OPTing In – The OnProcess Technology, Inc. Blog

We’re Moving On…

OnProcess Technology — Thu, 30 Dec 2010 03:08:51 +0000

Well, only this blog is.

To its new home, in the new OnProcess Technology Website!

We started this blog after our previous website had been done, and it was easier at the time to use the wonderful wordpress.com facilities to get up and running. But it’s in our best interests to bring the blog (and its SEO juice) within our own domain. So that’s what we’re doing.

So, re-point your pointers, reset your RSS feeds, fix your bookmarks to this new address:

http://www.onprocess.com/blog

and stay with us as we explore the latest thinking about service supply chain optimization, customer experience management, and whatever else strikes our fancy.

Thanks for your interest so far!

–SK

Filed under: advanced exchange, Asset Recovery, Asset Retrieval, Customer Care, Customer Experience Management, Customer Understanding Research, Jobs, OnProcess, RMA management, Warranty Management Tagged: blog, moving, new blog, new website, OnProcess, OnProcess Technology

Article: Why TV Antennas Are Sexy Again

OnProcess Technology — Thu, 09 Dec 2010 18:43:23 +0000

OPT Take: Our emphasis in BOLD ITALICS

–sk

———

Tech One on One With Richard Schneider

Why TV Antennas Are Sexy Again

By Harry A. Jessell

TVNewsCheck, December 9, 2010 11:13 AM EST

Richard Schneider is no broadcaster, but he may be the most ardent champion of over-the-air TV in the country.

And it shouldn’t come as a surprise. He makes and sells TV antennas. For broadcasters, the ability to beam TV directly to viewers without wires is an edge. For Schneider, it’s everything.

Seven years ago, his hobby of building TV antennas “spun out of control” and into a business. Today, he says, his St. Louis-based Antennas Direct, has $10 million in annual revenue and is growing fast, thanks to America’s rediscovery of over-the-air broadcasting and what a bargain it is.

In this interview with TVNewsCheck, Schneider explains why the TV antenna is the “hottest selling device” for digital video and wonders why the FCC is bent on “committing infanticide” by taking spectrum away from broadcasters.

An edited transcript:

How are sales going?

It’s actually accelerating. In fact, November was the best month in the history of our company. We topped the amount of units shipped in June of 2009 running up to the digital transition.

How many units do you expect to sell this year?

We will probably be just around the half-million mark. We started online, but now sell mostly through retailers, including big box stories like Best Buy and CostCo.

That’s a lot of antennas.

My goal when I started this was to sell maybe 20 units a month so I could pay for my home theatre hobby. It would be a self-funding hobby and my wife wouldn’t find out how much I was spending on an HDTV projector.

And what do you think is going to happen next year?

We have some other large nationally known retailers that are evaluating our products. If even a percentage of those come through, we think we can grow another 30% for next year.

That’s another 150,000 units.

At least.

What’s the overall market for antennas?

We think the antenna market is anywhere from about four-and-a-half million to six million units a year and we believe that’s growing around 20%-25% percent annually. In dollars, we estimate the market to be roughly $250 million in annual sales in the U.S. We’ll do around $10 million.

And you think that that will continue.

Yes, because here’s where our opportunity is: 80% of the population doesn’t even know you can get over-the-air HDTV. You tell people and they look at you like you’re crazy: “You’re saying I can actually get free HDTV from an antenna?” It’s shocking to a lot of people. So we see this as a great opportunity. Our biggest obstacle isn’t other antenna manufacturers. It’s the fact that most people aren’t even aware that this is an option.

Who is the biggest player in this space?

Well, probably in terms of unit volume, I would say Audiovox . It sells under the names of RCA and Terk. They have a fairly good selection of indoor antennas.

Are there places where antennas are selling faster than the average?

Areas where there’s lots of multicasting are helping to drive a lot of the sales. That’s mostly large markets on the coasts, Los Angeles and the Northeast. As much as I hate to say this, HDTV is secondary to multicasting in driving sales. And in these areas, you can not only get a lot from your market, but potentially from neighboring markets.

What can you tell me about the people buying these antennas?

