Back to the depot: Reverse logistics in field service

This content originally featured on fieldservicenews.com

Kris Oldland, takes a look at the challenges and benefits of reverse logistics within a field service operation…

Whilst understanding the service supply chain is a fair challenge in itself, reverse logistics remains perhaps the most complex element of all within the puzzle.

In simplistic terms reverse logistics for service operations could perhaps best be defined when first thinking of how field service works. For field service operations a dispatcher will send an engineer out to a device that needs either repair or maintenance.

Whether it is a jumbo jet engine or a vending machine this type of dispatch is classic field service. Reverse logistics essentially flips this concept. With reverse logistics it is the product that comes to the engineer, rather than the other way around.

The challenges of reverse logistics

There are numerous challenges within reverse logistics – it is not as some would believe simply forward logistics the other way round!

For a start there is the significant challenge of both determining and then tracking the value of an asset.

Lets take a simple consumer example of the repair of a laptop a technician may be sent out to repair a motherboard with a value of say £500 and a the tech replaces the defective motherboard with a working one.

Working within a reverse logistics framework the defective motherboard is sent back to be repaired. However what is the value of the defective part? It is no longer £500 as it doesn’t work. Yet, it is also not zero as the cost of repair may be a relatively nominal amount for a sub-component.

There are numerous challenges within reverse logistics – it is not as some would believe simply forward logistics the other way round!

Therefore we have to take into account that the defective motherboard has a value somewhere between zero and £500.

And this is just one small characteristic of reverse logistics that makes it such a complex field.

Then things get even more tricky when we add OEMs or third party repair int the reverse logistics value chain mix.

Staying with the laptop example, what if a retailer sold the device? They are likely to have their own service offering, and could do some initial diagnosis either in the field or in store, but if that first tier of maintenance isn’t sufficient then the part may be returned to a repair centre. And if at this point they are not able to resolve the issue then it may be that the motherboard needs to be sent back to the OEM.

In a reverse logistics chain it is vital to keep track of the unit at any given point within the service chain, as well as third party repair and record when the unit is in someone else’s hands. After all, the unit has value, and that value could even belong to the customer.

the ability to track products within a reverse logistics value chain, even when they are outside of your organisation is hugely important financially as well as logistically.

Then we have the additional complexity of varying warranties from different parties. For example the OEM might supply a warranty that is either in force for a longer or shorter period than the one offered by the retailer. The ability to track such warranties could mean a huge sum in reimbursements from the OEM if it turns out that a part is generally defective.

In short the ability to track products within a reverse logistics value chain, even when they are outside of your organisation is hugely important financially as well as logistically.

Why bother with reverse logistics?

Well primarily reverse logistics allows for companies to maintain high level service agreements and SLAs whilst not taking such a severe financial hit that can result from swap-out break fix repairs.

In a field service repair scenario, where the pressure is on to get the customer back up and running ASAP often the simplest, quickest and most efficient solution is to swap out a faulty part rather than repair it on site. Such an approach can lead to greater customer satisfaction alongside higher field service efficiency.

However, to simply dismiss non-functioning parts as scrap is throwing away money.

In a reverse logistics situation, where the device is sent to an engineer on the bench, a company are in a far better position to facilitate the fix.

Whilst your engineer may not have access to the various resources he needs to make a fix on site, or simply not enough time to or the components available to make the repair on site , as mentioned above the defective part may well still hold value if it can be repaired.

In a reverse logistics situation, where the device is sent to an engineer on the bench, a company are in a far better position to facilitate the fix. Resources can be more readily consumed, component are more readily to hand.

Also due to the fact that there is less time pressure and potentially easier access to learning resource it is possible for an engineer with less skills to undertake a repair so labour costs can be potentially reduced whilst reclaiming value that may have been lost if the unit could not be repaired.

Is reverse logistics always a good idea?

Another consideration is whether the decision to make a repair is economically viable. Depending on the cost of labour and parts it may be more cost effective to simply send a new unit to the customer.

Depending on the cost of labour and parts it may be more cost effective to simply send a new unit to the customer.

This is where a dedicated reverse logistics software solution can shine. Such solutions can track what we have used in parts and in labour once enough data has built up within the system.

Then if the expense of a repair reaches a specific tipping point a flag can be raised to highlight the fact the cost of repair outweighs the cost of replacement

Once we have reached this point of economic costs, we can determine if the part is economically worth repairing.

Selecting dedicated reverse logistics software

Whilst reverse logistics software can have significant benefits, selecting the right solution can be a challenge as it is not generally a broad product category that analysts and the IT media pay much attention to so side by side comparison can be hard to come by.

As with most software in related to service delivery it is critical to proactively ask questions that relate to you’re own specific business requirements.

As with most software in related to service delivery it is critical to proactively ask questions that relate to you’re own specific business requirements. Remember, no matter how many strong recommendations a software provider has, your needs are unique to you.

With this in mind also remember a live demonstration is also hugely important. Don’t accept a simple overview in PowerPoint, as some less scrupulous software vendors have been known to misrepresent what the software, in its current state, can do.

In the case of reverse logistics software, seeing really is believing as it is a niche area and you want to ensure that your provider both understand the complexity of the process as a whole as well as your specific business needs.

The Bottom Line

The bottom line when it come to reverse logistic is quite bluntly all about the bottom line.

When it comes to reverse logistics return on investment is achieved through effective inventory and spare parts management. Some companies will see ROI by using reverse logistics to simply keep repairable units on the shelf until they are actually needed, saving money by avoiding repair on units that might not be used.

Field service requirements for reverse logistics are complex, and will change as relationships with customers, distributors and contractors evolve over time.

Additionally a company may be taking parts into inventory that, due to the advancement of technology, have become obsolete. Therefore, the right reverse logistics software allows a company to be efficient in the use of their time and inventory.

However, effective reserve logistics in a service and aftermarket context does rely heavily on software that is designed specifically for the task.

Field service requirements for reverse logistics are complex, and will change as relationships with customers, distributors and contractors evolve over time.

But those companies who can come to a full understanding of the impact of reverse logistics on the business will be able to review how their key processes can be streamlined and automated, providing visibility and control over repairable inventory whilst serving their customers better.