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Copyright © 2007 Reverse Logistics Association Welcome Reverse Logistics Association Amsterdam Seminar June 25, 2007
Copyright © 2007 Reverse Logistics Association The Request for Information and Quote, Contracts & The Statement of Work Gailen Vick President Reverse Logistics Association
Copyright © 2007 Reverse Logistics Association Welcome and introductions OEM outsource decisions and building the RFQ Exercise and break 3PSP responding to the RFQ Outsourcing/Service best practices Exercise and break Contract requirements and RL components Understanding the Statement of Work Exercise Close Agenda
Copyright © 2007 Reverse Logistics Association Real knowledge is to know the extent of one's ignorance. Confucius
Copyright © 2007 Reverse Logistics Association Workshop Objective: Offer both a client/service provider perspective Cover key points of success and failure Opportunity to share best practices Provide a reference point while building agreements
Copyright © 2007 Reverse Logistics Association Supply Chain - After Market Services Product Life Cycle FORWARD LOGISTICS Supply Chain END USER / CONSUMER REVERSE LOGISTICS Aftermarket Supply Chain New Product Development Material Management Manufacturing & Distribution Aftermarket Customer Services Design Development Technology Roadmaps ASIC Development Mechanical Design PCB Layout Prototyping New Product Introduction Vendor Relations Planning Procurement Inventory Planning Component Fabrication PCB Assembly Box Assembly Volume Manufacturing Integration Configuration Final Testing Distribution to Customer Customer Fulfillment Transportation Customer Service Contact Centers (helpdesk, call centers) Depot Repair Field Service End-of-life Manufacturing Fulfillment Services IT Process Management Recycling Refurbishment/ Screening Replacement Management Returns Authorization Management Spare Parts Management Transportation/Warehousing Warranty Management "In other words, anytime money is taken from a company's Warranty Reserve or Service Logistics budgets, that is a Reverse Logistics operation" - Gailen Vick, President RLA Customer Service Contact Centers (helpdesk) Depot Repair Service Logistics –Field Service –Transportation/Warehousing –Spare Parts Management –RMA Management –Replacement Management End-of-life Manufacturing Fulfillment Services IT Process Management Recycling Refurbishment/ Screening Warranty Support
Copyright © 2007 Reverse Logistics Association Winning at Reverse Logistics Good relationships equal success Management participation at all levels Clear measurable objectives Agreement on business requirements Commitment to mutually solve problems Metrics performance vs. expectations Continuous communication/Improvement Trusting, open and honest relationship
Copyright © 2007 Reverse Logistics Association Course Contents, Expected Results Developing the Outsourcing Model Internal vs outsource true cost relationships What the 3rd Party Service Provider Needs in the RFQ RFP the key components, What the 3PSP needs to know RFP selecting the 3PSP RFP the 3PSP response Best Practices in building a long term relationship Unique components of a reverse logistics contract Components of the SOW
Copyright © 2007 Reverse Logistics Association Relationship Partnership Outsourcing Documents RFI RFQ Contract SOW RFI - Request for Information RFQ Request for Quote Statement of Work
Copyright © 2007 Reverse Logistics Association Facilities Executive Cross-departmental outsourcing investigation team Finance Manager PurchasingHR LogisticsLaborAcct.Legal Operations Manager Development ProdITProd Sponsorship Understand business objectives Quantify scope/schedule/resources of investigation Establish a decision process The Outsource Decision
Copyright © 2007 Reverse Logistics Association The Outsource Decision DepartmentItem Business Fund. Functional Issues Weight Cost Tracking Invoicing Problem Resolution Process Control Reporting Real Time Data Repair Tracking Transaction Capability Returns Mgt. Purchasing Inventory Control Import/Expor t Scrap Control Process Doc Control Engineering Repair Expertise Test Expertise ESD Control Organization Practices Meterology Document Control Training/Documentation Warehouse Environment Power Stability Expansion Senior Mgt. Operations Mgt. Operations Flexibility Cost Reduction Efforts Production Flexibility Quality Facilities Management Accounting IT Materials Process Eng. Risks Outsourcing Decision Matrix Cost
Copyright © 2007 Reverse Logistics Association Single vs. Multiple Suppliers OEM/Retailer 3 rd Party Program Mgt. OEM/Retailer 3 rd Party Location 3 rd Party Location 3 rd Party Location 3 rd Party Location The Outsource Decision
Copyright © 2007 Reverse Logistics Association Building the RFI/RFQ Business objective statement Contract & Statement of Work definition Operations history and forecasts Process flowchart and process times IT Requirements and reporting Material handling requirements Product specifications/BOM if pertinent
Copyright © 2007 Reverse Logistics Association Building the RFI/RFQ Create a 3PSP selection team Outline the selection/RFQ process Understand the 3PSP RFQ requirements Develop a ranking matrix Same information is available to all 3PSP candidates Outline and offer due diligence to sensitive information Ensure the RFQ process is published to 3PSPs
Copyright © 2007 Reverse Logistics Association Beginning OEM RFQ Process Selecting a Service Provider Who are the service providers? Where are they located? Can they meet our immediate needs? Are they reliable? Can they grow and stay competitive?