There’s a perception that it’s the elderly or the indigent that are buying them. But we’re seeing quite a big growth over the last 18 months among younger people, meaning people in their 20s or 30s. They’re using it as a supplement to pay TV or, more frequently lately, as a supplement to broadband.

What they call over-the-top TV?

Yes. We were actually nervous when the Hulu service started, thinking, oh, this is going to be another kind of competitor for us. But what’s funny is, as soon as that service started coming into its own, our phone lines started ringing with a decidedly younger group of people saying, hey, I have decided to cancel my pay television, I am getting what I want from Hulu or Netflix in terms of premium content and I want to get my local live content from an antenna. We noticed this about 18 months ago. People see digital TV as a new technology, a new service. It’s really now becoming a viable supplement to the broadband offerings. It’s given people the rationale they need to cancel pay television.

Let’s talk about the technology a little. Is there anything really new in this space or are we just marketing different sizes for different places?

Antenna design has been a lost art. There really hadn’t been much done in over-the-air antenna design in 35 years. But what we now have is new testing and simulation tools and analytic devices that didn’t exist even three years ago. So we can actually now run through thousands and thousands of iterations of geometries fairly quickly, a process that would have taken months, if not years, 25 years ago. A lot of this has come out of the defense industry.

So, there have been a lot of advancements. We have been able to make antennas much smaller than before and much more reliable, more resistant to interference and much more efficient than something that might have come out five or 10 years ago.

They’ve also been herding stations into the upper VHF and UHF bands. That has made our job a lot easier because when you’re designing antennas for a narrower set of frequencies, you can make them more effective and more powerful and also have better luck in rejecting interference.

What about the VHF band? Is there anything that can be done to improve performance there?

We came up with a new antenna for high V called the ClearStream5. It’s a loop in front of a wire reflector tuned for chs. 7-13. We have had fairly good results with that. Low V is actually a lost cause. We do have a couple of antennas for low V, but there are so many obstacles on the low V band that there’s really nothing we as an antenna manufacturer can really do to overcome that.

As a matter a fact, we’re developing some new amplifiers with filters that actually block out low V and we’re finding we get much better noise performance and overload resistance. We’re thinking of maybe extending that not just to all the amplifiers, but maybe even to the antennas themselves, filtering out anything below ch. 7. We’re finding that we’re delivering a lot less interference and garbage to the tuner by doing that.

What do you think of the FCC chairman’s push to shift 40% of TV spectrum to wireless broadband?

The FCC is about 180 degrees from what is going on in the marketplace. We’re kind of baffled at why they’re committing infanticide. The digital transition was one of the most successful initiatives undertaken by the government and now they’re going to kill it in the crib.

They are completely out of step with the realities of the marketplace. We visited the FCC and we were met with a lot of skepticism when we explained how popular over-the-air was. We invited them to come out to our warehouse and see all of the shipments that are leaving the dock. One staffer mentioned, “Well, I don’t watch over the air” and his peer group doesn’t either, implying no one in the country does, as if they’re representative of the country.

Do you think TV stations do enough to promote over-the-air TV?

No, I really don’t. A handful do get it, but I think there’s a number of them that don’t realize what percentage of their viewership actually does get their signal over the air. That number has been undercounted for years. We have gone to some stations, partnered with them and have handed out antennas to their viewers. Their station managers were surprised at the turnouts that they have gotten. Sometimes thousands and thousands of people have shown up for a chance to get 100 antennas. It’s opened up some eyes among station managers: “Wow, I didn’t realize that this many people weren’t getting our signal over the air.”

You know that broadcasters now have an incentive not to drive viewers to antennas because they get a share of the cable money through retransmission consent.

Yes, we’re aware of that and so we’re not trashing the cable providers. But there is an inexorable movement away from pay television to broadband. This shift is happening regardless of whether we promote over the air or not and some stations do appreciate having a good percentage of their viewers — a healthy percentage of their viewers — over the air. It gives them a little bit better contract position when carriage fee disputes go on.

Would you like to sum this up?

What we’re trying to do is overcome the perception that over the air is in a state of decline. People are surprised that antenna sales have accelerated since the digital transition. The irony is that in the broadband age the hottest selling device for digital video is a TV antenna. I don’t know what it takes to get the word out: the best picture quality now is over the air.

