Tag Archives: Customers

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Reverse Logistics Leaking One of the issues many growing companies face is obsolete inventory and customer returns.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.

“I Fight for the Users!” – What Tron Taught Me about Serving Customers

A Review of the Movies

In the Disney movies Tron and Tron: Legacy, the character for whom the movies are named famously declares, “I Fight for the Users!” In the world those movies create, the Tron character is passionately loyal to the humans who designed and use the computer program. It’s been a few years since Tron: Legacy came out, so here’s a short clip to remember the movie:

Tron - UserYouTube – Tron Recognizes a User

Toward the end of the clip, Tron (also known as Rinzler) sees his opponent bleed and realizes that his opponent is a user (human). Because of his loyalty to users, Tron refrains from killing the human. At the end of the movie, Tron sacrifices himself to save the humans from being killed:

Tron - I fight for the UsersYouTube – Tron Realizes He Fights for the Users

The reason I’m fascinated by Tron’s loyalty to the users is that my supply chain should have equal loyalty to the customers. In all our efforts to fight waste and inefficiencies, we should boldly declare, like Tron, “I Fight for the Customers.” For some reason, however, I often ignore or stop paying attention to the voice of the customer and find myself fighting against, instead of for, the customer.

Voice of the Customer and Putting Away Christmas Decorations

A poignant example of ignoring the voice of the customer happened recently while I was putting away my home’s Christmas decorations. The Christmas lights are especially time-consuming to neatly organize, so I instead gathered everything into a giant ball and stuffed it into a plastic bin. I just wanted to get done as quickly as possible, so I told myself,” I’ll deal with untangling this mess next year.”

However, this is exactly what a good supply chain shouldn’t do. I’m creating a local optimum (putting away my decorations as quickly as possible) that will cause pain to my customer (in this case, me in 11 months). Since I am my own customer, I know the voice of the customer quite well. I remember untangling the lights just weeks before, and I know exactly what I should do to please the customer. I don’t though. Since it’s a hard task and it pays off now to just throw everything into a box, I do the minimum to get the job done when I could increase customer satisfaction.

“I Fight for the Customer”

This same type of local optimization occurs every day along the supply chain. As we get busy or deadlines get scrunched, we naturally reduce the effort we put into pleasing our customers. Whether it’s our internal customers or the end consumer, it’s easy to forget that how we stack a pallet or design a product can negatively affect our customer down the line.

Each day, I need to repeat “I Fight for the Customer” throughout process improvement and Kaizen efforts. As you and I battle inefficiencies and reduce waste, we should have the same natural instinct to stop what we’re doing when it threatens customer satisfaction. For example, I can reduce airspace in packaging boxes, but as soon as my product’s quality is compromised from being too tightly packaged, that’s the blood that should force me to rethink my initiative.

The Empty Chair at Amazon.com

In the early days of Amanzon.com, Jeff Bezos, CEO and customer service champion, reserved an empty chair at all important meetings. He told his team that the chair was reserved for the most important person in the company – the customer. He asked everyone to imagine the customer was sitting there and to keep her in mind in throughout all their decisions. Later, Bezos hired someone to sit in the chair and passionately represent the voice of the customer. This practice helped to guard Amazon against any initiatives that didn’t help its users, and kept everyone’s thoughts centered on who kept them in business.

How Can I Better Fight for the Customer?

What ways can you better proclaim “I Fight for the Customer” in your supply chain? Here are some questions to consider:

  • Do I have adequate channels that bring the voice of the customer to me?
  • Do I frequently review how process changes affect the customer?
  • Do I address both the external and internal customer experience in all major meetings?
  • How can everyone in my organization feel closer to our customers?
  • How can I prioritize initiatives more closely to fit customer needs?
  • How can I better share my voice, as well as my customers’ voices, with my vendors?

By bringing the customer back into focus with your daily efforts, your organization can better solve the needs of those that keep you in business. Building the resolve to fight for the users of your product and services will result in a more loyal and pleased customer base.

New Business and Lean Quotes Page Added

Lean and Business Quotes

I’m excited to announce that Supply Chain Cowboy now has a page devoted to business and lean quotes. I’ve gathered over 60 of my favorite business and lean quotes and added my own thoughts to many of them. They’re currently grouped into seven categories:

Here’s a sampling, five of my favorites:

“Continuous improvement is not about the things you do well ‐ that’s work. Continuous improvement is about removing the things that get in the way of your work. The headaches, the things that slow you down, that’s what continuous improvement is all about.”

– Bruce Hamilton

“A chess novice can defeat a master if moving twice each round.”

– M. Goldenson, Ten Lessons from a Failed Startup, in VentureBeat. 2009. Quoted in Nail It then Scale It, p. 96

“Small wins are a steady application of a small advantage.”

