Are Your Reverse Logistics Leaking Profits?

Reverse Logistics Leaking One of the issues many growing companies face is obsolete inventory and customer returns. These have a nasty habit of sucking up cash and bringing otherwise profitable firms to their knees. In this episode of the Supply Chain Cowboy Podcast, I talk with Curtis Greve to get his expert advice on how best to handle reverse logistics.

Reverse logistics are kind of funny in that they tend to fly under the radar. Returns usually aren’t thought of as one of the most attractive parts of operations. However, improving how you handle obsolete inventory and returns by just a fraction could be the best thing you can do for your bottom line.

You can listen to or download the podcast from the link above, or check out the full transcript. Also, please subscribe to the podcast through iTunes to receive new episodes automatically.

About Curtis Greve

Curtis Greve managed returns for Walmart, ran the 3PL GENCO as its CEO, and started his own consulting firm, Greve-Davis. He’s also one of the founders of the Reverse Logistics & Sustainability Council (RLSC), the premier group on advancing the field of reverse logistics.

RLSC’s upcoming annual conference will be held on January 19-21, 2015, in Dallas. More information on the conference, as well as a wealth of advice and information, is available at ReverseLogistics.com.

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    ‘The Johnny Tightlips’ and Two Other Popular Approaches to Supplier Relations

    “Before you send that email, there are a few lines I want to take out. We don’t want to share that information with that supplier.”

    “Really? But this supplier has done so much for us – shouldn’t they know what’s going on?”

    “Not yet. Maybe later – but we don’t want to put any tension on our relationship right now.”

    Three Approaches to Supplier Relations

    Most companies have a list of key suppliers that you just couldn’t live without. Your dependence on them reminds you of the support you get from best friends, siblings, or even your spouse. But sharing personal information with family and close friends is often easier than sharing business information with your suppliers. What if they take advantage of you? What if they share that information with your competitors? What if they become your competitor?

    Navigating your supplier relationships depends a great deal on your business model and the character of the suppliers you work with. Perhaps you could benefit from increased information sharing. Or – perhaps you should hold back a bit more. Here are three approaches to supplier relationships to consider.

    The Johnny Tightlips

    Johnny Tightlips

    Johnny Tightlips is one of my favorite characters from the Simpsons. His catchphrase, “I ain’t sayin’ nothin’,” characterizes the attitude that a surprisingly large number of businesses take. While this arms-length relationship seems cold, it also has served many companies quite well.

    The stories of suppliers moving upstream and becoming a direct competitor with their customers are numerous and instructive. For example, Asus was Dell’s supplier when they announced their own brand of personal computers that would compete directly with Dell.

    If you’re a fan of poker-like negotiations, then keeping your cards close is highly advisable. Millions of dollars have been won by letting the other party speak while you sit quietly and listen. In fact, using a “pained pause” may be a great tactic to try next time you’re in negotiations. This tactic is described as, “When your negotiating partner makes a too-low offer, sigh, look him or her in the eye and say nothing.” Your silence puts pressure on them to do better, negotiate with themselves, and make a better offer without a word from you. For more on the Pained Pause, check out this Lifehacker Article.

    However, relationships with Johnny Tightlips suppliers are only good as good as the benefits they bring. Unless you have most of the power in a supply chain, it’s unlikely that your suppliers will sacrifice much for you. When hard times come, they’ll more likely to switch to your competitors since there’s no loyalty or relationship in place.

    Here’s a couple of my favorite Johnny Tightlips appearances:

    The Open Book

    The Open BookOn the opposite end of the spectrum is the open book approach. Your suppliers provide valuable services to your company – much like your employees. Treating them the same as employees, especially in regard to information, makes a lot of sense.

    Being open has a myriad of benefits. Suppliers are able to collaborate with you on new ideas. Because they’re higher up the chain, they bring valuable insights about what efforts they’ve seen previously work or not. They also may have innovative ideas that they’re more likely to share with you because of your relationship with them.

    An open policy also can be lifesaving when the road gets bumpy. Suppliers are much more patient when they know what is going on – why payment is delayed or orders are down. Though the rough spots are often the most difficult times for honest communication, that’s when it’s most impactful. A detailed email explaining the situation openly can open the door for more lenient payment terms and with the relationship intact.