Filed under: Customer Understanding Research, OnProcess Tagged: broadband, Cable, HDTV, technology trends

Article: How Not to Sell A Commodity Product

OnProcess Technology — Wed, 17 Nov 2010 18:11:58 +0000

OPT Take: While written from a primarily sales orientation, the thinking is consistent with our messages to senior executives and marketing teams. Our emphasis in bold.

Original Article: http://www.bnet.com/blog/salesmachine/how-not-to-sell-a-commodity-product/13017

How Not to Sell a Commodity Product

By Geoffrey James | November 16, 2010

I’m having an amusing time today negotiating a price for a new car. I’ve gotten a couple of quotes across the Internet and was easily able to get a price below dealer cost. I still haven’t test-driven the car, so I don’t know if I’m going to buy it, but there’s a good chance I’ll write a check this evening.

What’s funny, and kinda sad, about this is that the dealers are clearly not prepared, in any meaningful way, to keep me from playing them off against each other. They’re in a price war for my business and have done nothing — nada — to raise the stakes and sell me a “solution.”

That’s a weird oversight, because I have a 23 year history with one of the two dealers, and even told them that in my email. So they’ve already got a leg up in getting my business to the point where I would probably have been willing to pay a couple of hundred dollars more, just to do business with them.

I think I’m probably like a lot of informed consumers (and informed B2B buyers) in that I’m willing to do a bit of research to figure out what want and what it should cost. However, I’m also influenced (heavily) by how I’m treated. One of the reasons I really like that dealership is that their service team is top notch.

Same thing with consumer electronics. I tend to buy from J&R because they’re easy to work with and because their customer service is 1) American and 2) Reasonable. I will almost always buy from J&R, even if the price is a bit higher than some other website.

Now, it could be that the dealership is waiting until I’m in the dealership to do an upsell, or perhaps to package some services along with the purchase, but it’s getting a bit late for that. On the bright side, the salesperson did email me her cell phone number, which was smart.

Anyway, the reason I’m posting this is because it’s difficult to see sales professionals passing up a real opportunity to at least use loyalty to their advantage and put the purchase into the context of a larger relationship.

The sad thing is that this is happening everywhere. The Internet is making many product categories into commodities by eliminating proprietary knowledge about pricing. In order to survive and keep margins up, sales professionals MUST raise their game.

It’s also true in B2B. Unless you’re going to compete on price, you MUST raise the bar and start figuring out how to provide more and better. If you need an example of how this is done, check out how Newell Rubbermaid is turning its consumer brands into B2B solutions for retail outlets. Brilliant stuff.

Filed under: Customer Care, Customer Experience Management, OnProcess Tagged: differentiation, differentiation on service, maintaining margin in commodity markets, marketing strategy

Article: Held Hostage by Service Calls

OnProcess Technology — Fri, 12 Nov 2010 19:19:15 +0000

Link to original article

Published on InfoWorld (http://www.infoworld.com)

Held hostage by service calls

By Christina Wood

Created 2010-11-12 03:00AM

The last time I needed an at-home service call, I thought, “Does this company think we’re living in the 1950s? Who can be at home from 8 a.m. to 1 p.m. on a Tuesday just because they bought a new fridge?” Even for someone who works out of a home office, such service policies mean a half-day trapped at half-capacity: no field calls, no paying clients, no lengthy and involved phone conferences.

Such four- or five-hour windows are the norm in home services and have been for decades. Are service providers expecting that anyone who needs cable installed or a refrigerator repaired has a stay-at-home spouse? Or do they simply not consider the inconvenience? Either way, the idea rankled. Then I saw a survey by Harris Interactive for SoundBite Communications that made this claim: “One out of two consumers feel like prisoners in their own homes due to long service windows.” That about sums it up.

[ For a look at where tech support is going, read Christina Tynan-Wood’s “The (better) future of tech support.” | Frustrated by tech support? Get answers in InfoWorld’s Gripe Line newsletter. ]

Maybe times were different when service companies decided that customers would be willing not only to pay for new cable service, a new fridge, or in-home repairs, but also give up a vacation day or station someone at home to handle it. Now, when we’re expected to get work done while commuting, be on call 24/7, and pull our weight in lean organizations, asking for the afternoon off to wait at home so that you can watch TV on the weekend doesn’t contribute to a reputation as a dedicated, invaluable employee.

