How do you measure success in reverse logistics / product returns?

For example, the advanced exchange of computers and PCs under warranty. Returns of cable boxes. Returns of PDAs. Returns of medical devices. Returns that account for 1/2% to 5% of sales, or more for some product lines.

Consider the following scenario:

Sales for a Company are steadily improving. Product returns under an advanced exchange warranty program are more concerning. Too unpredictable.  Too high in some months. The graph below shows the value of product returns by month.

graph1dan

Here’s how the Company’s Executive Team might respond…

Product returns for a company are not predictable. Results in months 5, 8 or 11 trigger kudos. “Good work in reducing returns!”

On the other hand, posting results for months 9 and 10 result in shuttering a logistics program and creating a new task force to drive policy changes to get better results.

A more relevant question may be:  how do we measure success in a way that can drive continuous improvement?

An alternative approach is to first identify core component processes. As a start, consider two component processes: servicing demand for returns (first chart below) and returns performance (the 2nd chart below). The two charts below are based on the same data as the above chart — just from a different viewpoint.

graph2dan

graph3dan

We may get a better interpretation from the Executive Team… Returns performance is more consistent than we realized, and is showing some definite improvement, despite changes in the levels of returns demand. Identifying the right component processes (based on vision, experience, best practices) may have side-benefits:

  • better visibility
  • process that are quality-controllable
  • specific sub-processes that can outsourced and measured effectively
  • processes that can be benchmarked

When we identify and measure the right core sub-processes, what gets measured can open possibilities:

  • for BPO (Business Process Outsourcing)
  • for applying DMAIC and Lean Six Sigma
  • for implementing goals that make sense, benefit the business and are more likely to drive change

–Dan Gettens