    Before your open your books completely, here are some important questions to ask:

    • Has your supplier proved their trustworthiness yet?
    • Is there any specific information that poses an unusually high risk if shared?
    • Have sufficient contracts been signed to prevent unauthorized sharing outside the business?
    • If you are a public company, are SEC guidelines – especially insider trading rules – being followed?
    • Have we sufficiently explained the policy to those who interact with our supplier?
    • Are your instincts prompting you to hold something back? Why?

    Despite the risks, opening up communication often yields impactful results.

    The Game of Kingdoms

    The Game of KingdomsA middle ground is a philosophy I call the game of kingdoms approach. Imagine your company as a kingdom – complete with a castle and city walls. Your suppliers and customers are also kingdoms. Some are bigger than you, and some smaller. Just as a king engages with other kingdoms, you work with other companies.

    The much larger kingdoms – the ones you’d like to have on your side if a war starts – merit investment in open communication. You want to build those ties in diplomatic ways by sending emissaries and fortifying trade routes. The smaller kingdoms may require less work. Taking a diplomatic game approach and envisioning various castles often helps me make better decisions on supplier relations.

    Besides, “inter-kingdom diplomacy” just sounds more fun than “supplier relationship management.”

    What’s Your Weapon of Choice?

    Which approach do you currently use with your suppliers? How might you benefit from adjusting your communication style?

    Share your thoughts in a comment, and be sure to check out our recent podcast where we talk with the former VP of Operations at Skullcandy about vendor relationships and metrics.

    [Image Sources: Johnny Tightlips (modified) | Open Book | Castle]

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      Tips for the APICS CSCP Exam

      Tips for the APICS CSCP ExamA while back, I took and passed the APICS Certified Supply Chain Professional (CSCP) exam. Since then, I’ve had a quite a few people ask me what it’s like and what advice I have. I’ve consolidated and summarized my experience in the article below.

      Is the APICS CSCP Exam Right for Me?

      Which Certification Should I Pursue?

      The first thing you need to do is determine whether the CSCP exam is the right certification for you. Certification is definitely a plus in the supply chain profession. There are quite a few different options, most of which are summarized in this excellent chart on Wikipedia. To begin my journey, I spent a lot of time looking at these different options.

      For me, it really came down to which organization I wanted my certification from. In my opinion, the two strongest options are APICS and the Institute for Supply Management (ISM).

      APICS offers two certifications. The CSCP is an overall look at supply chain management. The CPIM (Certified in Production and Inventory Management) is more focused on inventory and production at a detailed level. ISM offers one main certification, the Certified Purchasing Manager (CPM). The CPM is primarily geared toward procurement.

      Certification Job Search

      Next, I began searching Monster.com and other job sites to see what types of opportunities these certifications might unlock. I was quickly surprised how many jobs said “APICS certification preferred” or “CSCP preferred” – especially jobs that appealed to me. From this, I decided to go for the CSCP. If I were more interested in just buying, then ISM’s Certified Purchasing Manager (CPM) would make sense.

      APICS vs. ISM

      Is Certification Worth It?

      The cost of the study materials and test made me pause for a moment. Some employers are happy to help out with the $1,000 to $2,000 total cost. Mine wasn’t, but the investment made sense. I was also looking at business school programs at this time, and I was surprised to learn how strongly some MBA programs promote this same certification, sometimes even for their current students. While I didn’t want to take on extra studying as a MBA student, the fact that the schools were recommending these certifications sealed the deal for me.

      What Materials Should I Use to Study?

      Only two roads made sense to me if you’re serious about earning your CSCP: self-study or a class.

      About the APICS CSCP Learning System (and How to Get It for Less)

      The APICS CSCP Learning System is definitely the way to go for self-study. While they can’t claim that the system teaches everything that’s on the test – it gets pretty darn close. Unfortunately, it has a steep price tag of $1275. To reduce that, purchase an APICS membership. Student memberships are free, and professional memberships are $200 per year. Being a member gives you an instant $330 discount on the Learning System. If you have friends who also want to study, you can get a discount when you purchase more than one set at the same time. For instance, I saved $100 by purchasing my study materials at the same time as a friend. Search online forums and try to find someone to go in together with – it could save you a few hundred dollars.