According to the survey, 81 percent of consumers had to take time off from work to meet a service technician, and 76 percent were inconvenienced by this. The experience left 51 percent feeling imprisoned in their own homes.

All this waiting around for trivial in-home services costs American businesses a fortune, too, according to the survey. “Eighty-one percent of consumers report having to take time off from work or adjust their schedule,” says the release. “To ensure they are home during the service appointment window. This translates into more than $13.4 billion in lost productivity for U.S. businesses.”

What’s the solution? Texting, according to SoundBite Communications, a company that hopes to provide this solution.

“One thing that came out of this survey is that people are OK with taking the time out. They understand the necessity. The issue is the four- or five-hour window and the complete feeling of helplessness as you wait,” explains Mark Friedman, chief marketing and business development officer of SoundBite Communications.

The survey asked consumers if they would be interested in receiving a text alert one hour before the technician was due to arrive, allowing them to go home from work to meet the tech rather than waiting around for half the day at home. Fifty-four percent said a service like this would improve their overall satisfaction with the service and their opinion of the company providing the service.

I have found that simply asking — when I set up the delivery or service — will usually get me a phone call from the technician within a reasonable time frame before the appointment. But I concur that rather than hoping the technicians are agreeable, the system could stand a technology update to tighter scheduling and more information sharing with customers.

I know that when I make an appointment with someone, I show up on time and keep the meeting to an agreed-upon length. If my intentions are thwarted, I call to say I’ll be late. If service technicians can’t manage that for some reason, I’d prefer GPS tracking on my technician. That way, I could log on and see where he is — perhaps with a time estimate of how long he will be there — and decide if I can answer a call as it comes in, join a phone conference, or take the dog for a walk. Then again, I suppose a text message saying the tech is an hour away would be an improvement over waiting around all day.

Got gripes or questions? Send them to christina_tynan-wood@infoworld.com.

This story, “Held hostage by service calls,” was originally published at InfoWorld.com. Read more of Christina Tynan-Wood’s Gripe Line blog at InfoWorld.com.

Source URL (retrieved on 2010-11-12 11:15AM): http://www.infoworld.com/d/adventures-in-it/held-hostage-service-calls-837

Filed under: Customer Care, Customer Experience Management, Customer Understanding Research, OnProcess Tagged: at-home service, Customer Experience, customer experience research, Harris Interactive, SoundBite

Study: Customers Will Pay Organization More For A Great Customer Experience

OnProcess Technology — Tue, 09 Nov 2010 20:13:17 +0000

We’ve been saying this for some time to our prospects and clients — here’s some more research to support that position. –sk

Link to original article

Customers Will Pay Organization More For A Great Customer Experience

Bozeman, Mont., 10/13/2010

According to the fifth annual Customer Experience Report, a Harris Interactive study sponsored by RightNow Technologies (NASDAQ: RNOW), customer experience is playing a significant role in determining where consumers choose to shop and how much they are willing to spend. Results show that exceptional customer experience creates loyal customers and has the power to impact a company’s top and bottom lines.

Read entire Customer Experience Report

Nearly all consumers (85 percent) said they would be willing to pay more over the standard price of a good or service to ensure a superior customer experience. Of those consumers that said they would pay more for an excellent customer experience:

55 percent would pay 10 percent or more
27 percent would pay 15 percent or more
10 percent would pay 25 percent or more

Customer Experience, the Secret Weapon for Driving Revenue
These results show that delivering a positive customer experience can help organizations increase revenue. For example, in 2009 Cyber Monday alone generated $887 million in revenue for e-retailers. Based on the results of this study the industry could have generated an additional $87 million in revenue in just one day by providing superior customer experience.

