is waiting.
Technical Support was so good, I came away loving my iPhone once again. She even gave me the direct dial number (888-892-9760) so I can get my iPhone problem fixed fast the next time there is a network issue, sun spots hit, or I have a TECHNICAL issue.
Tweet or Die
In today’s business world, you can categorize executives into three camps. The first, and typically oldest camp, are the Luddites. Luddites are made up of people that refuse to embrace technology. They expect to be admired because they can read emails. Of course they learned to do this to survive. Luddites won’t be around in 2020 because they will be retired or dead.
The second faction is what I call the Google Generation. This is large, typically middle aged group of executives that embraced new technology as it was being born. This is the group that watched and maybe even participated in the infamous dot com bubble. They email while on autopilot, they google everything, and they have a blackberry or smart phone with them at all times so they can check their email and google anything, anywhere.
The problem the Google Generations faces is that they resist upgrading and adopting new technology. They don’t text message, they email. They don’t Tweet, they email. They don’t post a blog, they write a newsletter. They only spell English words and they have spell check on auto. They don’t see a need. 4 Thm, txt msgs & tiny urls, r like OMG!
The Google Generation will have to adopt or they will become irrelevant faster than they think. They still have time. They can quickly learn to Tweet, set up a Linked In and Facebook account for themselves and their business, and figure out how to tie it all together to help drive business.
The third group, I call the Tweetie Birds, range in age from 20 something to 50+. They live in a world where function trumps form. Spelling is optional. (LOL) They coordinate all the social media. By that I mean, they record a podcast, post it on their blog, notify their followers on Twitter that the podcast is up on their blog and on Apple Itunes, and they have their Tweets posted on their Facebook, MySpace, Plaxo, and Linked In automatically.
Tweetie Birds also keep up with everything from news, to sports, to personal activities, even when their favorite food vendor is pulling up in the parking lot, all by sound bite sized feeds that they can easily access via the net, their iPhone, or via text message. Easy input, easy output.
Tweetie Birds move fast, learn fast, but live simply. They have been trained to multi-task almost from birth.
What everyone else had better realize is that these people are taking over. They will only deal with others that can speak their language, in their format, at their speed and they will force their communication requirements on the world.
A great example of this was at the bottom of an email I recently received. (Yes Tweetie Birds do email, but only when required.) Below the “Thanks Tim” was the person’s phone number and the caption “Escalation – John Smith 412-555-5555″. This person worked for a technology company. In an instant he told everyone he communicates with in the world all that was required if there was a problem. This is more than just a good idea or improved customer service. This is the new way of thinking about communications at it’s best.
Brilliant!
“The Customer Comes Second” – Tom Peters
The bottom line – Attract great talent, take great care of them, and they will do a great job of taking care of your customers.
Tom Peters on Organizational Excellence from Tom Peters on Vimeo.
UPS Learned It Isn’t Big Brother, It’s The Customer
The internet has changed the way the world works in just about every way possible. Some customers are using technology in creative ways to monitor supply chain activities. Supply chain companies must work with the customers and their employees to ensure they perform at a high level, whether the customer is standing there or not. You never know when a customer may be watching, or how.
If your team performs at a consistently high level, it won’t matter if the customer is watching or not. If they take short cuts or ignore quality processes, they could find themselves in an embarrassing situation, like the video below. This video has the most views on YouTube of any UPS Delivery video, including their multimillion dollar white board ad campaign.
Outsourcing Lessons Learned
Many companies today are outsourcing functions in many areas. Call centers, for example, are being outsourced for a lot of good reasons. Executives, however, have to be careful in selecting the provider they use when outsourcing.
To the customer, the party you outsourced to is you. Customers don’t care who’s name is on the paycheck of the person they are talking to. They will hold you responsible. Before you blindly follow the recommendation from the VP of Procurement, check out the service provider yourself.
By the way, if you want to eliminate some excess, wasted overhead in your company, cut the entire Procurement Department. During my 15 years as a service provider, I never saw a Procurement Department that earned their keep. I also never talked to any insiders that had to use them that thought they were worth a nickle either. But, I digress.
A good example poor customer service reflecting badly on the outsourcing party is Healthcare Recoveries, working on behalf of Highmark Blue Shield (guess the “blue cross” wasn’t PC). I received two letters from Healthcare Recoveries for claims related to treatment on two of my children. The letters asked me to call an 800# during normal business hours and answer a couple of questions. Of course, they didn’t say what the questions were. They didn’t offer an simple online solution and most irritatingly, they wouldn’t answer the phone!