― Charles Duhigg, The Power of Habit: Why We Do What We Do in Life and Business

“A ship in port is safe – but that is not what ships are built for.”

‐ Rear Admiral Grace Hopper

“As long as I listen to my customers, I never need to have another original idea.”

– Niel Robertson, founder of Trada, in Do More Faster

I’ll add to the page regularly, so be sure to check back for updates. Also – if you have a quote that means a lot to you, add it in an email or shoot me a message on the contact us link.

Supply Chain Cowboy Business and Lean Quotes Page

6 Proven Ways to Stop Burning Money on Customer Fines

If you’re shipping to a large customer, especially a big-box retailer, then you’ve likely encountered chargebacks or fines. Many large companies fine their vendors when they encounter a deviation from purchase order or vendor requirements. Viewing these vendor fines as an easy way to boost their bottom line, large companies have recently increased their emphasis on chargebacks. Some companies have even created “Profit Recovery” departments with the directive of finding methods to reduce payables to vendors. While some of these fines are necessary motivators for supply chain compliance, many of these deviations are the result of problems on the receiver’s end of operations.

Chargebacks and Fines Burning Money

For those who don’t enjoy paying their customers, here’s five tools to fight chargebacks and reduce the number of fines you receive. Of course, no one strategy can solve all of your problems, but my company was able to reduce chargeback expenses by over 60% with these methods.

1 – Fight Every Single Chargeback

As much as you dislike filing disputes, a clerk somewhere dislikes processing them just as much. Many companies (such as Walmart) will reduce unofficially the number of fines if they know you will dispute them. Paperwork piles up on their end and suddenly charging you for every small discrepancy doesn’t cover the cost of hiring an additional clerk to handle your disputes. Even if you know you’ll lose the dispute, file it anyway.

2 – Perfect Paperwork

Perfect Shipping Documentation

From the disputes I’ve dealt with, approximately half of them are a result of a problem on the receiving (customer) side. However, we can still ended up paying for many of the shortages or other problems if our shipping documentation is not detailed enough. To avoid this problem, over-document when you ship. Absolutely be sure to include carton count, weight, pallet count, and other basic information. If possible, seal the trailer and record the seal number. Having the driver count and sign the bill of lading is also essential.

When shipping by FedEx, we often strapped boxes together to save on freight costs. However, when a customer claims a shortage, this prevents us from proving our carton count because of the banded boxes. We therefore changed our process to not strapping together boxes. This change gives us an exact FedEx paper trail for each carton to help us win future disputes.

Almost as important as perfect shipping documentation is a filing system that will help you find the necessary paperwork when you need it months later. Clearly marked, well-organized folders or paperless filing systems are well worth the time they take. They’ll simplify your life by making the dispute-filing process quick and easy. For chronic-problem customers, we maintain spreadsheets to track pertinent information that we can quickly access later. This few minutes of data entry saves hours of searching when disputes arise.

Perfect Dispute Paperwork

Another place where it helps to be exact is in the dispute paperwork you’ll send to contest the fine. Ensure every field is complete and legible if handwritten (typed is better). Be descriptive and make it very easy to understand. Remember, a clerk who reviews disputes all day will handle your claims. Anything you can do with your dispute to make the clerk’s job easier will result in more fines being rescinded.

3 – Never Pay the Same Fine Twice

When acquiring a new customer, always read their routing instruction guide so you can build a process that follows their requirements. However, if you miss something and are fined for it, improve your processes so you never pay the same fine twice.

For each chargeback we receive, we assemble everyone who interacts with the customer into a quick huddle and agree on changes to avoid future chargebacks. If necessary, we institute a two-person sign off system or other techniques outlined in my previous article, Strategies to Fulfill Customer-specific Requirements. For our very difficult customers, we record every piece of data and take pictures of every piece we ship out. Then when the inevitable chargebacks come, we can easily dispute them by replying with our detailed paperwork and pictures.

For example, one of our more complex customers required slip sheets (40×48 inch pieces of flat cardboard) between different SKUs on a pallet. Since most of our other customers will accept mixed pallets, we missed this requirement. However, after receiving a significant fine, we reviewed and changed our process. The pick sheets that print for that customer now have the instructions clearly outlined. We also take pictures of the pallets and require two authorized signatures before anything for that customer leaves our warehouse.

4 – Collaborate with the DC

Many complicated issues can be quickly solved by going to the gemba, or source, of the problem. Usually, that means visiting your customer’s distribution center and talking with their team. Seeing how they handle your products can spur creative collaboration that saves both companies time, money, and headaches.

We had constant product damage issues with one of our major customers. We were following their routing requirements exactly, but their requirements were often the cause of damages for our unique products. We brought the issue up in a visit and several follow-up conversations with the receiving lead at the primary DC we shipped to. After explaining the problem and brainstorming together, we were able to tweak the routing rules to a solution that both reduced damages and made receipts easier for the their team.