View industry infographics in the Customer Experience Report

This year’s research also shows that a great customer service experience significantly impacts purchasing decisions:

Nearly all consumers (82 percent) have stopped doing business with an organization as a result of negative experience and most (75 percent) do not return
55 percent of consumers became customers of a company based on its reputation for great customer service, and 40 percent of consumers have switched to a competitive brand simply because of its reputation for exceptional service

“This year’s report not only demonstrates the financial impact of a negative customer experience, but the real value of positive customer experiences. By focusing on delivering exceptional experiences, businesses have the opportunity to grow their customer base, improve brand loyalty and increase overall revenue.”
Greg Gianforte, chief executive officer, RightNow

The Power of Word of Mouth

Consumers not only voice their customer experience preferences with their own wallets; they also influence their peers. According to the 2010 Customer Experience Report, customer advocacy should be a key focus for businesses because:

Customer service is still the number one reason consumers recommend an organization, more than products or price
Word of mouth is the number one influence on consumers’ purchasing decisions (76 percent), followed by customer reviews and online feedback at 49 percent
79 percent of consumers that have had a negative experience with an organization told others about it, and 97 percent chose to share their experience via word of mouth
85 percent wanted to warn others about the pitfalls of doing business with that company and 66 percent wanted to discourage others from buying from that company

What Makes a Great Experience?

The 2010 report outlines why consumers stop doing business with a company:

Rude staff (73 percent)
Issues weren’t resolved quickly (55 percent)
Unknowledgeable staff (51 percent)

Companies can improve the customer experience by providing friendly, knowledgeable support and resolving issues in a timely manner.

“Drugstore.com is heavily invested in delivering a positive, personalized customer experience and it has a tremendous impact on our business, steadily increasing our Net Promoter score and increasing sales.”
Lisa Larson, Director of Customer Care, Drugstore.com

“Customer experience is a top priority for Nikon. We work hard to quickly respond to customers’ needs no matter how they choose to reach out to the company. Our dedication to providing customers with a great experience is helping Nikon consistently achieve a 95 percent customer satisfaction score.”
David Dentry, GM, Customer Relations, Nikon

Survey Methodology

This survey was conducted online within the United States between June 30-July 2, 2010 among 2,217 adults (aged 18 and over) by Harris Interactive on behalf of RightNow Technologies via its Quick Query omnibus product. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Where appropriate, this data were also weighted to reflect the composition of the adult online population. Propensity score weighting was also used to adjust for respondents’ propensity to be online.

Filed under: Customer Care, Customer Experience Management, Customer Understanding Research Tagged: Customer Experience, Harris Interactive, research, RightNow

Cisco Introduces Customer Collaboration Software to Help Businesses Track and Respond to Social Media Interactions

OnProcess Technology — Wed, 03 Nov 2010 15:55:32 +0000

Cisco Introduces Customer Collaboration Software to Help Businesses Track and Respond to Social Media Interactions.

Filed under: Customer Care, Customer Experience Management Tagged: Cisco, Customer Care, social media

OPT Job Posting: Cost Analyst

OnProcess Technology — Tue, 02 Nov 2010 18:29:16 +0000

See the position listed at http://www.onprocess.com/About-Us-Careers.asp#CostAnalyst

Filed under: Jobs, OnProcess Tagged: Ashland, careers, jobs, OnProcess Technology

What Gets Measured…Lessons from Reverse Logistics

OnProcess Technology — Wed, 20 Oct 2010 20:03:39 +0000

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.

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.

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

Filed under: advanced exchange, Asset Recovery, Asset Retrieval, OnProcess, RMA management Tagged: BPO, business process outsourcing, Dan Gettens, DMAIC, Executive Management of Reverse Logistics, Lean Six Sigma, measure success in reverse logistics, measuring reverse logistics, returns demand, reverse logistics

Article: There’s a Cable Set-Top Revolution Goin’ On

OnProcess Technology — Wed, 20 Oct 2010 19:14:31 +0000

Link to Original story in Light Reading: Cable

There’s a Cable Set-Top Revolution Goin’ On

OCTOBER 19, 2010

The traditional notion of the cable set-top box (STB) is being radically redefined. The STB, the primary cable component inside millions of US homes, is morphing, expanding, and extending with new features and functionality. STBs are shrinking into small devices that turn digital signals into analog, growing into intelligent boxes that can handle multiple types of video, and extending their capabilities through home networks, mobile smartphones, and broadband-connected devices such as the iPad.

