System Reverse Logistics Paper

System Reverse Logistics Paper

Based on material from chapters 1-4 (Reverse Logistics and Closed Loop Supply Chain Processes). Answer CO 6 in a concise, yet inclusive manner.

CO6: Identify and catalog current best practices in RL.MANAGING HIGH TECH CLOSED LOOP SUPPLY CHAINS AND SERVICE PARTS LOGISTICS INTRODUCTION The very significant changes that have been taking place in the high tech service and logistics support industry over the last 10 to 15 years have led to dramatic improvements in the strategic management, control, and direction of field reverse logistics (RL) support for whole units, subassemblies, and spare parts control using a closed loop system. In order to understand and make use of these improvements, it is essential to see, in a broader perspective, the almost revolutionary changes, which have taken place in the typical field and logistics support service organization. In general, in the 1950s through the 1980s, in almost all equipment manufacturing sectors, but particularly in high tech areas (data processing, office automation, telecommunications, medical electronics, etc.), field service, including the provision of whole unit installation, maintenance, and repair services, was operated as a cost center. Typically, these service organizations were highly decentralized, focusing primarily on the issues of getting the service engineer to the site to support installation tasks for whole units in the event of failure observed by the customer after installation, to repair the equipment, and for preventative and/or predictive maintenance tasks. Service management, as it existed, was primarily concerned with the supervisory questions associated with field control of service personnel, and logistics delivery with a heavy emphasis placed on general customer satisfaction along with an adherence 65 Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 66  Reverse Logistics and Closed Loop Supply Chain Processes to the agreed upon budget or cost allocation. Manufacturers and distributors provided these services in the high tech industries; in other industries, internal building or plant maintenance service organizations performed these tasks. At this time, logistics and parts support generally came fr om the “factory” manufacturing function. Complete products (whole units), subassemblies, and parts were usually obtained from the manufacturing inventory, or in crisis situations, directly from the production line. From the perspective of the service organization supporting manufacturing or distribution, parts were “free.” Even for the end user with its own internal maintenance and service forces, parts were acquired by the user at the time of installation or by a purchasing office. Here again, for the service personnel, parts were considered as free, or as part of the initial purchase. The starting point for this service was the result of a product sale; this set up an order request to the service organization for product delivery and installation. Typically, the product delivery and installation was accompanied by an installation service engineer who provided the setup, test and check out, training and documentation, and orientation of the end user to the equipment and technology. In general, the presumption was that this equipment, once installed, would be permanently utilized by the purchaser until the end of its life. In general, depending upon the business distribution model used, the actual service after installation would be provided either by the original equipment manufacturer (OEM) or dealer service organization as part of a full closed loop supply chain (CLSC) system, or by the purchaser’s own internal plant and/or building services organization involving self-maintenance and repair. The whole product was rarely, if ever, returned as a full unit unless major catastrophic failure or failure to perform occurred. In general, if the full unit failed, individual components, subassemblies, or parts were pulled and replaced by either the assigned service personnel from the manufacturer or distributor or available service personnel from internal plant and building maintenance service forces. The ultimate disposal of the product was at the discretion of the purchaser. In some cases, a manufacturer would accept the old, used unit as a trade-in, providing limited credit against the new purchase price. In most cases, however, the product was sold to a broker or junk dealer who then disposed of the product, or simply paid for the product removal. In certain limited markets, such as office furniture, small secondary market dealers developed selling both new and used products. This highly decentralized, fragmented