Copyright © 2007 Reverse Logistics Association Beginning OEM RFQ Process Create Detailed RFP/I/Q Register as an RLA User RL Quote dramatically simplifies access for Reverse Logistics Services RL Quote is a powerful sourcing tool for access to the Reverse Logistics world RFI ed to 3PSPs Receive Quotes from 3PSPs Feedback to 3PSPs Sourcing service providers with RL Quote is free for OEMs Simple; just complete the quick registration process Global exposure, feedback for 3PSPs
Copyright © 2007 Reverse Logistics Association RFIs are Released by OEMs & Retailers OEMs & Retailers Find 3PSP for Free 3PSPs Receive the RFIs Beginning OEM RFQ Process
Copyright © 2007 Reverse Logistics Association Outsourcing Matrix
Copyright © 2007 Reverse Logistics Association 3PSP Ranking Matrix
Copyright © 2007 Reverse Logistics Association OEM Outsourcing Expectation Adjustments Managing the Service Provider takes a different set of management skills Lines of Communication are different & more difficult Understanding and measuring the performance of the Service Provider Extra expense due to startup/transfer costs and follow-up costs 3PSP has its own priorities, perceptions, business objectives Market allegiance, security, strategic direction Building the RFQ
Copyright © 2007 Reverse Logistics Association Building the RFQ Response Service Provider RFQ Response Know the critical issues behind the RFQ Know the product/service roadmap: History & Future Eliminate boilerplate/sales jargon in the presentation Prepare a project plan to describe the startup plan Provide a statement on security operations
Copyright © 2007 Reverse Logistics Association OEM Expectations 3PSP understands the business Understanding of the price components and assumptions Creative solutions Cost reduction possibilities IT integration & reporting capability Program management and headcount Commitment to Continuous Improvement
Copyright © 2007 Reverse Logistics Association The 3PSP RFQ Response The first ten pages – what are they about –Your Company, the Business, or the Client Executive Summary – 3 to 5 reasons why your service is the best solution for the Client Dont be passive: dont say We can do this – be definitive in your statements Let the Client know your process on the first page Dont forget the things you dont know
Copyright © 2007 Reverse Logistics Association The 3PSP RFQ Response The Service Provider must present he understand the business: Experience in performing the service, or the talent to create the business The financial capability to invest in the future, to grow and to build infrastructure It has unique capabilities in technical knowledge or the expert knowledge to carry the project forward There is the skilled personnel available and a formal training plan to grow & train the workforce to be flexible Solid Reputation in the market, references from current clients. Active participation in the industry
Copyright © 2007 Reverse Logistics Association Program Management Model 3 rd Party Program Mgt. 3 rd Party Location 3 rd Party Location 3 rd Party Location 3 rd Party Location 3 rd Party Program Mgt. Call Center Fulfillment Logistics Repair Location OEM Repair Vertical Relationships Horizontal Relationships
Copyright © 2007 Reverse Logistics Association The Importance of IT OEMs agree – IT is a big deal Prepare a 3-5 page overview of IT capabilities and reporting Describe in-depth all current IT operations Describe the IT Strategy with a 2-3 year plan Respond in detail with the IT options available to the OEM Provide sample reports
Copyright © 2007 Reverse Logistics Association Continuous Improvement Continuous effort on Cost Reduction & Cost Control OEM Executives push their organization Pro-Active 3 rd Party actions are very positive OEM expects vendor efficiency over time Repair costs must be related to the retail sales price How ? Look to reduce Touch Time and indirect labor Improve the process, improve quality, increase yields Reduce scrap, improve asset management Meet or exceed future environmental regulations
Copyright © 2007 Reverse Logistics Association Project Startup Best Practices Communicate often Metrics: Before, regularly, and final Acknowledge the difference between qualification units and high volume units Plan on follow up visits & audits –Self audits, Client audits, executive on-site reviews. Sponsor and publish success stories
