April 15, 2010

Intelligently reintroducing product back into the service supply chain

A very high percentage of materials returned from technology service calls are actually in perfect working order. In the reverse supply chain industry we call this no-trouble found (“NTF”) or no-fault found (“NFF”). Some organizations simply scrap these components, chalking them up to the cost of warranty and repair. This introduces unnecessary spend on resupplying their spare parts inventory. The most intelligent companies use proven best practices to reintroduce the needed NTF products back into their service environment or create a new revenue stream from the items they don't need for potential warranty claims.

Here's a real-world example. Let's say you're home working on your desktop or laptop, and it breaks. You don't know what's wrong, and since your purchase included an on-site warranty, you call the 800 number for a technician to come to your house. The technician arrives with a repair kit, ready to fix pretty much whatever problem you're having with your system. But the technician is not really going to diagnose everything -- he doesn’t have the time to sit there and diagnose every single problem on your system. So he does a lot of swap-outs. He might pull out four pieces of memory modules and replace each, not knowing which of those memory modules is causing the problem. But your computer works now, so the tech packs up the four modules he’s just removed and goes on his way.

Now those four memory modules that were pulled out of your system end up back in a warehouse aggregated with similar material from the same situation that has happened thousands of times a day. Keep in mind that it is very likely that not all of these modules are faulty; in fact, maybe only one out of four is truly bad. That would amount to a 75% NTF rate on your memory, with three pieces being perfectly fine to use in the service depot once tested to ODM specifications and repackaged for field use.To intelligently reintroduce the working products back into the service supply chain, companies will aggregate these types of materials within their organizations, typically at one or two hubs. Converge then provides testing and screening services to go through this material and find those items that are NTF. Once we separate the good from the bad, the company decides if it requires any NTF product back for warranty support. In other words, is the company still supporting that product in the field? If yes, the product is routed back to them. If no, then the product can go out for asset recovery through the product returns management program. The benefit here is that the company leverages Converge's ability to look into multiple organizations' service pipelines and forecasted demands, and to resell that product, maximizing its returns.

NTF rates vary by component but can be as high as 77%, which is pretty unbelievable when you consider the amount of returns coming back to organizations. But companies are all about customer satisfaction -- they want to take care of us, as the consumer, as quickly as possible. So they do whatever they need to do to make sure your system is back up and running, even if it means replacing parts that may not be defective within those systems. The key is for them to implement a testing and screening process on the service depot end to be able to intelligently reintroduce NTF product back into the service supply chain.

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