cost center approach to field service in the high tech sector changed dramatically in the 1980s and 1990s and has continued to change into the twenty-first century. Service is now being managed typically as a profit center or independent line of business; it is generally run centrally with its own physical distribution, Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Managing High Tech  67 logistics support, parts management, and control functions. In the modern service organization,* a service call from the customer is not viewed as a call for an automatic on-site dispatch, but rather as a basis for determining what actions are to be taken in order to resolve the customer’s problems in the most timely and cost-effective manner possible. In-depth technical analysis, remote diagnostics and call avoidance mechanisms are now being increasingly used as an online part of the call handling process (see Figure 4.1) to attempt to avoid altogether the need for physical on-site dispatch (through advising the customer to take his own corrective action or through the dispatch and shipment of whole units, parts, supplies, corrective software, etc., directly to the end user). In addition, many of the internal plant and building maintenance organizations have been outsourced to third party or OEM service organizations, requiring dispatch and assignment of independent service engineers from outside the plant or facility. In the modern call management process, discussed in Figure 4.1, the initial request for service could involve:  Initial purchase ordering process and request to deliver/install the product  Product problem on requirement for service assistance  Need for change, modification, or retrofit of the product  Product removal The first process step involves a diagnostic analysis to determine what actions to take, what resources are required (service, personnel, parts, whole units, etc.) and the timing of the service requirement. The next step is to schedule, assign, and dispatch the appropriate resources (service on installation, engineer, product shipment, etc.) and to initiate the service call task. The third step is to modify the field service organization through:  Paper request  Beeper/pager  Laptop or PDA The final stages involve the management of the service process, leading to a completion of the service request, and “close out” of the call, and this would in turn, provide complete data on:  What was done (installation, repair, preventative maintenance, etc.) * This entire process is described in detail in Managing High Tech Service Using a CRM Strategy, by Donald F. Blumberg, CRC Press, 1999. SYSTEM DISPLAYS CUSTOMER INFORMATION AND PERTINENT DATA CALL TO BE DISPATCHEDADVISE ETA; CLOSE OUT CUSTOMER INTERACTION DISPATCHER** ASSIGNS FSR TO CALL BASED ON • PRIORITY • AVAILABILITY DATA ON SERVICE CALL REQUIREMENT CALL TAKER ENTERS CUSTOMER NAME OR ID ON CRT FE* EVALUATES SITUATION • CORRECTABLE • UNCORRECTABLE A FE* COMPLETES CALL- CALLS DISPATCHER OR SENDS DATA DIRECTLY DISPATCHER OR SYSTEM PROVIDES NEXT CALL DATA AND MESSAGES FE* ADVISED OF CALL,CONFIRMS ETA, GIVES AND RECEIVES MESSAGES DATA BASE UPDATED • MTBF • MTTR • PARTS • COST • CUSTOMER DATA • DIAGNOSTIC TREE CALL CLOSED OUTINFORMATION ON CAUSE, ACTION, PARTS USED, TIME, COST RECORDED ON LINE • REPORTS GENERATED • PARTS INVENTORY UPDATED • INVOICES AND COST ALLOCATION GENERATED DISPATCHER ADVISED AND ACTION TAKEN A FE* OR DISPATCHER ADVISES CUSTOMER OF ETA IF DIFFERENT FROM INITIAL ESTIMATE Avoid DETAILED TECHNICAL ASSISTANCE AND DIAGNOSTICS FOR CALL AVOIDANCE Not Avoidable Not Avoidable CALL TAKER PERFORMS PRELIMINARY DIAGNOSTIC SCREEN ADVANCED PDA / LAPTOP CONTACT FE* • BEEPER • PHONE IN • DIRECT RELAY • TO LAPTOP OR PDA FE* NEEDS PARTS OR OTHER SUPPORT 3 CALL TAKER ENTERS INFORMATION ABOUT SERVICE PROBLEM CALL DIAGNOSTICS FUNCTIONS Figure 4.1 Overview of call management process. (From Blumberg, D. [2002], Managing High-Tech Services Using a CRM Strategy, New York: St. Lucie Press.) * FE = FIELD ENGINEER ** DISPATCHER OR CUSTOMER RELATIONSHIP MANAGER / SUPERVISOR FE* TRAVELS TO CUSTOMER SITE WORK FORCE SCHEDULING AND ASSIGNMENT FUNCTIONS DISPATCHER** ASSESSES NECESSARY RESOURCES FOR PROBLEM • SKILLS • PARTS 2 CUSTOMER PLACES ORDER OR CALLS SERVICE CENTER 1 Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 68  Reverse Logistics and Closed Loop Supply Chain Processes Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Managing High Tech  69  Time and cost data  Updated, customer tasks and requirements, including configuration status  Parts and materials used  Other information about service calls In those cases in which an actual on-site call is required after such “call