For two weeks, I called the 800# during normal business hours. I’ve called FIVE times to date and have yet to talk to a human being. I am concerned about my health insurance so I must keep calling. However, I’m getting upset with Highmark Blue Shield. They are the ones who continue to raise my premiums and cost me money and it is clear they are wasting it on this call center service that won’t answer the phone.
Bet the VP of Procurement and the CEO of Highmark Blue Shield NEVER actually called the 800 # to see how it really worked. They probably reviewed a great power point presentation and probably actually called the references the potential providers gave them. However, I bet they didn’t put themselves in the shoes of their customers and try to use the service.
Instead of just being bitter, I thought I would offer up a few outsourcing guidelines for all:
- Don’t use Procurement for anything. They don’t know anything about the subject matter, providers, or internal needs of the guys who have to live with their decisions. Procurement people are like the consultants that ask to borrow your watch then tell you what time it is. Let the internal experts pick the providers when outsourcing.
- Put yourself in the shoes of your customer and see if the service is as advertised. Figure out how to mimic your customers and use the service. Don’t tell anyone, just do it.
- For every reference a provider gives you, find two more that use the service that they didn’t give you. A great place to find these “other” customers is from the providers competition.
- After you’ve hired them, check out their service yourself, regularly. In a prior life, we started a hot line for employees to call. Once a quarter a member of our Board of Directors would call to see how we would react to his fake situation. This hot line was a great success and it’s success was in no small part due to that Board Member who kept us on our toes.
- Never forget, to the customer, that party you outsourced to is YOU. You can’t blame anything on them. The customer doesn’t care. If they love them, they love you. If the customer gets upset dealing with them, they are mad at you.
Hopefully, now you can make better decisions in outsourcing. Shoot, worst case, you can feel good about getting rid of your Procurement Department and cut needless, ineffective overhead expenses!
Sears vs. ATT – Customer Service Faceoff
In the last couple of days I’ve had two extreme example of customer service, one good and one bad. As you will see, good customer service will result in more profit complete with free word of mouth advertising, while poor customer service results in wasted expenses and loss of future sales.
My wife purchased a refrigerator from Sears last year and was talked into buying a maintenance agreement with it. I personally think that most maintenance agreements are a waste but it made my wife feel better so it seemed to be worth it.
Last week we received a call from an automatic system that said, in an automated voice, “Your maintenance call has been scheduled between 8:00 am and 5:00 pm on Tuesday. Please contact us if you will not be available during that time.”
What my wife heard was “We are going to hold you captive for an entire day and not communicate with you until our maintenance guy decides to show up. If you don’t like it, tough, cancel the damn appointment.” My wife, who didn’t initiate the event, was instantly pissed at Sears. This rekindled the last time we had routine maintenance. Sears called at the end of that scheduled day and said they couldn’t make it and they would have to reschedule, which they later canceled and rescheduled again.
No matter what the poor maintenance guy does when he gets to the house, my wife is going to have a problem with Sears and she will tell everyone about it. Remember, this was for routine maintenance. The frig works fine. Sears just figured out how to snatch defeat out of the jaws of victory.
Compare that to my experience with AT&T. I received two bills mailed to my former employer that when received, were already 30 days past due. I called the customer hot line and really let into this lady that answered my call.
“I have called you guys twice about getting the address changed on my cell phone. Not only is the address wrong but you over billed me. I’m only suppose to pay $70 per month but you’ve charged me $250 each month!” The lady was very polite and asked for a minute to figure out what went wrong. She typed and sighed and then said “Wow, I don’t blame you for being upset. You requested this change in November. You were also billed for an air card for some reason. I will fix that right now. We put your new address in the paperless address space.”
“Seriously? Why would you put a PO Box in a paperless address space?” I snapped, expecting that somehow it would be my fault.
“We screwed up. I’m going to take off the late fees, cancel this one charge, and make a note of our error. I will make sure that it is completely taken care of. You might want to consider setting up a direct withdrawl or credit card payment to make sure we don’t mess you up in the future.”
I was shocked. They screwed up and admitted it, fixed everything and gave me options to prevent future errors. I was in love with AT&T. I set up a direct withdrawl on the spot and told three people about the great customer service that day.
Good customer service always pays off. Poor customer service is just wasted overhead.
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