      Local or Online Class

      The other option is to prepare for the test through a class that essentially walks you through the APICS Learning System as a group. Local APICS chapters will sporadically offer certification classes for a variety of prices. If you can, find one that doesn’t charge more than the books. Classes are very helpful for people that need an outside motivator that will help them study the materials. If you know you won’t be able to read 1,000 pages of text without having to attend a weekly class – then this is the route you should go. In addition, you’ll meet others studying the same material – so if you’re a social learner, this may be the key to your success.

      Getting Through the Material

      The textbooks are incredibly dry (at least the 2013 versions were). They just spit out facts with no stories and hardly any diagrams. At first, this was very frustrating and horribly boring. However, after a few hundred pages, I began to appreciate this style. The books cover a vast amount of materials in close to 1,000 pages. If they had more fluff, then that number would obvious increase dramatically.

      Applying the concepts to my current job also helped. Whether it’s writing in the margins or discussing the concepts with your team, applying what you learn is the best way to really remember it. I help make quite a few changes in our department while studying the CSCP concepts.

      For the most part, I had to sit down and force myself to read an entire textbook section in one sitting. Otherwise, I found it very difficult to find the motivation to come back to the section. Luckily, the textbook is broken up into fairly short sections. Each section has an online review quiz. This is where the Learning System really shines.

      The online portion of the APICS Learning System is what saved me. The quizzes help me remember the key points from the chapter. I was often frustrated by the quiz questions – some are very poorly written and the correct answers are often debatable. They hopefully fixed those questions, but be warned that some may still be ambiguous. I was very worried that the test questions would be just as ambiguous. Don’t worry though – I thought all the test questions were very straightforward.

      The online tools are accessible by smartphone, tablet, or desktop. However, I found that my smartphone was the least frustrating method of taking the tests. The tests seem to be much slower and harder to navigate on my desktop. So even when my laptop was available, I usually used my phone instead.

      As great as the online quizzes are, the absolute best help are the flashcards. So much of the test depends on whether you know the vocabulary. I printed out flashcards and used them regularly. A friend of mine stumbled on another method if you find paper flashcards less motivating:

      A Free Online APICS Flashcard Game

      Screenshot of APICS Flashcards Game

      While it’s not quite as awesome as Call of Duty or Little Big Planet, it’s a more fun way to learn the vocabulary quickly.

      How Long Does Studying for the APICS CSCP Exam Take?

      It took me three months to complete the APICS Learning System. Now to be fair, my first child was born during this time, so that slowed me down a bit. However, if you read for an average of an hour each day, you can finish in three months or less.

      Looking back, I probably studied a bit too much. If you can pass all the online quizzes with 80% or more, then I would feel pretty confident that you’ll pass the exam. I actually thought the real test was a bit easier than the review quizzes in the CSCP Learning System.

      I’ve heard rumors that most of the people that fail the exam do not speak English as their primary language. So if you are not a native English speaker, you may want to study a bit more and understand all the words in all the online quizzes.

      What was Your Method of Studying for the APICS CSCP Exam?

      This was my detailed routine of study for the exam:

      • Take the pretest to see what the questions would be like
      • Read one section (1A or 1B for example)
      • Take the quiz for that section (Quiz 1A)
      • If I didn’t get over 80% on the quiz, then I retook the quiz and read up on the questions I missed
      • Once I got over 80% and understood the questions I had missed, I’d move onto the next section
      • After I finished all the sections in the three modules, I’d take the test for the entire module. I’d review the questions I missed until I felt comfortable moving on.
      • Once a week, I’d run through all the flashcards – even if I hadn’t reached those words in the book yet. After a few weeks, I knew all the words very well.
      • After finishing all three modules, I took the post-test
      • Right before the test, I took a day off work and reviewed all of the books again. This was probably overkill, but I really didn’t want to shell out the extra money to retake the test.