avoidance” diagnostics is completed, the analysis as part of the call handling process can provide specific recommendations to the service engineer as to which parts should be taken with him on the service call, thus, reducing the percentage of “broken” calls, or calls in which the service effort must be halted until a subsequent time when parts or technical assistance is available. An alternative approach is to dispatch another service engineer or “courier” to get the part or subassembly to the service engineer in the field. In effect, by looking at the full timeline of a service call request (Figure 4.2), it is possible to see the impact of parts, knowledge and data, and real parts availability and resupply on overall service efficiency and elapsed time. Parts and subassemblies management impacts the service timeline in the following areas: call handling and diagnostics and the service call on site.  Call handling and diagnostics — An analysis of the customer call request can often be used to determine the cause of the service problem, the parts required to fix it, and other actions. If these actions are simple, and can be carried out by the user, the call Service Organization Action/ Impact Evaluation of Problem, Parts Requirements, Etc. Service Call, Help Desk and Diagnostics Service Tech Assigned Troubleshooting and Travel and Diagnosis Time as on Site Required Equipment Failure Fails Recognized Customer Action/ Impact Lack of Parts Results in Call Broken or Delayed Arrival at Site Remove, Repair, Replace May require Additional Travel or Waiting Time, If Parts not Available Customer Restores Service Directly Repair Time Restore Time Figure 4.2 Adjust, Align, Calibrate Field service timeline. Checkout and Restart Call Closeout and Availability of Service Engineers Equipment Availability Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 70  Reverse Logistics and Closed Loop Supply Chain Processes handling process could result in providing instructions and guidance to the user-operator and/or shipping a part, item of software, or supply to the user, thus closing out the call. If the problem can not be corrected centrally or through the user himself, then diagnostics can be used to determine who should be dispatched, and with what parts. Since 60 to 75% of all service calls require one or more parts, this step is very important. In essence, through the use of call diagnosis, based on past data about parts failure and relationship or equipment failure to parts failure, the problem can be resolved by the user directly, or the service dispatch can be much more efficient through insuring that both the right skill sets and parts are dispatched and assigned.  Service call on site — Upon arrival at the site, as shown in the timeline in Figure 4.2, the service engineer begins his troubleshooting and diagnostics, typically using a pull-and-replace process, requiring one or more parts or subassemblies. If the parts are available, the process can be completed rapidly; if the parts are not available in the hands of the service engineer, in his trunk, or at the site, the service engineer has one of three options: – Break off the call altogether and request a new dispatch – Leave the site to pick up a part at some location and return – Await the delivery of the part by another service engineer or courier In any case, the lack of the right part or subassembly at the right place and at the right time leads to either a short delay or long delay (broken call) in the same timeline. This analysis and evaluation of the service timeline shows that parts, subassemblies, and even whole unit availability (for full swap out) can directly affect service efficiency and cost effectiveness in terms of:  Overall restore time  Service repair time  Travel time The most effective way to manage and control this situation is to optimize the field engineer trunk stock fill rate and reduce broken or delayed calls. This is best accomplished through a CLSC to control the logistics flow down to the field level and back to the repair depot. As a result, substantial changes have, and are taking place with respect to the management, direction, and control of the full logistics pipeline in the high tech field. While much is being currently done in the area of improvements in call handling, diagnostics, and dispatch, it is in the area of closed loop control of service parts, subassemblies, and whole unit Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Managing High Tech  71 logistics management where some of the most innovative and productive improvements have been made. As indicated above, service operations usually require a combination of service personnel skills and parts in order to