From Cradle to Grave

In the glitterati of forward chain management, the reverse logistics has taken a backseat. In the recent past, the laid-back attitute of IT vendors and the lack of uniformity among partners and system integrators has raised many eyebrows, but at the end, customers proved to be the trend change makers. On a broad context, reverse logistics can be defined as movement of goods from the point of consumption back to the point of origin. The service providers facilitating the reverse logistics are engaged in recapturing the value loss. There are various methods to liquidate returns that include: re-use (cannibalize the SKUs), re-sell (refurbish), transfer to original seller (manufacturing defect), sell at heavy discount (scrap) and destroy (incinerate). The suave vendors have already outsourced their repair services and warranty management to the third-party solution providers, while others have their own in-house processes.

As vendors are virtually shifting their preferences to customer-driven services, the business of fixing is expected to blossom. From warranty repairs to refurbishment services, the integrated life-cycle of products has increasingly become a focus area these days. The OEMs and ODMs are turning to a low-cost outsourcing model for their warranty support and repair needs. On the other side, third-party service providers are diversifying their offering portfolio with asset recovery, back-end support, infrastructure management, onsite installation, re-deployment and remote solution delivery to stay afloat. The help-desk support and technical expertise through outsourcing model is expected to grow manifold. As the reverse logistics management is highly customer-centric, the vendor community together with technology integrators are taking a holistic view.

The market size of third-party service providers is yet to be measured, as it is still at a nascent stage and is unorganized. In India, a majority of players in this space are usually focusing on one or two of the verticals of RL services, hence missing out on the overall integrated services portfolio. Fewer full-service providers operate in this arena, and have major thrust in metropolitans and large cities and the irony is that the upcountry market goes for a toss, when it comes to keep the IT-driven systems up and running at the helm of managing reverse logistics. The major third-party reverse logistics and solution providers include inTarvo Technologies, Accel Frontline, Repair & Return Technology, TVS-e Servicetec and Cadensworth India, which is a fully-owned subsidiary of Redington. inTarvo Technologies offers an integrated model of remote and field support for a wide range of IT products and associated software, applications and technologies. The company has a network of more than 400 service centers spread over 200 locations.
Accel Frontline provides end-to-end technical support, warranty support, customer care, helpdesk and managed services, and repair and refurbishment to its clients. The company has a unique single window service offering for all OEM customer care and support activities across India. It integrates the helpdesk, service centers, field teams, parts warehouses, and distribution and logistics divisions. TVS-E Servicetec, which is a spin-off set up in October 2007, as a part of TVS-Electronics for servicing TVS-E warranty products, and has more than 400 service centers in over 300 locations and maintains five warehouses. The company offers end-to-end expertise in product support, including onsite and offsite SCM, accessories distribution and technical support through a call center. A trade association, Reverse Logistics Association (RLA) monitors third-party after-sales support services providers for OEM, ODM, and retail chains. According to a recent RLA analysis, IT hardware is one of the most lucrative warranty markets in India, after consumer electronics.
As an extension of reverse logistics management, e-waste has also become one of the focussed areas for managers. Cerebra Integrated Technologies, which specializes in electronic manufacturing is investing Rs 50 crore (partly with equity dilution) for a proposed e-waste recycling unit in Bengaluru. inTarvo Technologies is also setting up a collection hub and a dismantling center near Pune with an investment of Rs 10 crore. This new facility, will be a hub for the collection, conversion and extraction of metals. It has already forged an alliance with a global e-waste management company, and will ship hazardous parts and elements outside the country for its safe disposal. V Ranganathan, MD, Cerebra Integrated Technologies said that whenever they get defective equipment or waste, the company would check if it could be repaired and fix the components, otherwise send it back to the manufacturers. "The parts which cannot be repaired, will be sent for being powdered in Singapore," added Ranganathan.

