Why CBI? - Background

Remanufacturing Reverse Logistics

Reverse Logistics, as defined by The Council of Logistics Management, is:

"The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements."

Reverse Logistics Management is rapidly gaining stature in the business community. The Council of Logistics Management, in its article "An Examination of Reverse Logistics Practices" (Vol. 22, No. 2, 2001), also states:

"Most companies handle the returns process poorly. Companies that handle returns well often do so through cumbersome manual processes. Few use well-defined software solutions because traditional software applications fail to provide the necessary functionality. Most companies manage returns in a reactive manner, and few optimize the value of the goods as they are returned. Managing the flow of goods through the reverse supply chain has tremendous untapped potential to increase the bottom line. Costs associated with managing the reverse supply chain consume an estimated 0.5 percent of the annual U.S. Gross Domestic Product (GDP). For 2001, that equated to 51 billion dollars."

Many organizations, from UPS on down, are now contributing to define best business practices, offer return handling services and software solutions. However, the primary emphasis continues to be on the return of defective OEM goods that are most often either repaired or scrapped.

Remanufacturing requires additional support tools as customer returns of "dirty cores" (core), the raw material for production, dramatically increases return processing intensity. Further, normal return processing activity for Warranty or returned finished goods, increase, as it often includes return credit of the item's associated core. Often, the legacy systems used for recording this activity require much manual intervention, further increasing costs due to labor and error resolution.

Legacy and PC-based Core Bank Solutions

Traditionally, design of core bank software has focused primarily on the accounting (Accounts Receivable - A/R) aspects of Core Banking. Therefore, most are similar to simple bank account processing in that they provide for posting of quantities in and out, representing core return obligations against a sale and the core return. These are now legacy systems that require a substantial investment to upgrade to modern technology, add new features, or migrate to new corporate systems. Some provide for automatic application of the return against the sale for the return customer based on simple rules and integrated to A/R billing software. This often requires a manual effort to properly apply returns to sales and issue the subsequent credits. Often, this results in credits for unwanted cores that soon become excess/obsolete inventory, due to the difficulty of this effort without proper system controls. However, these or other low-end PC-based packages will most likely suffice, whether integrated or not, when dealing with low transaction volumes and simple application rules.

However, the remanufacturing landscape has been dramatically altered due to acquisition and consolidation. Today, many name brand OEM's now produce and sell remanufactured products in addition to other large corporations dedicated solely to the aftermarket. Many still attempt to use legacy Core Bank solutions that are not designed to handle large corporate requirements. This has brought about the need to offer flexible core billing, bank methods, and return policies tailored to the customer and type of product. This is the area where most systems fall short and lost business could be the result. When special terms are offered, the impact is not just the cost of labor to "manually handle", but most often customer dissatisfaction results from:

Customer service is unable to provide up-to-the-minute and accurate responses to inquiries on return shipments;
Improper return application results in "banked" quantities instead of applications against open return obligations;
Customer bank position reporting is not available when needed. Reports are inaccurate, voluminous and paper-based, and are impossible to reconcile against Accounts Payables.

The above are major contributors to Industry reports of extremely low inventory turns for remanufacturing organizations. These factors create the need for a solution developed on modern technology designed to automate processing based on flexible business.

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