      I had a friend studying at the same time, so we would compare notes every few days. Mostly, having someone else kept me on track – and complaining about poorly written quiz questions together made it more fun. I brought the current book I was reading with me everywhere and sometimes had  my wife read the text aloud to me when we had a few extra minutes (like waiting at the doctor’s office). I’m happy to report that I didn’t study at all in the hospital when my daughter was born.

      What’s the APICS CSCP Test Like?

      Save the Date

      The test itself is straightforward. It’s given in the same facility as GMAT and other standardized tests. Since the CSCP exam isn’t a wildly popular test, scheduling is often quite limited in some locations. I scheduled my test about two months in advance. This was good because the deadline motivated me to push through the texts. My friend didn’t schedule the test for some time and ended up dragging out her study period to eight months. If this might be a possibility, I recommend reserving early in your study process.

      Test Day

      My advice is to just stay cool on test day. Honestly, if you’ve read all the text, know the flashcards, and have received an 80% on the post-test, then you’ll pass. Don’t overthink the questions – there weren’t any trick questions that I remember. Eat a good breakfast, go to the testing center, and take care of business. You’ll do just fine.

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        How Skullcandy Rocked S&OP

        How Skullcandy Rocked S&OPI’m excited to share with you the first episode of the Supply Chain Cowboy Podcast. I had a great interview with Mark Kosiba, former VP of Operations at Skullcandy. He shared his experience with forecasting, S&OP, and vendor scorecards – all very popular topics on our website right now.

        I used to hate forecasting. I thought it took as much skill as tossing a dart at a bunch of post-it notes with numbers on them. But after talking with Mark Kosiba, I can see how a truly collaborative S&OP culture can transform a company. He took Skullcandy from just one spreadsheet to a set of world-class processes that earned Target’s ‘Vendor of the Year’ award. If you want to improve how you forecast, then you’ll definitely want to check out this episode.

        You can listen or download the podcast from the link above or check out the full transcript. The podcast will also be available soon on iTunes for subscription.

        I’d love your thoughts on what you’d like to hear more of as we record future shows.

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          WANTED: Supply Chain Cowgirls

          Being male, I never paid much attention to gender diversity in my field of work. The issue never really came up.

          That was before my daughter was born.

          Now, as I watch her grow and think about her future, gender diversity becomes much more important. I want her to have every opportunity that I’ve had – hopefully even more. Most of all, she should be able to become anything she wants, especially a supply chain cowgirl.

          WANTED: Supply Chain Cowgirls

          Why Aren’t More Women in Supply Chain

          Supply chain emerged from a company’s production functions. Assembly lines and factories were traditionally dominated by blue collar, male workers because many of the jobs required significant physical strength. Over time, though, companies’ operations have evolved, and machines either have taken most of the strenuous physical labor out of these jobs or replaced humans completely. For many companies, the focus has gone from sweat and overtime to long-term relationships and inter-company cooperation. As these changes happened, however, the involvement of women in supply chain hasn’t kept pace with other fields. Women hold only 10% of supply chain leadership roles, while the average for other departments is 24%. More details on these numbers is available at SupplyManagement.com.

          Part of the problem for this imbalance is the number of women studying for supply chain degrees. Only 37% of students in supply chain classes are female. With an average of 60% of college students being women, it’s clear that this subject isn’t yet in vogue with female students. I’d infer that part of the challenge is awareness. Women often aren’t as aware of supply chain as a career choice, and don’t have an accurate vision of what that path would entail. It could also be a cultural draw of men to logistics because traditionally ‘trains, planes, and trucks are boys’ toys.’

          What are Supply Chains Missing because Few Women are Involved?

          Profits

          Roy Adler of Pepperdine University found that companies with more diverse leadership teams tend to outperform their more gender-biased competitors . More women in a company’s supply chain team could find creative cost savings opportunities that their male colleagues may not pursue. Read more about Adler’s study in Logistics Quarterly.

          Team Unity

          If you feel your team isn’t achieving its potential, it might be a gender diversity problem. Too many of the same gender on a team can lead to biased views or groupthink. Improving team chemistry might be as easy recruiting a few extra team members of the opposite gender – be they men or women.