The Roadblocks:
Speaking to The DQ Channels, Saket Kapur, MD, Green Vision said that, SIs and SPs currently are only focusing on new supplies, while independent operators are involved in purchasing old working and non-working hardware for cannibalizing; sale in upcountry markets; and reclaiming metal waste. "Key challenge in managing reverse logistics is non existence of congenial ecosystem. Buying old material from the customer, involves VAT/CST implication both on purchase, as well as sale. Moreover, managing road permits and statutory forms are unconvincing for authorities," Kapur added. According to Kapur, another practical problem is warehousing of the old material owing to the expensive real estate, while OEMs and distributors are not focussing at this area.
Despite the growing business necessity of effective reverse chain management, the lack of well-connected mechanism, particularly in smaller towns and remote locations is one of the demerits of reverse chain management. "The major logistics providers are capable of doing reverse logistics only in the metros and major cities. Getting the parts back from smaller towns and remote locations are currently done through local consignment agents whose tracking procedure is not effective," said Alok Kumar Mitra, COO, TVS-E Servicetec. Apparently, it is not a lucrative business compared to the onward shipments, as the volume does not justify the freight. "The franchisee system of the logistics providers has decentralised billing, and made the reverse logistics less effective compared to forward-logistics," Mitra added. He also said that the statutory requirements like waybills, road-permits and octroi, are other hurdles in the smooth inter-state transportation of parts and products. In order to overcome such regional issues, TVS-E Servicetec is planning to create branch warehouses with sales tax registrations in major states.
Sudheer Puthhiran K, President-Field Services, inTarvo Technologies said that, traditionally the reverse logistics component for technology products is usually eight to nine percent of its total cost. He said, "Lower margins in the recent times have led to a squeeze in the budgets, thereby posing a challenge to delivering quality of services and reduction of SLAs. With reduced budgets RL managers are looking at balancing SLAs and costs." According to him, the challenge always remains on measuring qualitative indices like customer satisfaction, which is the ultimate goal of RL services.

Integrated Lifecycle Management:
Integrated Lifecycle Management (ILM) services fortifies the reverse logistic services of the vendor and the integartion facilitates lifecycle of the product through better end-to-end support. Puthhiran opines, "These services if integrated seamlessly, lead to real-time productivity gains and also reduce pain associated with the product usage significantly. This leads to painless RL services for the customer. On the back end, the MIS management and call management services integrate and come live to give better control for the OEM or distributor on SLAs thereby giving measurability to qualitative indices like customer satisfaction." Over the last couple of years, inTarvo has been advocating ILM services to its customers through 'control tower' model. "The concept, which is now strongly followed abroad, challenges the traditional method of calculating RL costs wherein the services have moved to segmentation-based integrated support services, which are on need basis rather than on size, industry or equipment," Puthhiran said. With a move to lifecycle analysis based on response time, parts coverage, availability and add-on services, all incidental costs like staff, management, courier and infrastructure are mapped and new cost-effective models can be developed based on these inputs for an effective integrated delivery. "Keeping in pace with our growth and integration of different ILM services, we are expanding to tap the global markets with services offering, which take advantage of our labor arbitrage. For this we are setting up a facility at an SEZ near Chennai for catering to ILM requirements of customers in the US & European markets," said Puthhiran.

The Responsiveness:
Reverse logistics plays a critial role in getting back the parts, and facilitates proper disposal through e-waste management. "We do get proper response from the OEM vendors and national distributors on the product performance and customer service on a monthly or quarterly basis. The feedback from these channels are also recorded and discussed for improvements," said Mitra. According to him, TVS-E Servicetec plays a central role in getting defectives back for onward shipment to the OEMs for replenishment and reimbursement. Puthhiran believes that customer loyalty and satisfaction are dependent on a painless reverse logistics processes and faster response time. He said, "To this, there has always been a tussle between the sales and RL departments. OEMs and national distributors have a little choice but to build a great RL service, and the bottomline rests on responsive RL services, which takes the pain out of the system."
"Although reverse logistics is not perceived as one of the major focus areas by vendors, the trends are compelling them to take a service-led approach to derive business benefits in a longer run. The minimal turnaround time and availability of neighbourhood service repairs centres are some of the key offerings in post-sales. "The OEM vendors and NDs may have different levels of SLAs depending on the mandate of the organization as well as their customers' needs. There is however, a demand to increase responsiveness through greater co-ordination of different departments within the organization," said Puthhiran. "The clients have been supporting us, in our endeavor of providing better customer satisfaction and better sales to channels," he concluded.

Muntazir Abbas
muntazira@cybermedia.co.in