Companies that have developed key manufacturing relationships in Asia to bring down the cost of products need to carefully consider what gets returned there when things don’t go as planned.
It is logical to have products made where the cost of labor is relatively low. However, when all costs are considered, it often does not make sense to send defective products back to Asia to be repaired and returned.
Even when the actual repair is free, the total cost of having products repaired in Asia must include many other cost elements. Factors such as shipping costs, duties and taxes, and management and labor costs are fairly easy to calculate. However, other costs that may not be so apparent include inventory carrying costs, reduced cash flow, opportunity costs, customer satisfaction issues, and even product obsolescence. All of these costs must be calculated as part of the total cost of sending products to Asia for repair.
The costs of shipping to Asia can vary widely. When duties and taxes are included the transit costs may approach several dollars per pound. While not a huge amount per item, when sending large shipping volumes the total shipping costs can increase significantly.
With the recent run up in fuel prices, many shipping companies are considering reducing the speed of container vessels to save fuel costs. This technique called super slow-steaming makes an already lengthy repair and return process even longer. While these changes may reduce fuel costs for the shipping companies, don’t expect those costs saving to be passed on to you.
Longer ocean transit times will translate into higher inventory cost for your company. The longer the transit time, the later the delivery and the later your company (and customers) will receive its products back.
This is especially burdensome on the reverse logistics side. When companies send products back to Asia for repair they suffer the transit time delays in both directions. Assuming normal shipping times this process can take four or five months to complete a repair and return cycle of your (or your customers) inventory.
Slow repair and return cycle times will eventually impact customer satisfaction. Customers are likely to be unhappy with repair and return cycle times measured in months instead of days. Late product returns could result in financial penalties and / or loss of future business due to a poor service record with customers. Moreover, management will have to spend more time and energy dealing with cycle time issues and dissatisfied customers.
Not only do companies have to wait for their products to get back before they can resell them, long shipping times can negatively affect a company’s cash flow. Cash is tied up in inventory at sea that could otherwise be better employed. The need for faster and more efficient customer repair and return solutions puts further importance on companies to carefully consider what really needs to get returned to Asia and the total cost of that process.
OEM’s that have a significant portion of their inventory dollars stuck at sea may want to consider a local third-party depot repair service center, like Advanced Technical Services (ATS), that specializes in developing customized reverse logistics and repair solutions. ATS has developed support solutions for customers in most every industry including automotive, critical power, marine, satellite, telecommunications, wireless and many others.
Outsourcing repairs to a company like ATS that is strictly focused on developing efficient repair solutions often yields the triple benefits of lower cost of repair, reduced customer repair cycle times and improved customer satisfaction.
ATS is strategically located in the Chicago suburb of Carol Stream, IL making it convenient for any customer to facilitate the shipment of products in and out of their depot repair facility.
To discuss how Advanced Technical Services can improve your returns management process by avoiding overseas delays, lowering costs and improving customer satisfaction, contact us at 800-323-4813, firstname.lastname@example.org or visit us at www.ats4solutions.com.