5 – Share Feedback with Buyer

If despite your best efforts, you’re still swimming in fines from a specific customer, it may be time to elevate the issue to the buyer. While this depends heavily on your relationship, we were recently pleasantly surprised with how helpful a buyer from a national US retailer was in helping us to solve dispute problems. We were contacted by someone from the “Profit Recovery” department claiming we owed money for product damages from several years prior. Unsure how to respond, we raised the issue with the buyer on our next sales meeting later that month. She was happy to help, and detailed exactly who we should contact and what we should say to have the disputes dropped. This method is especially useful if the charges seem obviously unjustified.

6 – Budget, Minimize, and Improve

Problems and variations are still a reality for most supply chains, especially growing small businesses. While doing our best to standardize and automate, variations still exist, and some will result in fines. A wise course of action at the executive level would be to set a target maximum for customer chargebacks and support improvements that reduce that budgeted allowance. Supply chains are full of different companies and people working together to create value for the end customer. Anything you can do to collaborate and make the jobs of partner companies easier will often reduce fines and chargebacks – and make your offering to the end customer more valuable and competitive.

Want to join in our quest to conquer the wild west of supply chain management? Subscribe to Supply Chain Cowboy and receive future articles by email.

How to Win Friends and Influence People in Your Supply Chain

 

How ti Win Friends and Influence People in the Supply Chain

Even though supply chains are becoming more automated, people still play a critical role in successful interactions and product flow. This is especially true for most small businesses. Relationships and conversations matter much more to small businesses because they don’t have the power of Walmart or Apple to rely on novel-length contracts and impersonal automation. Instead, phone calls, personal visits, special favors, and constant cooperation are what keep small companies alive and their products flowing. So it makes sense that the ability to win friends and influence people in your supply chain is a powerful skill that is needed to help your company survive and flourish.

I recently finished listening to the business classic, How to Win Friends and Influence People (HTWF&IP), by Dale Carnegie. Although originally published over 75 years ago, it’s still a consistent bestseller because it’s simply a great book. The lessons are timeless and apply directly to everyday life in along the supply chain. I’d like to share a few simple examples of how I’ve seen the book’s suggestions directly help me solve problems with vendors, customers, and fellow team members.

Always Make the Other Person Feel Important

“There is one all-important law of human conduct. If we obey that law, we shall almost never get into trouble. In fact, that law, if obeyed, will bring us countless friends and constant happiness. But the very instant we break the law, we shall get into endless trouble. The law is this: Always make the other person feel important.”

“Make the other person feel important – and do it sincerely.”

― Dale Carnegie, HTWF&IP

The strongest takeaway I gained from the book is that making others feel important can help solve most conflicts. The key, however, is to do so in a sincere way. Never use flattery or give undeserved phrase. However, by recognizing the important roles that others play – and seeing problems from their perspective, you can give them the due respect and honor that you would like to be given if you were in their place. Often problems vanish as soon as the other person feels acknowledged and respected.

I’ll first share an embarrassing example I’ve realized about myself. My company often gets last-minute rush orders that fall outside our normal fulfillment time. We have a standard lead time, but sometimes to win the sale, our salespeople must promise delivery in a much shorter period than our standard. When those orders are thrown at me, and I’m ordered to make it happen, I find myself reluctant to do so. However, when someone approaches me kindly, acknowledges how busy my team is, and asks me to please consider making an exception this one time, my attitude is completely different. I feel important and thus do everything I can to make sure the order succeeds. Of course, I recognize that I need to work on helping all orders succeed equally, but you can see how powerful an extra 30 seconds of conversation can be.

How to Win Friends and Influence People

Utilizing the same principal, I recently helped schedule a delivery appointment with a key customer even though we thought it couldn’t be done. Our warehouse supervisor had called for an appointment at the end of the month, and because the customer was fully booked, the customer said we couldn’t deliver until several days later. Our CEO wanted us very much to deliver within the month, so I called back. I talked with the same receiving clerk for a few minutes. I acknowledged how busy he was and listened for a minute about everything he had going on. I praised him that he’d be willing to handle that much on a Friday. After just a minute of getting to know him a little more, I explained that our order was very small, just a few cases, and he would be doing us a great favor if we could sneak it in between his many other important shipments. He said it wouldn’t be a problem – and we delivered that afternoon. Not only did the order get delivered on time, but I now have a friend at our customer’s warehouse that I look forward to talking with again.

Make others feel important – and do so sincerely.

Continuous Improvement through Continuous Praise

“Let us praise even the slightest improvement. That inspires the other person to keep on improving.”