successfully complete the process of installation, maintenance, and repair in the field. Depending upon the product technology involved, for between 60 to 70% of all service calls on average, a part or parts, subassemblies or whole units are required in order to complete a “fix” or repair. As a result of this important requirement for parts in the field, there is a great tendency for proliferation and distribution of parts locally, often found in the trunks of the service engineer’s cars or vans on sites, and in some cases, squirreled away in service engineer’s homes or lockers, or at the installation site itself. Given the general structure of the logistics and distribution pipeline, it is very important to recognize that perhaps the most important element of the pipeline is to insure an optimum fill rate at the service engineer trunk or site level. Service engineers fill rate is computed by dividing the number of times a demand for the part is made, divided by the number of times that the part is available at the particular stock location. CLOSED LOOP SUPPLY CHAIN STRATEGY The key to understanding the effective management of logistics and control in high tech service rests on a strategic conceptual approach to the total flow of parts, subassemblies, whole units, and so forth, in the field. In the typical field service environment, a closed logistics pipeline exists, as shown in Figure 4.3, which involves the continuing flow of parts, subassemblies, and whole unit/loaners, as well as test equipment to and from the field. At the central warehouse facility, material flows in from the organization’s manufacturing centers (to the extent they exist), as well as from external vendor purchases. They also flow to the central warehouse through a return loop from the field for depot refurbishing and rehabilitation operations. The parts (stock-keeping units; SKU), subassemblies, and whole units then flow downward to district or branch war ehouses/depots, and ultimately to service engineers, installers in the field, or both. This material is then used in the installation, maintenance, and repair tasks associated with servicing the installed customer base. In general, and typically in the maintenance/repair actions, some SKU are pulled out of customer equipment and replaced to fix the unit. These could include low value or cost, or nonrepairable items that are often disposed of, and high value or cost, repairable items that are sent back for rehabilitation and refurbishment. It should be noted that the current philosophy of pull-and-replace rather than repair in the field usually leads to perfectly good parts and units also being returned. The final link in Copyright © 2005. CRC Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 72  Reverse Logistics and Closed Loop Supply Chain Processes MANUFACTURER OR VENDOR Scheduled Order Available NATIONAL WAREHOUSE AND DISTRIBUTION Periodic REGIONAL OR DISTRICT PARTS DEPOT Periodic Borrow OTHER VALUE ADDED SERVICES MANAGEMENT AND COORDINATION Request PURCHASING DEPOT CENTERS FOR RETURNED PARTS Borrow REGIONAL OR DISTRICT PARTS DEPOT REGIONAL OR DISTRICT PARTS DEPOT A Failed Sub Assemblies Periodic SERVICE ENGINEERS Failed A Sub Assemblies SERVICE ENGINEERS Borrow Mode Borrow Mode A Spare Parts Failed Sub Assemblies EQUIPMENT POPULATION Figure 4.3 Spare Parts Failed Sub Assemblies EQUIPMENT POPULATION SERVICE ENGINEERS Spare Parts A Failed Sub Assemblies Failed Sub Assemblies EQUIPMENT POPULATION High tech closed loop chain. this integrated, closed loop pipeline is the refurbishment/depot repair function which returns the units “pulled” and replaced in the field, back to the central warehouse or the district and/or branch local depots, and from there back to the field. Given this concept of an integrated logistics “closed loop” pipeline, which describes the flow of the material within the service environment, it is of interest to note some key operational parameters. These include:  Approximately 50% of the total value of the inventory within the pipeline is generally found below the manned warehouses or depots, either being transported to or from the field in the trunks or hands of the service engineers, or in some cases, stored at customer sites, or flowing from the service engineers themselves back to a central location for processing and dispatching. In addition, of course, is the installed base of the product, which will also flow back as it is “built” and/or replaced.  Approximately 80% of the value of the service inventory flows from service engineers and the installed base in the field, back into the return pipeline through the refurbishment and rehabilitation …

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