Companies chase success in after-sales services

The quality of the after-sales experience is a key factor in customer loyalty. That's exactly why brand-owner companies should pause and ask themselves: Do we really want to outsource a process that can make or break a customer relationship?

Considering the level of coordination required among customer contact centers, field-service operations, repair depots, warehouse operations, and transportation logistics, improving the after-sales experience can be challenging for any company. Add antiquated IT systems to the equation, and it's easy to see why, despite misgivings, companies often outsource after-sales operations.

On the other hand, some companies choose to manage their own after-sales operations. For them, following industry best practices is vital to achieving a high level of success.

In a report out of Cambridge, Mass.-based Forrester Research, "Taking Control Of Your Aftermarket Supply Chain, Best Practices To Build A Foundation For Reverse Logistics Success," Patrick Connaughton, senior analyst, notes that winning companies not only enhance the customer experience, but also find ways to recoup lost profits on returned goods by taking advantage of secondary markets to resell repaired and refurbished products.

"It's been estimated that up to $100 billion in products move through the reverse-logistics [RL] pipeline each year in the U.S., with average return rates ranging from as low as 3 percent to as high as 40 percent, depending on the industry. Even with this high volume, many companies still do not invest heavily in their aftermarket or reverse-logistics operations," Connaughton says. "Traditionally, RL hasn't been viewed as a core competency by the brand owners, which results in an appetite for outsourcing."

Managing the aftermarket supply chain spans functional areas, and requires redefining customer service and inventory management processes. Forrester Research cites three steps that enable an aftermarket supply chain transformation:

• Move returns validation and "avoidance" upstream.
• Automate reverse-logistics processes with technology.
• Measure and report on performance to drive improvements.

First of all, returns can be significantly reduced by implementing additional validation checks upstream of the distribution centers (DCs) either online, in the retail store, or in the customer call center, Connaughton says.

For instance, companies can head off costly invalid and unauthorized returns by implementing an online pre-authorization or "gate-keeping" solution that validates the return before it hits the store or warehouse. As part of the online authorization, customers print bar-coded shipment labels that streamline the warehouse receiving process and tie the customer to the returned goods for better case management and tracking.

Forward-thinking retailers and after-sales service operations also have integrated their prescreening systems with the OEMs' returns authorization systems, Connaughton says. Consequently, when UPC or serial numbers are scanned, warranty eligibility and product exchange rules are automatically checked to authorize the return.

The second key best practice is to automate the reverse-logistics processes using information technology. "The reality is that without the right technology in place, it's practically impossible to enforce the standard processes required to drive costs out of aftermarket operations," Connaughton says.

According to Forrester, companies that have been successful in reducing aftermarket costs have focused on automating key areas with technology. They typically include:

• Use a best-of-breed warehouse management system (WMS) to automate the DC's standard reverse-logistics processes.
• Integrate the WMS and accounting systems to trigger faster credits to improve customer satisfaction.
• Apply a service parts optimization solution to reduce stock-outs for service and repair operations.
• Activate electronic RL B2B messaging to identify backhaul opportunities and significantly reduce transportation costs.

Finally, as is the case with other operations, it's also essential to first measure performance, and then report on it to drive improvement.

"No matter how much is invested in automation and process changes, the only way to drive improvement is to measure the success of each program and make adjustments as needed," Connaughton says. "Without this level of visibility, operations managers navigate without a map."

Performance measurements, as noted by Forrester's research, span from the executive level to the warehouse floor—and reach back to the product manufacturer. Successful companies start in a few key areas:

• Make someone accountable for each return, and measure their success to help drive initiatives to consolidate systems and processes;
• Close the feedback loop to improve product and operations quality using product life-cycle management software that not only centralizes return-reason codes to drive design improvements, but also identifies non-design-related return trends to help determine the root cause; and
• Insert quality checks for outsourced processes, such as through use of their own employees as quality-assurance staff within an outsourced DC operation.