― Dale Carnegie, HTWF&IP

Enabling others to improve is one of the most rewarding and effective methods of improving your company and supply chain. Through improving and encouraging the job skills, creativity, and problem solving abilities of others, your entire network will benefit from more engaged players and improved processes. In fact, a key tenant of the Toyota Production System is to encourage improvement through the creativity of every one of its employees and supply chain members. Imagine if Toyota managers were dictatorial, constantly shouting out commands and berating employees for mistakes. It’s not a stretch to predict that Toyota would be out of business if that’s how they managed their people.

Praise, in contrast, has an almost magical effect in motivating others to improve. Based on this principal, I’ve watch my company grow one of our key suppliers through targeted praise – and withholding the occasional frustrations.

When we first started producing one of our new products, we found a small firm of just a few people that was eager to work with us. Although eager, they often had quality control problems, delays, and incongruent processes that come from being a young company. I became frustrated many times, and recommended dropping them as a supplier – even though that meant they would likely go out of business.

Despite my recommendation, my wise manager counseled that we keep them on as a continued ally. My manager was careful to encourage them to improve:  he identified and focused on what they did right. When problems surfaced, we took a shared-problem approach and tried to solve the issues in a way that we and the supplier would bear responsibility together for improvement. We rewarded their progress with compliments and increased orders.

Because of the years of patience and encouragement, this supplier is now our miracle worker. We have other, more advanced suppliers. However, when we’re in a tight spot, no one can pull off an emergency order with next to no lead time like that small supplier we’ve grown. Because of this supplier’s expertise at short-notice orders, we’ve been able to catch many sales opportunities that we would have otherwise needed to pass up – or pay much more in expedited freight. I’ve witness how patience and praise can help a supplier grow to a point that boosts your bottom line when no one else can.

Avoid Arguments and Let Others Save Face

“If you argue and rankle and contradict, you may achieve a victory sometimes; but it will be an empty victory because you will never get your opponent’s good will.”

“Letting one save face! How important, how vitally important that is! And how few of us ever stop to think of it! We ride roughshod over the feelings of others, getting our own way, finding fault, issuing threats, criticizing a child or an employee in front of others, without even considering the hurt to the other person’s pride. Whereas a few minutes’ thought, a considerate word or two, a genuine understanding of the other person’s attitude, would go so far toward alleviating the sting!”

― Dale Carnegie, HTWF&IP

In the course of your interactions with customer and vendors, I guarantee that points of disagreement and contention will arise. Huge quality problems, incorrect freight counts, painful cycle counts, overdue orders, key stock outs, mountains of obsolete inventory, and…well, I’m sure you could add another 20 problems to the list. Indeed, problems are so common in the supply chain that I’ve heard supply chain management called problem management or fire management. But how do we fight fires while still thinking long-term? Indeed, supply chain success comes not only from solving the temporary problems, but creating long-term cooperation and synergy through strong relationships. Thus, we find ourselves in a precarious balance between the problems of today – “who’s responsible for fixing and paying for this?” – and long-term partnerships to improve the entire supply chain – “how can we improve information and product flow along the chain?”

Better defined, the risk we face is allowing the problem of the day to slow and destroy the progress made on long-term relationships. Even if someone is particularly difficult to work with, venting your frustrations and giving that person a piece of your mind could easily set back months or years of investment. Even if you’re completely right, avoiding argument – or letting your opponent gracefully retreat – may be the smartest move to make.

Certainly when money is involved, the process takes on higher stakes. In the interest of our companies, it certainly befits your and I to recover money that is rightfully ours. However, when arguments or disagreements become personal, bitter, and unrelated to the actual problem – these are fights to avoid.

When dealing with some of our Asian suppliers, this concept becomes especially important. Asian cultures treat conflict differently than other cultures. Saving face is much more important there than in the US or Europe – although we often fail to realize that it’s still quite important in any culture. When problems arise, if we are able to deflect the blame away from any specific person and instead focus on solutions, our suppliers are much more willing to work with us on solving the problem. For example, whenever I send an email to a supplier that dictates, “This was your fault. You need to either do this or pay a significant penalty,” nothing good ever comes from it. However, when I am able to approach the problem as the following, the problem is often rectified: “We noticed this problem. This is not good because our end consumers are not happy when this happens. What can we do to solve this problem?” Working together to solve a problem is always more productive and rewarding than pushing a punishment.

Final Thoughts

How to Win Friends and Influence people is a great reminder of how we should treat others. It brings together a lot of applicable advice on how to interact with people, and therefore becomes an excellent real-world resource that teaches just what the title professes.

I enjoy spreadsheets, databases, and technology, but relationships with people are more important than any automated email alert. Carnegie cites a study that explains how “even in such technical lines as engineering, about 15 percent of one’s financial success is due to one’s technical knowledge and about 85 percent is due to skill in human [interactions] and the ability to lead people.” I see it as no stretch to say that at least 85% of the success of your business in the supply chain is your ability to interact positively with others.

If you’ve already read Dale Carnegie’s book and would like another great read on improving human relations, then I recommend Leadership and Self-deception.