Copyright © 2007 Reverse Logistics Association On-Going Best Practices Maintain/Push the idea of Partnership Communication between all levels of the organization Single point of contact for business escalation process Insist on regular Communication (QBRs, Pricing reviews, audits and weekly performance reports) Partner in Goals and Objectives in 1, 2, 3 years in the future Be up front about problems / mistakes and be pro-active in suggesting corrective action
Copyright © 2007 Reverse Logistics Association On-Going Best Practices Defined 3 year Business Plan and Strategy Defined program for Employee Training, skill development and technical advancement Continuous review of cost competitiveness when measured against: Other client or provider internal programs Other regional vendors OEM new product cost Overall return costs (warranty mgt & logistics) Offshore / Worldwide Vendors Analyze the returns and suggest process changes or changes in product management rules
Copyright © 2007 Reverse Logistics Association New Service - RL Forum RL Professionals can Ask a Question Other Professionals can help Answer
Copyright © 2007 Reverse Logistics Association Contract Management
Copyright © 2007 Reverse Logistics Association Relationship Partnership Outsourcing Documents RFI RFQ Contract SOW RFI - Request for Information RFQ Request for Quote Statement of Work
Copyright © 2007 Reverse Logistics Association The Services Contract Business services to be provided and the process of service(s) What is the definition, how will it be done and who is responsible? –Original Product Warranty determination –What will happen if there is a design issue? –On-going analysis of design improvements –Responsibility for Asset Management –Scrap decisions, when and how scrap is determined –What is the definition of BER (Beyond Economic Repair). –Record keeping and archiving.
Copyright © 2007 Reverse Logistics Association The Services Contract Process changes – no changes without approval vs. ability to change Resolution of performance issues Material/Product/Equipment Ownership Special Material / Chemical requirements Document handling and security Invoicing, payment terms and problem invoice resolution
Copyright © 2007 Reverse Logistics Association The Services Contract The Relationship –A definition of the business relationship Repair Warranty Statement –A statement of the warranty offered Cost Reductions –How to divide the spoils of cost reduction Property # 1 –Define the use and 3rd Party responsibilities Property #2 (Test Equipment) –Define who is responsible for maintenance Inventory Loss –What happens when there is an inventory loss
Copyright © 2007 Reverse Logistics Association The Services Contract Epidemic Failure –Dealing with Failures outside the expected failure profile EOL & Bufferstock Purchases by 3rd Party –Obligations related to the purchase of inventory Excess Materials (Scrap) –Method of disposal by required regulations Disengagement –Operational statement on handling products, equipment and materials Termination of the Agreement –Statement on termination for cause
Copyright © 2007 Reverse Logistics Association The Statement of Work Should be a flexible document, not within the Contract Receiving, Order fulfillment, Shipping processes & accuracy Metrics and reporting methods Transaction timing & accuracy Repair Process & Equipment Business coverage requirements Security & Environmental Requirements
Copyright © 2007 Reverse Logistics Association RL in Your Finance Calculations Product After tax Profits Are They Measured Right Returns Take Away From Bottom Line Profits Product Production Cost Reverse Logistics Management Your Company Manufacturers 1 Million Units Per Year Revenue per Unit is $1 or $1,000,000 Profit per unit is 5% After Tax or $50,000 Return Rate Average is 10% or 100,000 units Returns Represents $100,000 of Sales or $50,000 negative to bottom line Reverse Logistics Recovers 80% of the Returns or $80,000 to company bottom line Companys After Tax Profit is $30,000 So who is most important, the VP of Marketing/Sales that took $50K from your Company or the Reverse Logistics Professional that gave you $30K of After Tax Profit?
Copyright © 2007 Reverse Logistics Association Thank You
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