Never before have cable multiple system operators (MSOs) had so many options from which to choose for their in-home customer premises equipment (CPE) at the same time as they are seeking to reduce capex and STB inventory, according to a new Heavy Reading Cable Industry Insider, “Set-Tops Gone Wild: iPads & IP Revolutionize Cable Devices.”

Depending on the needs of a particular household, cable operators can deploy multi-room HD DVRs, digital terminal adapters (DTAs), next-generation STBs, digital gateways, smart remotes, or applications for connected devices. They can support interactive TV, IPTV, or even 3DTV.

Never before have cable multiple system operators (MSOs) had so many options from which to choose for their in-home customer premises equipment (CPE) at the same time as they are seeking to reduce capex and STB inventory

Most connected devices, including the recently reintroduced Apple TV and Android-fueled Google TV, are regarded as competitive to cable because they support over-the-top (OTT) video. However, as the report explains, Comcast Corp. (Nasdaq: CMCSA, CMCSK) demonstrated how the unique characteristics of a connected device can be complementary to cable when the company introduced its iPad application during the 2010 Cable Show. In a landmark demo, Brian Roberts, chairman and CEO of Comcast, showed how the iPad could be used to extend STB capability and become a remote control for Comcast’s Xfinity video services.

Many service providers are now developing iPad apps. Simultaneously, cable is exploring the advantages of providing customer access to more services that exist “in the cloud” of cable and Internet networks. Cable is seeking to add IP video support to STBs and add video support to cable modems, blurring the line between the two units, the report says. The Federal Communications Commission (FCC) is proposing its own solution, called AllVid, that could result in a broadband-connected retail device by the end of 2012.

Meanwhile, major MSOs plan to reduce their overall inventory of leased STBs and rein in related capex. Next-generation network architecture and the range of available devices enable operators to tailor customer offerings using an inventory mix of thick intelligent boxes, thin clients, and retail devices.

The report takes a high-level view of cable’s strategic options with STBs and related video devices, and it profiles 12 leading companies in the STB market. The increasing options for cable CPE reflect the ongoing redefinition of what cable is and how the industry will deliver its services.

— Craig Leddy, Contributing Analyst, Heavy Reading Cable Industry Insider

Filed under: Asset Retrieval Tagged: cable industry, Cap Ex, capex, Comcast, CPE, Craig Leddy, Heavy Reading Cable industry Insider, MSOs, set top boxes, STBs, Xfinity

Article: Logistics Outsourcing Picks Up Steam

OnProcess Technology — Wed, 13 Oct 2010 12:55:24 +0000

Link to original article: http://www.edn.com/article/510910-Logistics_outsourcing_picks_up_steam.php

Logistics outsourcing picks up steam

OEMs and ODMs in the electronics industry are increasingly offloading their logistics. That includes everything from shipping and warehousing to assembly and programming.

By Rob Spiegel, Contributing editor — EDN, October 11, 2010

Outsourced logistics services have grown at a fast clip in the past couple years. The move to outsourcing escalated during the cost-cutting of the prolonged recession. Logistics service companies are taking larger and larger chucks of OEM activities. Sometimes it’s hard to tell what the core competence is for an OEM these days. Manufacturing has been outsourced for years. Portions of deisgn are getting outsourced, particularly in the cell phone and laptop markets. Logistics companies are taking on more than just transportation. They offer warehousing, kitting, assembly, programming, design engineering, and forecasting. Some even take ownership of their customers’ inventory, providing a significant balance-sheet benefit.

And just when you think OEMs have become little more than marketing companies, along come logistics companies that provide marketing and sales services. During the recession, logistics companies greatly expanded their array of services. “OEMs are continuing to evaluate what it costs to get things to market,” said Tom Dinges, senior consultant at iSuppli Corp in El Segundo, Calif. “So if they can save money by using someone else’s facilities, they’ll look strongly at those opportunities.”

Distributor logistics

Distributors have long provided inventory services, but those services are expanding as customers let their distributors keep ownership of the inventory until it’s ready for production. “We offer services as though we were a logistics company,” said Colin Campbell, VP of supply chain at Newark in Chicago. “As well as managing our customers’ inventory, we also offer them a balance-sheet advantage.”