          Systems Management

          Most women have a talent for remembering birthdays, managing households, and tracking children’s activities. Those expertise easily apply to important supply chain related skills such as remembering deadlines, managing purchasing teams, and tracking international shipments. Ann Drake, founder of AWESOME, an organization promoting women in supply chain, says that,”Today, the supply chain is about orchestration and leadership and change management. Enter the orchestrators – the women who embrace change and who are ready to lead.”

          Collaboration and Creativity

          A key trait that I’ve often seen my female coworkers surpass men in is emotional intelligence. This ability to correctly gauge the motivations of others is critical to building strategic alliances with both suppliers and customers. They often change adversarial, arms-lengths relationships with customers into life-long connections that strengthen the entire supply chain.

          How Can I Help Get More Women in Supply Chain?

          Focus on Making a Positive Influence

          Women naturally want to make a positive difference in the world – through family, work, and community.  That’s what supply chain is all about – making a value added difference to your community and the world. This might include worker’s rights, working conditions, safety compliance, and other noble missions that strengthen both people and supply chains.

          Promote the Different Areas of Supply Chain

          To me, part of the allure of supply chain is the vast variety of jobs it encompasses. If someone doesn’t think an assembly line is right for them – that’s no problem. Logistics, purchasing, compliance, contract management, or sales analytics are just a few of the growing opportunities that may present a different side of supply chain that’s more attractive.

          Encourage Girls to Become Leaders

          Take the mission of the Girl Scouts of America as inspiration to “Find the leader in each girl.” Encouraging them to volunteer for leading roles in school clubs and extracurricular activities fosters a habit of leadership. When opportunities to lead in college and the business world arise, stepping forward will be second-nature to these talented women.

          Start Young

          Ellen Voie, President/CEO of Women in Trucking Association, Inc., gives this parenting advice:

          “Buy trucks as toys for young girls, teach your teenager how to drive a stick shift and cultivate the ambition that shows up on the soccer field, in the classroom and when making a decision to pursue a degree in a nontraditional program. Let’s find the leader in the girls around us and make them into the next generation of…logistics professionals.”

          Help Create a Culture that Promotes Balance

          Supply Chain is a 24/7 profession that could easily consume all of an employee’s waking hours. To avoid burnout, companies need to work hard at supporting employees’ balance between work and personal time. Technology has allowed more flexibility in how people work, and this can help women find a better work-life balance. There’s a lot of great women that could add value to your organization because they can’t work a normal 9-5 schedule.

          Become a Mentor

          If you’re a woman in supply chain already, then you could be the key to bringing in more female colleagues. More positive female role models in the field will help break down negative stereotypes. Support others and coach them in the field. Consider helping out with local chapters that support female professionals and encourage them to investigate the opportunities in supply chain.

          Network

          Women (and men) can use their relationship building, communication, and collaborative skills to build strong, supportive networks that will sustain further growth in the field.

          Encourage Problem Solving and Puzzles

          “Supply chain is all about puzzles and is ever changing, so if you enjoy puzzles and want a career/job where there will be new and different challenges every day then Supply Chain is the place to be.”
               – Ryvyn Young, Home Depot (quoted by WomenInSupplyChain.org)

          As girls realize that the games they play on their phone and with their friends relate directly to the skills needed to succeed in supply chain, they become more interested. Share that information with them and let them see how it relates.

          Future Supply Chain Cowgirl?

          Supply Chain CowgirlNo matter what my daughter wants to play with – dolls, trucks, or legos – I’ll be right there playing with her. You better believe, though, that she’ll hear from me in detail how her Barbie was manufactured, shipped to America, processed in a distribution center, stocked in a local store, and brought into our home. If I tell the story with enough enthusiasm, maybe one day she just might consider becoming a supply chain cowgirl herself.

          Article Notes

          Special thanks to Jenny Lambson and Audrey Fuller for their excellent advice and feedback for this article. Also, thank you to my daughter Rachel for cooperating in the photo-shoot.

          I welcome your thoughts and advice on this important subject. If you’re currently a supply chain cowgirl, how has your experience been? What advice would you give to others, both male and female?

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