Sometimes logistics services are as simple as taking responsibility for the transportation of products from a warehouse to the customer. Digi-Key Corp in Thief River Falls, Minn, uses UPS and FedEx for its shipping, but the company maintains the tracking on its own site so customers don’t have to go off to a transportation site to follow product across the country. “We wanted complete visibility for our customers. We’re like a glass house,” said Todd Bills, VP of order fulfillment and logistics at Digi-Key. “We see where the freight is and report it to our customers.”

One of the reasons more services are getting outsourced is simply that OEMs have become comfortable with the idea of using a specialized service company to provide services. Manufacturing led the way years ago. If you can accept the idea of a vendor building your product, the idea of offloading transportation and warehousing to a specialized company is acceptable. And why not some assembly and returns? “As companies get comfortable with outsourcing it’s easier to decide whether it’s the right thing or the wrong thing,” said Jim Smith, president of Avnet Logistics, a subsidiary of Phoenix-based Avnet Inc. “Typically, if they’re outsourcing one thing, they’re willing to look at other things.”

Manufacturing was outsourced primarily as a cost-saving measure, not because the manufacturing process at an EMS company was necessarily superior. Logistics and warehousing, however, are often shipped out because a logistics company can provide a better customer experience. “All of our customers have to look internally at where they want to place their investments,” said Tim Kolbus, VP of operations and logistics at Arrow Electronics Inc in Melville, NY. “They say logistics is not one of their core competencies, so they’re asking us to help them.”

In order to bolster its logistics services, Arrow recently acquired a reverse logistics company and a firm that performs IT asset disposal. Kolbus noted it was an easy extension to provide a greater range of logistics services. “It’s simple for us to manage a customer warehouse,” said Kolbus. “We have the product knowledge. That way they ask us instead of using a 3PL. We even manage products that are not on our linecard.”

Recession sparked a growth spurt

While logistics companies may provide an improved customer experience, cost cutting was certainly part of the decision process. So it’s not surprising there was a surge in outsourced logistics over the past three years. Companies like Avnet and Arrow have both launched expanded outsourced logistics services that go beyond their longstanding supply chain services. “There are cost savings in outsourcing logistics,” said Avnet’s Smith. “If companies don’t have the knowledge of logistics, they’ll throw excessive costs at it. They can avoid that and keep their costs down by outsourcing.”

Some of the trend toward outsourced logistics was prompted from the corporate boardroom. “During the recession, companies looked at improving their balance sheets,” said Bill Sanders, VP and general manager of Ingram Micro Logistics North America in Santa Ana, Calif. “They said, ‘What can we do differently?’ And the CFOs started looking at the supply chain. That created a higher level of outsourcing.”

The economics of outsourced logistics make sense in a global world of expanding and shrinking markets: OEMs can buy their services tailored to their exact needs. They don’t have to worry about layoffs and empty warehouses during downturns. And they don’t have to hire employees and buy buildings during boom times.

“If you get 10,000 orders this month and 20,000 the next month, we’ll ramp up and down,” said Ingram Micro’s Sanders. “This allows the OEM to take advantage of system built to handle volumes without the need to invest in in-house systems and processes.”

A wide range of companies are now turning to outsourced logistics, including both OEMs and ODMs. And size doesn’t matter. The largest companies are offloading logistics and warehousing, as well as smaller companies. “The type of companies using outsourced logistics include OEMs, ODMs, e-tailers, and even brick-and-mortar retailers,” said Sanders.

Reverse logistics gets in the game

One of the new areas for outsourcing is reverse logistics, the business of returns. According to Gailen Vick, president of the Reverse Logistics Association in Lehi, Utah. For years companies didn’t consider their returns as an outsourcing opportunity. “Today most companies down even know they have reverse logistics,” said Vick. “When they realize they have it, they outsource it.”

More and more logistics companies have started to offer returns services as part of their overall service package. “We offer reverse logistics services,’ said Sanders. “We bring in a customer’s phones and return those ones that can be refurbished to the customer’s manufacturing center, and we take care of scraping the rest.” He noted Ingram Micro also provides the service of selling refurbished phones into the channel that buys refurbished products.

Filed under: advanced exchange, Asset Retrieval, Customer Experience Management, OnProcess, RMA management Tagged: logistics outsourcing, outsourced logistics, reverse logistics, supply chain services